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Tax Protestor Cases Exhibit
("Damn, We Lost Again! And why is it that people who sell
tax protestor materials file their tax returns anyway . . .")

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IRS WARNING ON SCAMS

 The Internal Revenue Service issued a nationwide alert to taxpayers warning them not to fall victim to tax scams. These schemes take several shapes, ranging from promises of special tax refunds to illegal ways of "untaxing" yourself.

 "Each year, con artists shamelessly take advantage of people, sometimes charging fees for illegal tax schemes," IRS Commissioner Charles O. Rossotti said. "People should be on‑guard for these scams. If something sounds too good to be true, it probably is."

 If people think something may be unscrupulous, they can report suspected tax fraud to the IRS at 1‑800‑829‑0433.

 The IRS urges people to avoid these common schemes:

oNO TAXES BEING WITHHELD FROM YOUR WAGES.

Illegal schemes are being promoted that instruct employers not to withhold federal income tax or employment taxes from wages paid to their employees. These schemes are based on an incorrect interpretation of tax law and have been refuted in court. If you have concerns about your employer and employment taxes, you can get help by calling the IRS at 1‑800‑829‑1040.

 o "I DON'T PAY TAXES ‑‑WHY SHOULD YOU?"

Con artists may talk about how they don't file or pay taxes and then charge people a fee to share their "secret." The real secret that these people don't reveal is that many of them actually do file and pay taxes ‑‑they just won't publicly admit it. Again, the IRS reminds people that failure to file or pay taxes is subject to civil and/or criminal tax penalties.

 o AFRICAN‑AMERICANS GET A SPECIAL TAX REFUND

Thousands of African‑Americans have been misled by people offering to file for tax credits or refunds related to reparations for slavery.  There is no such provision in the tax law. Some unscrupulous promoters have encouraged clients to pay them to prepare a claim for this refund. But the claims are a waste of your money. Plus, those who file subsequent claims can be subject to a $500 frivolous return penalty.

 o PAY THE TAX, THEN GET THE PRIZE

The caller says you've won a prize and all you have to do to get it is pay the income tax due. Don't believe it. If you really won a prize, you may need to make an estimated tax payment to cover the taxes that will be due at the end of the year. But the payment goes to the IRS ‑‑not the caller. Whether you've won cash, a car, or a trip, the prize giver generally sends you and the IRS a Form 1099 showing the total prize value that should be reported on your tax return.

 o UNTAX YOURSELF FOR $49.95.

This one's as old as snake oil, but people continue to be taken in. And now it's on the Internet.  The ads may say that paying taxes is "voluntary," but it is absolutely wrong. The U. S. courts have continuously rejected this and other similar arguments. Unfortunately, hundreds of people across the country have bought "untax packages" before finding out that following the advice contained in them can result in civil and/or criminal tax penalties being assessed.  Numerous sellers of these bogus packages have been convicted on criminal tax charges.

 o SOCIAL SECURITY TAX SCHEME.

Taxpayers shouldn't fall victim to a scam offering them refunds of the Social Security taxes they have paid during their lifetimes. The scam works by the victim paying a "paperwork" fee of $100, plus a percentage of any refund received, to file a refund claim with the IRS. This hoax fleeces the victims for the up-front fee. The law does not allow such a refund of Social Security taxes paid. The IRS processing centers are alert to this hoax and have been stopping the false claims.

 o "I CAN GET YOU A BIG REFUND . . . FOR A FEE!"

Refund scheme operators may approach you wanting to "borrow" your Social Security Number or give you a phony W‑2 so it appears that you qualify for a big refund. They may promise to split the refund with you, but the IRS catches most of these false refund claims before they go out. And when one does go out, the participant usually ends up paying back the refund along with stiff penalties and interest.

 Two lessons to remember:

1) Anyone who promises you a bigger refund without knowing your tax situation could be misleading you

2) Never sign a tax return without looking it over to make sure it's honest and correct.

 o IRS "AGENT" COMES TO YOUR HOUSE TO COLLECT.

First, do not let anyone into your home unless they identify themselves to your satisfaction. IRS special agents, field auditors, and collection officers carry picture IDs and will normally try to contact you before they visit. If you think the person on your doorstep is an impostor, lock your door and call the local police. To report IRS impostors, call the Treasury Inspector General's Hotline at 1‑800‑366‑4484.

  IRS WARNING ON WITHHOLDING

 The Internal Revenue Service issued a consumer alert today involving illegal schemes where employers do not withhold federal income tax or employment taxes from wages paid to their employees.

 These schemes are based on an incorrect interpretation of the Internal Revenue Code that wages are not a "source" of income and that the definition of "sources of income" does not apply to U.S. individuals. This incorrect interpretation is contrary to the express language of the Internal Revenue Code and its regulations. The interpretation has been refuted in court.

 If you have concerns that your employer is improperly failing to withhold federal income and employment taxes, you can contact the IRS at 1‑800‑829‑1040.

 The IRS has seen a small number of these cases involving employers in recent months. The agency is actively investigating cases where employers fail to withhold income taxes and employment taxes (Social Security and Medicare taxes).

 "We are pursuing these cases to uphold the law and make sure everyone pays their share," IRS Commissioner Charles O. Rossotti said. "We don't want to see taxpayers caught in a bind because employers fail to properly withhold taxes."

 "The law is crystal clear that income and employment taxes must be paid," said Joe Kehoe, Commissioner of the IRS Small Business and Self‑Employed Division. "Evading employment taxes can have serious consequences. Employers may be subject to criminal and civil sanctions for willfully failing to pay employment taxes."

 Unscrupulous individuals and promoters have used a variety of false or misleading arguments for not paying employment taxes. The courts have repeatedly rejected these arguments as frivolous and routinely impose financial penalties when such meritless arguments are raised.

 "IRS Criminal Investigation works closely with the other IRS operating divisions to investigate and refer for prosecution individuals and companies who have willfully failed to file or pay employment taxes," said Mark Matthews, IRS Criminal Investigation Chief. "Each year, Criminal Investigation obtains significant criminal convictions for such violations, most of which involve incarceration and fines."

 In the past three years, 127 individuals have been sentenced to confinement in either federal prison, a halfway house, home detention or some combination thereof on employment tax issues. Nearly 86 percent of the persons sentenced for evading employment taxes served an average of 17 months confinement and were ordered to make restitution to the government for the taxes evaded (plus interest and penalties.)

 Recent examples of employment tax prosecutions can be found on the IRS Criminal Investigation website at

 In cases where your employer withheld employment taxes but failed to deposit them, or failed to issue W‑2s, you should contact the employer to request the W‑2. If you are unable to secure a W‑2 from your employer, you should complete and attach Form 4852, Substitute for W‑2, to your tax return using the best data available to calculate the wages and the withholding. This information can often be secured from pay stubs.

 In addition, if your employer refuses to withhold employment taxes from your wages and the IRS is unable to collect the employment taxes from your employer, you still have the responsibility to pay income tax and you are ultimately responsible for your share of the FICA tax.

  You can get additional help by calling the IRS at 1‑800‑829‑1040.

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