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Quatloos! > Tax Scams > Tax Protestors > EXHIBIT: Tax Protestor Dummies 2 > Cases Tax Protestor Cases Exhibit Nonfiler Enforcement Program "Taxes
are what we pay for a civilized society."
One of the basic tenets of our tax system is the belief that all citizens must comply with the requirements to file returns and pay taxes. Fortunately, the vast majority of Americans recognize their civic duty and voluntarily comply with their tax filing obligation. Taxpayers who fail to file income tax returns and pay taxes pose a serious threat to tax administration and the American economy. Their actions undermine public confidence in the Service's ability to administer the tax laws fairly and effectively. Whether because of an inability to pay or severe procrastination, some citizens drop out of the tax system. The IRS has made attempts to make it easier for persons to voluntarily comply with the tax laws and to bring themselves current on any outstanding filings or tax due. Assistance is provided to those persons to resolve issues that caused them to drop out of the tax system and bring them back into compliance. CI's role is the enforcement of the tax laws for individuals who are not responsive to outreach efforts and who deliberately fail to comply with their obligation to file and pay taxes. CI has devoted resources to identify these individuals and in the most flagrant cases, criminal prosecution is recommended. CI's ability to investigate and prosecute flagrant cases and generate publicity relating to these prosecutions is an important compliance tool. Ever since the 16th Amendment to the Constitution was ratified (February 3, 1913) giving Congress the power "to lay and collect taxes on incomes" there have been citizens arguing that it was not properly ratified and income taxes are illegal. Unfortunately, some citizens continue to raise such arguments in spite of the fact that they have no basis in law and the courts have repeatedly rejected their arguments as frivolous. Unscrupulous promoters and their followers have long employed frivolous arguments concerning the legality of the income tax as pretexts to enrich themselves or evade their taxes. Their motivation is usually monetary, not some legitimate purpose or belief. Anti-taxation groups have been around for a long time. They are small but vocal. In the past, organizations like Your Heritage Protection Society (YHPA), The Save a Patriot Society, The Pilot Connection, and the Freeman all attracted followings. Though the leadership of these movements used different arguments to gain followers, they all share one thing in common; they received substantial sentences in a federal prison for their activities. Their followers paid a steep price for following bad advice. Some were prosecuted, many more were involved in years of litigation and ultimately had to pay all taxes owed along with penalties and interest. Criminal Investigation's Nonfiler Initiative IRS has implemented a multi-functional, comprehensive effort called the National Nonfiler Strategy. The overall goal of this strategy is to bring taxpayers back into compliance and keep them there. In addition to nonfilers, the IRS will reach out to individual taxpayers who are not legally required to file but are potentially entitled to refunds or credits. The following nonfiler relating statistics represent CI's efforts in the past three fiscal years and the current fiscal year (first half):
*All investigations that are initiated in one year are not
necessarily recommended for prosecution, indicted and/or
convicted in the same year. Beware of Employment Tax Schemes Currently, the same arguments concerning the legality of the tax system are being used in an attempt to convince employers they do not have to withhold employment taxes. Employment tax evasion schemes have serious consequences not only for the employers but the employees as well. Employers are subject to both criminal and civil sanctions but employees also suffer because as a result of their employer's actions they may not qualify for social security, Medicare, or unemployment benefits (or they may qualify for reduced benefits). These programs provide important benefits to many citizens and will continue to grow as more citizens reach retirement age. The health of these programs depends on everyone paying their fair share.
