False Returns and Mortgage Applications

[LPC]

The answer is to keep income taxes private. Period.

There are already laws to make tax returns private, but you say that those laws are being evaded, and that the taxpayers aren't being harmed by those violations.

I think you've now taken three or four different positions on the same issue.

[SteveSy]

It seems like some of you give the word "law" some magical ability.

"It's a law" as if that stops someone or even prevents someone from doing something and only the rare bad person or company violates them or it. Unfortunately not many have respect for the law unless of course its a law they find desirable.

I'll bet a good bottle of wine that you can send in one of those forms unsigned or an X in the signature spot, as if you're saying sign here, and you have a 99% chance of getting what you asked for. If they're caught what would they say, "oops we must have missed that form, sorry, we'll check better next time", while 500,000 other similar forms go undetected and the data is now in some public server somewhere available for a small fee.

There is a very high price to pay, beyond taxes, for having to give the government your private information on a return. How much crime is committed by use of the SSN alone? The number in dollars is astronomical I'm sure. Just about everything you do, your current financial status, and just about every purchase you make is available for a small fee due to the government's desire for your information.

[Judge Roy Bean]

The answer is to keep income taxes private. Period.

There are already laws to make tax returns private, but you say that those laws are being evaded, and that the taxpayers aren't being harmed by those violations.

I think you've now taken three or four different positions on the same issue.

I think you're confused as well - perhaps it's me on too little caffiene.

I doubt I've even implied that taxpayers aren't being harmed by the violations, let alone said that. The harm for everyone who files taxes is that information about them is being made available to third and fourth parties that not only shouldn't be, but doesn't even need to be made available in the first place.

We're into the law of unintended consequences with the 4506-T. There is an obvious legitimate need for a taxpayer to be able to obtain copies of prior years' returns. But the lending industry has managed to impose itself into the mix, and there is a cottage industry of bombarding the IRS with 4506-T's to satisfy the curiosity of the underwriters. The sheer volume has reached the proportions where the IRS has had to enter into the on-line realms to satisfy the demand.

When did "that's none of your business," disappear from the lexicon of answers to impudent questions about your taxes?

Allowing tax returns to be used as a crutch for lending decisions makes them inherently un-private and the taxpayer's control over the use or sale of their formerly private tax information becomes zero.

If it were just, as the lenders would say, "income verification," then the most that should be supplied are images of the W2's and 1099's.

[Famspear]

SteveSy wrote:

It seems like some of you give the word "law" some magical ability.

"It's a law" as if that stops someone or even prevents someone from doing something and only the rare bad person or company violates them or it. Unfortunately not many have respect for the law unless of course its a law they find desirable.

Hmmm. I think this discussion has evolved into one about people who break the law, Steve. Obviously, where people break the law, such as by submitting (or causing to be submitted) forged 4506-Ts (and under JRB's scenario, it is indeed the lender rather than the data service provider who is culpable), I don't see too many arguments here that merely having 6103, etc., on the books gives the law some "magical ability" to prevent violations thereof. Indeed, we assume that some people do indeed break the law. Indeed, that's why the criminal statutes are there -- to punish people who do so. See my earlier posts, for example.

IRC section 7206 provides (in part):

Any person who --

[ . . . ]
Willfully aids or assists, in, or procures, counsels, or advises the preparation or presentation under, or in connection with any matter arising under, the internal revenue laws, of a return, affidavit, claim, or other document, which is fraudulent or is false as to any material matter, whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim, or document [ . . . ]

shall be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation) or imprisoned not more than 3 years, or both, together with the costs of prosecution.

Merely having 6103 and 7206 on the books does not have any magical ability, any more than having a law punishing murder prevents all murders, or prevents people from committing murder and not getting caught, or prevents guilty murderers from being acquitted by juries.

Laws are, however, a deterrent. That is, SOME people (not all people) who otherwise might do certain things may be deterred from doing those things when they perceive the RISK that they MIGHT go to prison, etc.

This is pretty basic.

[Famspear]

Earlier, I wrote:

One of the ways that people can obtain copies of your Form 1040 returns without your permission is for you to file bankruptcy. For example, if you file an individual Chapter 7 bankruptcy, the Trustee appointed by the Justice Department can, under 6103, obtain copies of all prior Form 1040 returns directly from the IRS without your permission. Likewise, the Trustee's attorney or CPA can obtain those tax returns directly from the IRS without your permission by obtaining a 2848 power of attorney from the Trustee and then ordering the returns.

