The DoJ also posted
a copy of the complaint.
Some highlights:
Allen is currently incarcerated, following a conviction under Ohio state law for possessing a firearm while under disability, at the Hocking Correctional Facility in Nelsonville, Ohio.
And Allen seems to be "CtC educated."
12. Allen’s schemes are based on the false premise that his customers do not receive “wages” as defined under I.R.C. § 3401(a), a frivolous claim that the Sixth Circuit Court of Appeals has stated “is tantamount to a typical tax protester argument that the income at issue is not taxable.” United States v. Hendrickson, Case no. 07-1510, 2008 U.S. App. Lexis 27988 (6th Cir. June 11, 2008). The theories about the supposed narrow application of federal income-tax laws (including arguments that wages are not income, and that only federal workers are required to pay income taxes) have been uniformly and repeatedly rejected by the federal courts. The claim that wages are not income “has been rejected as many times as it has been asserted.” Abdo v. United States, 234 F. Supp.2d 553, 563 (M.D. N.C. 2002), affirmed, 63 Fed. Appx. 163 (4th Cir. 2003). Other courts long ago rejected the claim that wages and income for federal income tax and withholding purposes mean only wages and income of government employees. See United States v. Latham, 754 F.2d 747, 750 (7th Cir. 1985) (the argument “that under 26 U.S.C. § 3401(c) the category of ‘employee’ does not include privately employed wage earners is a preposterous reading of the statute. It is obvious that within the context of both statutes the word “includes” is a term of enlargement not of limitation, and the reference to certain entities or categories is not intended to exclude all others.”); McKinley v. United States, Case No. C-2-90-848, 1992 WL 330407, *5 (S.D. Ohio Sept. 3, 1992) (“The plaintiffs assert that only federal officers, federal employees, elected officials or corporate officers are ‘employees’ who are considered to be taxpayers under the Internal Revenue Code. . . However, the plaintiffs’ interpretation of the law comes from a misunderstanding of the law, and has been rejected by the federal courts. . . In fact, the term ‘employee’ as used in the I.R.C. does include private wage earners.”) (internal citations omitted).
[...]
14. The IRS’s Frivolous Return Program has identified at least 100 returns that Allen prepared with this scheme. These returns contain similar characteristics making them identifiable as being prepared by Allen. The “single” filing status box is checked, but the word “single” is crossed out and “MFR-01” is written in its place. The apparent purpose of this is to indicate that the customer is purportedly not required to file a tax return.
15. On all lines of the tax return referring to income or tax, the word “None” is written. On the income line of the return, Allen also writes “No wages under IRC 3401(a).”
16. To each tax return that he prepares, Allen attaches bogus Forms 4852, titled “Substitute W-2, Wage and Tax Statement,” or Form 1099-R, titled “Distributions From Pensions, Annuities, Retirement or Profit Sharing Plans, IRAs, Insurance, Contracts, etc.” On these Forms, Allen falsely reports that the customer has no wages or distributions, negating the correct amount reported on the legitimate Forms W-2 and/or 1099 issued by the customer’s employer or other third-party. On the income line of the Forms 4852, Allen writes “None under IRC 3401(a)” or “None under IRC 3401(a) and 3121.”
I often wonder how these people find their "clients," and the answer seems to be what I would call "serial marks."
19. Allen prepared the 2007 tax return of customer Dallas Steen of Lancaster, Ohio, an employee of Waste Management. Steen became Allen’s customer on the advice of a friend; the friend was referred to Allen when the friend’s previous tax return preparers, Edward and Joseph Flickinger, were enjoined on March 1, 2006 and June 30 2006, respectively, from promoting their tax-fraud scheme and from preparing tax returns.
And the Hendrickson connection is made explicit:
20. Similarly, Allen prepared a 2006 return for customer Adam Shields on which Allen reported Shields’ wages of $84,296.14, but then falsely reported $89,793,57 in itemized deductions - including Shields’ wages of $84,296.14 which Allen falsely claimed as a miscellaneous deduction called “Non-taxable income” - and requested an improper refund of $15,703.58. Allen, in the note attached to Shields’ return directing him to sign and date the return and send it to the “IRS Center” in Kansas City, Missouri,” stated that “[t]hese returns work according to Cracking the Code filers. Worth a try!” Cracking the Code refers to a self-published book written by Peter Hendrickson, a convicted felon whose frivolous tax-defier arguments have been rejected by the Sixth Circuit and other courts. See United States v. Hendrickson, Case no. 07-1510, 2008 U.S. App. Lexis 27988 (6th Cir. June 11, 2008); Montero v. C.I.R., 354 F .App’x. 173, 174-176 (5th Cir. Nov. 19, 2009); United States v. Gray, Case no. 1:07-cv-42, 2007 WL 851873 (W.D. Mich. March 19, 2007); Nelson v. United States, Case no. 3:08cv508/MCR/EMT, 2009 WL 5851082, *8 (N.D. Fla. Dec. 7, 2009).
And, finally, we come to section 861:
21. Allen’s third scheme incorporates aspects of the previous two schemes. Allen prepares a cover letter for his customers stating that they are making a “Claim for Refund . . . pursuant to IRS Publication 556, Page 13” and enclosing a Form 1040X amended tax return. The letter claims that the customer’s “income from my labor is non-taxable income under fundamental law,” that the customer is a “‘nontaxpayer’ according to Economy Plumbing and Heating v. United States, 470 F.2d 585, 589-590 (U.S. Court of Claims, 1972),” that the customer’s Form W-2 and Form 1099R “fail to indicate that [their] income was non-taxable,” and that the “IRS fraudulently converted my non-taxable income to taxable income and kept the money (my property from my labor) through erroneously withheld federal income taxes.” The letter is signed “All Rights Reserved” by the customer as a “private American.”
22. Allen prepares the Form 1040X amended tax return that the customer then sends to the IRS. The Form 1040X falsely reports the reason for amendment as the “wage income reported was not from any of the sources listed in 26 C.F.R. 1.861-8(f)(1) and is therefore nontaxable income” and “is also exempt under fundamental law (my labor is my property and cannot be taxed).” Allen then falsely reports that the customer had no taxable income and requests an improper refund of all federal taxes withheld from the customer’s wages.
And the unauthorized practice of law:
33. Allen has also engaged in the unauthorized practice of law. By order entered December 7, 2005, the Supreme Court of Ohio found that Allen had engaged in the unauthorized practice of law, enjoined him from the unauthorized practice of law in Ohio, and assessed a civil penalty of $40,000 against Allen. The Supreme Court of Ohio found Allen in contempt on July 20, 2010. See Ohio State Bar Ass’n v. John Allen, Sup. Ct. Case no. 2004-2150 (Ohio).
34. As part of his tax-fraud scheme, Allen has attempted to represent customers before the IRS, claiming to be an attorney or counsel. As noted above, Allen has sent correspondence to customer Linda Steen’s employer claiming to be her “counsel.” Additionally, Allen submitted a Form 9423, Collection Appeal Request, on January 29, 2010 on behalf of Andrew and Janet Starkey, which Allen signed as the authorized representative in his purported capacity as “Private Attorney General.” In a letter enclosed with the Form 9423, Allen claimed that a “private attorney general is a private party in the United States who brings a lawsuit that is considered to be in the public interest, i.e. benefiting [sic] the general public and not just the plaintiff.”