Persons who are considering involving themselves in these anti-taxation "programs" should consider the consequences. Tax evasion is a serious crime punishable by imprisonment, fines and the imposition of civil penalties. During the last four fiscal years (1997, 1998, 1999, & 2000), there have been 2249 convictions relating to tax and financial-related crimes. Of those convicted, 80.9% were sentenced to prison time, home confinement, electronic monitoring, or a combination thereof. Complicated arguments against the American tax system are built by stringing together unrelated ideas plucked from widely conflicting court rulings, dictionary definitions, government regulations and other sources. Some of the most popular arguments include: Constitutional Argument - Filing a Form 1040 violates the Fifth Amendment right against self-incrimination or the Fourth Amendment right to privacy. The Truth: The courts have consistently held that disclosure of the type of routine financial information required on a tax return does not incriminate an individual or violate the right to privacy Sixteenth Amendment Argument - The Constitutional Amendment establishing the basis for income tax was never properly ratified. The Truth: The Sixteenth Amendment was ratified on February 3, 1913, and it states "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration." Religious Arguments - Use the Freedom of Religion clause of the First Amendment by taking a vow of poverty or fraudulently claiming charitable contributions of 50% or more of your adjusted gross income. The Truth: Taking a purported vow of poverty or claiming fraudulent contributions to filter your money through a church is not legal. Fraudulent religious organizations use funds for personal expenses. Internal Revenue Code Arguments - (1) There is no Internal Revenue Code that imposes taxes; (2) only "individuals" are required to pay taxes; or (3) IRS can only assess taxes against people who file returns. The Truth: The tax law is found in Title 26 of the United States Code. Section 6012 of the Code makes clear that only people whose income falls below a certain level do not have to file returns. Section 6201 of the Code states that the Secretary of the Treasury is required to make assessments "of all taxes imposed by this title [Title 26]." Forming a Trust Argument: - Forming a business trust to hold your income and assets will avoid taxes. A family estate trust will allow you to reduce or eliminate your tax liability. The Truth: Establishing a trust, foreign or domestic, for the sole purpose of hiding your income and assets from taxation is illegal and will not absolve you of your tax liability. See IRS Publication 2193, "Should Your Financial Portfolio Include 'Too Good To Be Trusts?'" Some American citizens use these and other clever arguments advocating non-compliance with the tax laws. Don't be misled. Inspect their promotional material carefully. Aside from being false and misleading, you will notice that it often contains elaborate disclaimers such as "this report is offered as vehicle for discussion and debate and for general informational purposes only. It does not constitute legal or professional advice and should not be relied on as a substitute for proper research and inquiries into original sources of authority." You will also find that many of these "tax experts" don't even follow their own advice but choose to pay their own taxes. The IRS is will: (1) To assist taxpayers who have been misled to correct their filing status, and (2) To vigorously pursue prosecution and prison sentences for individuals who violate the tax laws. To report suspicious or misleading tax information by an individual or group, contact your local IRS office or call IRS at 1-800-829-0433. The following case summaries are excerpts from public record documents on file in the court records in the judicial district in which the cases were prosecuted. On February 4, 2000, Edward L. Kotmair of Westminster, Maryland was sentenced to 27 months in prison and 1 year of supervised release for failure to file federal income tax returns. In September 1999, Mr. Kotmair was convicted of failing to file federal income tax returns for tax years 1990, 1991, and 1992. During those years, Mr. Kotmair operated his own carpentry business, Commercial Installers located in Cary, North Carolina that earned income of approximately $1.7 million. Some of Mr. Kotmair's income was derived from subcontracting work on Federal Government buildings in Washington, D.C. During his three-day trial, Mr. Kotmair attempted to convince the jury that he believed he was not required to pay income taxes. The jury rejected this argument and found him guilty on all counts of the indictment. United States Attorney Janice McKenzie Cole commented that federal courts and juries have consistently upheld the income tax laws and their applicability to everyone. Insurance Business Owner Sentenced On October 12, 2000, Channing Nando Wilson of Durango, Colorado was sentenced to 18 months imprisonment and fined $30,000 after being convicted of failure to file federal income tax returns. During a three-day trial held in July 2000 the government presented evidence that