Another thing about the Federal income tax return and bankruptcy is that, for cases commenced on or after October 17, 2005, the debtor is required to provide the trustee (not later than seven days before the first date set for the first meeting with creditors) with a copy of the debtor's Federal income tax return for the most recent year ending immediately before the commencement of the case. Also, if a creditor asks for a copy, the debtor has to provide one to the creditor. Noncompliance can result in dismissal of the case. See 11 U.S.C. 521(e)(2).

Where I have represented bankruptcy trustees in cases commenced before October 17, 2005, I have often received the tax return(s) from the debtor's accountant (with debtor's permission), or (less often) from the debtor's attorney, or from the debtor himself/herself, rather than from the IRS. The IRS is pretty slow to respond.

We try to protect this information, and we do have shredders. In chapter 7 and 11 cases for individuals, information from prior Form 1040 returns may be crucial in determining tax liability for the ESTATE (even though the estate is a separate taxable entity from the debtor). See IRC 1398(g) for the reasons why.

[Agent Observer]

Stevesy:

Unfortunately not many have respect for the law unless of course its a law they find desirable.

Oops. Sounds like a little Freudian slip on your part. That pretty much describes your stance on every issue. Too bad for you, though, that you "dis-respect" (ie, disobey) the law at your own peril. Last I checked, there were no subparts to laws that said "applies only to those who like this law." Boy, wouldn't murderer's have a hay-day with that one...

There is a very high price to pay, beyond taxes, for having to give the government your private information on a return.

Unless you live under a rock, that statement is relevant across the board, involving all entities, government and commercial. It applies to, banks, mortgage companies, super markets, pet stores, grocery stores, etc, etc, and so on and so forth. Your selective logic doesn't stand up to the reality test. I mean, really, ID theft never involves stolen bank accounts, on line money brokers (Ebay, Pay Pal, etc), or anything of the sort! It's simply not possible! All ID theft is related to the ebil goobermint and its usage of the ebil SSN! Oh, and when was the last time that an employee from Bank of America, or Safeway, went to jail for selling any of the information you provided them on a form? You'll find plenty of IRS employees who go to jail for that same thing. Sorry to burst your conspiracy bubble, Stevesy. Another argument, down in flames...

[Judge Roy Bean]

...But, I digress.

I think this has gone a ways off target - the original point was a LH newbie was wondering about the lender wanting to see their income tax returns, and the point I attempted to make was if the lender wanted to they could and some will.

The fact that the IRS has, at the behest of the industry, simplified and thus abetted this (IMHO risky) process is apparently not how some here wish to see the issue; no offense meant and none taken if you disagree with my assessment of the "contribution" made by allowing information brokers to have access to what used to be private information that only the taxpayer, their accountant or someone with their POA should be able to obtain.

[ASITStands]

The Judge is right about some brokers forging documents. I've examined closing documents in which the broker did the copy/paste trick. It can usually be discovered under microscope.

And, I agree it's more widespread than we might imagine. The lure of money does funny things to people. Mortgage brokering has been a preferred industry the last several years.

It's like those old jokes about used-car or life insurance salesmen versus politicians.

[Judge Roy Bean]

...And, I agree it's more widespread than we might imagine. The lure of money does funny things to people. Mortgage brokering has been a preferred industry the last several years.

It's like those old jokes about used-car or life insurance salesmen versus politicians.

JRB rant = ON:

It wasn't just mortgage brokers. Frankly, the majority of the small ones are diligent, upstanding business people who knew or know their clients, the market, their suppliers etc., and wouldn't play games to take advantage of people. A lot of them are still out there, hunkered down and trying to stay in business in a climate the scammers wanted to have and Washington was more than willing to play enabler for. The collateral damage was acceptable - of course, until it hit Wall Street. All of a sudden it seems we have a crisis.

Pardon me, DUH!

The giant sausage making machine that bought multi-millionaire lifestyles for hundreds of major corporate executives had willing participants, active supporters, bought and paid-for legislators, money-laundering criminals using them, law firm backers protecting them, K-street cheerleaders educating congressional staffers and handshake influencers keeping state AG's from being interested unless it had a political opportunity angle that justified a press release.