Mr. Wilson earned gross income of at least $129,000 in 1994, $88,000 in 1995 and $61,000 in 1996 from an insurance business he owned. Mr. Wilson's tax liability for tax years 1994-1996 was more than $45,000. Mr. Wilson testified at trial that according to his interpretation of the tax laws, he did not believe he was required to file income tax returns. The jury rejected these arguments and convicted him on all counts. Dallas Police Officer Sentenced On July 7, 2000, Nixon Wayne Mixon, a Dallas police department narcotics detective pled, guilty to failing to file income tax returns for years 1991-1997. On September 22, 2000, Mr. Mixon was subsequently sentenced to 180 days home confinement, placed on 5 years probation and ordered to pay restitution of $30,073.52. Mr. Mixon was required to resign from the police department. Though Mr. Mixon had worked with federal agents, including IRS agents on a number of joint investigations, he failed to accurately report his exemptions resulting in no income taxes being withheld from his salary. Mr. Mixon claimed that the IRS did not have the constitutional authority to collect taxes. United States Attorney Paul E. Coggins commented that "Police officers are not above the law. They have to file returns and pay taxes like everyone else. We required as part of the plea agreement that he resign from the police force because this officer speciously claimed that the tax laws were unconstitutional and didn't apply to him. The IRS will continue to diligently investigate professionals who violate the tax laws and my office will vigorously prosecute them." Real Estate Developer Sentenced On February 22, 2000, a Santa Rosa Beach, Florida resident, George Dana "Doodles" Harris received 18 months in prison, followed by a period of supervised release and was ordered to pay a fine of $40,000 after he pled guilty to income tax evasion. During the period 1990 through 1993, Mr. Harris a prominent real estate developer attempted to evade his income taxes by failing to file his income tax returns and concealing his income through the use of sham corporations and cashiers checks. During tax years 1990 through 1993 Mr. Harris earned more than $2,000,000 on which over $800,000 in taxes were due. Mr. Harris had previously pled guilty to income tax charges in 1983 and spent approximately 40 months in prison after paying over $1,000,000 in taxes. Adult Bookstore Owner Sentenced On February 17, 2000, a Parsippany-Troy Hills man who operated an adult bookstore in Union, New Jersey, was sentenced to 21 months in prison and fined $10,000 for failing to file a corporate tax return, filing a false personal tax return and attempting to obstruct the IRS. Jack Chesner pled guilty on June 15, 2000 to a three-count information. Mr. Chesner admitted he failed to report money received from investors in proposed adult entertainment businesses. Instead he converted these funds to his own use and destroyed and concealed business records sought by the IRS. Mr. Chesner also admitted that he failed to file corporate income tax returns for this company Chez Sez III Inc., which was doing business as Moviethon. Moviethon received substantial income from the sale and rental of videos. Periodontist Convicted of Failure to File Tax Return On January 18, 2000, Dr. Fred O. Sakamoto of Lewis Center, OH, pled guilty to failing to pay income and self-employment taxes on his 1993 income. Dr. Sakamoto admitted that he received taxable income to $246,499 during that year upon which over $81,191 in income and self-employment taxes (social security taxes) were owed. Dr. Sakamoto was sentenced on June 29, 2000, to probation for three years, which included one year of home confinement with electronic monitoring, and 500 hours of community service. Dr. Sakamoto was also ordered to cooperate with the IRS to pay all taxes due and owing. Using False Social Security Numbers Stuart Baer of Raleigh, NC, was sentenced on October 3, 2000, to 16 months imprisonment for income tax evasion. Mr. Baer failed to file federal income tax returns in 1993, 1994, and 1995. According to the indictment he attempted to conceal his income by providing false social security numbers to his employer and bank and used a false name on a bank account. Mr. Baer earned taxable income of $69,071.96, $75,865.55, and $39, 297.18 during tax years 1993-1995 respectively. In addition to the period of incarceration he received, Mr. Baer was sentenced to one year of supervised release, ordered to perform 100 hours of community service and file all delinquent tax returns. * * * * * * Over the last three fiscal years (1998, 1999, & 2000),
843 individuals have been convicted for failing to file a
tax return. Experienced IRS Special Agents, using complex
financial investigative techniques, have investigated these
cases and forwarded them to the Department of Justice for
prosecution. On average, more than 79% of those convicted
have been incarcerated-- the average term of incarceration
is 41 months and may include prison time, home confinement,
electronic monitoring, or a combination thereof. |
Tax
Protestors, Pure Trusts, and Other Stupid De-Tax Schemes & Scams
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