Still, a few actual victims have been like Episyrphus pushing the rock up hill; a tiny number of them have awoken a number of sleeping Judges and actually gotten a judgment in court; most gave up for wont of resources or succumbed to a confidential settlement.

So pardon my consternation when a Federal agency with a dismally anti-citizen reputation allies itself with what can only be seen as an opportunistic industry.

JRB Rant = OFF

[Gregg]

Sort of off topic but I just had to comment on this one..

When I pointed out that it wasnt in the code and that the SC has stated what it is she became embarrased then hostile. i guess they dont like it when you show that they dont know what they are talking about.
Now if we could only do that in court.

Of course the problem with that would be a federal judge isin't limited to sighing at you, and they win almost all the arguments they get into in their courtrooms...

[jg]

So pardon my consternation when a Federal agency with a dismally anti-citizen reputation allies itself with what can only be seen as an opportunistic industry.

Perhaps I missed an earlier post, but what evidence of "allies itself" is there?

The IRS may be naively processing what appear to be properly signed requests or it may have even had procedures that enable the wholesale submission of forms without considering the consequences; but it is most certainly not the policy and procedure of the agency to violate the privacy of income tax return information. At least, that is not my experience.

If there is any overt (or even inadvertent) improper releasing of taxpayer information that should be reported; so that it can be stopped.

Or, did I miss something?

[Judge Roy Bean]

...
The IRS may be naively processing what appear to be properly signed requests or it may have even had procedures that enable the wholesale submission of forms without considering the consequences; but it is most certainly not the policy and procedure of the agency to violate the privacy of income tax return information. At least, that is not my experience.

If there is any overt (or even inadvertent) improper releasing of taxpayer information that should be reported; so that it can be stopped.

Or, did I miss something?

I'd again refer to the law of unintended consequences, and I would add that the IRS isn't "naively" processing what appear to be signed requests.

There can be no naivete in this technological environment. Rational and considered experts were probably involved in the development of the processes. I'm even more confident there were voices who said it was a really dumb idea but were listened to and eventually disregarded.

This wasn't developed in a vacuum.

I'm equally confident the IRS considered the consequences and they had the counsel of some number of technogeeks and legal advisors, but ultimately they failed to acknowledge the reality of life today: As long as there is a financial advantage to be gained by obtaining information about someone and a willing source of that information the table is set for opportunists to get it and sell it.

If you think these companies who gather and offer information are non-profits you are more delusional than the TP's. If they can't get information, they have nothing to sell.

The alleged credibility of tax-return data provides an undeserved credence that only enhances its percieved value and thus, creates a market for it.

Where there's a market, there will be purveyors.

[jg]

If there is any overt (or even inadvertent) improper releasing of taxpayer information that should be reported; so that it can be stopped.

I'd again refer to the law of unintended consequences, and I would add that the IRS isn't "naively" processing what appear to be signed requests...
This wasn't developed in a vacuum.
... ultimately they failed to acknowledge the reality of life today
Where there's a market, there will be purveyors.

Unintended consequences, failing to acknowledge reality and even sheer stupidity do not equate to making allies (and seems to be more being played the fool).

More importantly, what can be done to stop the flow of information? This is a barn door that needs be closed; even if the horse has left the barn. methinks.

[Judge Roy Bean]

...Unintended consequences, failing to acknowledge reality and even sheer stupidity do not equate to making allies (and seems to be more being played the fool).

More importantly, what can be done to stop the flow of information? This is a barn door that needs be closed; even if the horse has left the barn. methinks.

I seriously doubt anyone was played the fool. Consider the overhead cost avoidance - not to mention the $4.50 per return year charge.

And if you still think ol' Bean is off in left field somewhere, the signature copying isn't the only game that is played; consider the article from September of 2006 from Ken Harney (Ken is no lightweight, folks):

http://www.washingtonpost.com/wp-dyn/co ... 00542.html

...Wider uses of 4506-Ts could also increase the potential for lender or broker abuse of the system. For example, some large wholesale lenders have required borrowers to sign the forms, but not date them or indicate the tax years to be checked. That allows secondary market investors -- the firms that ultimately own and fund the mortgage -- to access the data on up to four years of filings long after the 60-day limit prescribed by the IRS.

At worst, improperly executed Form 4506-Ts give unknown and unseen individuals the potential to obtain your most confidential income and tax information, then sell it, distribute it or post it on the Internet. With income checks likely to be faster and more frequent in the new electronic format, it will be more important than ever for home mortgage applicants to follow the IRS instructions on Form 4506 to a "T."

That means never signing the form without dating it and specifying the tax years you're authorizing to be checked. Even if the loan officer insists that it's the mortgage company's standard procedure -- or worse, a precondition for obtaining the loan itself -- never sign an incomplete 4506-T.

In the right hands, federal income verifications are a great way to fight fraud. In the wrong hands, it's an open invitation to identity theft, or worse."

And I would add, never sign one at all. If they want income verification, give them copies of your W2's and 1099's. If they're still curiouis, they can place a call to the entities that issued them, and it won't cost them $4.50 per return.

In an effort to bring this long walk on a short pier toward an end, I submit there is a tendency on the part of some here to reject the notion that there really are very clever people who work in allegedly reputable businesses, large and small. And there are climates that engender bending and even breaking the rules.

In fact, I would safely venture a guess that there are far more of them who manage to operate out of the limelight than there are your typical TP. And with the notable exception of the likes of Mr. Snipes, chances are they make a lot more money.

[Famspear]

Anyway, there are strict controls over the release of taxpayer information. I wouldn’t worry. Nothing can go wrong.

Oh, wait.........

http://quatloos.com/Q-Forum/viewtopic.php?t=1990

[Judge Roy Bean]

Information has a value, and there is an active market for it:

http://www.mortgagefraudblog.com/index. ... _striking/

Tuesday, January 08, 2008


Would Be Fraudster Caught Before Striking
Robert Michael Stewart, 26, Timonium, Maryland, was sentenced to 66 months in prison followed by three years of supervised release for fraud in connection with identity theft and aggravated identity theft in a scheme to sell stolen personal and financial information.

According to the plea agreement, Stewart sought to sell 325 folders of personal and financial information of individuals who had previously obtained a mortgage. He gained or had access to this information from his employment at a Pikesville, Maryland mortgage company. In January 2007, Stewart had approximately 200 folders at his residence, which he intended to be sold to others, who would use the information to obtain funds from existing accounts and obtain additional extensions of credit.

On January 4, 2007, Stewart provided a cooperating witness with three “samples” of the mortgage files to sell to buyers. The files included social security numbers, bank account and credit card numbers, copies of driver’s licenses, tax statements, payroll and statement of earnings, and bank account statements. The next day, Stewart negotiated the price of each file, and told the cooperating witness to sell 325 files for $50 each to a buyer who would use the information to commit identity theft.

On January 10, 2007, the individual helped Stewart carry additional files from the mortgage company office to Stewart‘s vehicle. The next day, agents observed Stewart load boxes from his residence into his vehicle. Stewart and the cooperating witness moved the boxes from Stewart‘s vehicle into the vehicle of the cooperating witness, who paid Stewart $8,000. FBI agents arrested Stewart outside his vehicle and took possession of all the stolen files.

United States Attorney Rod J. Rosenstein said, “People disclose sensitive personal and financial information every time they apply for mortgage loans and other forms of credit. Law enforcement agencies will continue to be aggressive in catching and punishing criminals who seek to use that information. Under federal law, every identity thief serves at least two years in federal prison in addition to the sentence for the fraud scheme.”

The parties agree that the expected losses from the information in these files would have been at least $500,000 had the files not been recovered by the FBI and had instead been sold to identity thieves.

[webhick]

Except that, if I infer or recall correctly from what Steve has previously said somewhere in Quatloos, Steve does not believe in his own theories strongly enough to actually follow through by refusing to file Federal income tax returns, or by filing false returns with tax protester arguments. I do hope for the sake of Steve and his family that my understanding is correct: that he does pay his Federal income taxes.

In this regard, Steve is much wiser than the poor souls whose lives are ruined or destroyed by these scams.

Actually, I've gotten the impression from SteveSy's posts that he thinks the laws to pay income taxes are illegal but he recognizes the consequences for not obeying them and is not willing to have his life (and possibly the lives of any of his dependents) financially ruined for his beliefs. In which case, it's not a matter of how strongly he believes his theories, it's just a matter of weighing the pros and cons.

[silversopp]

The laws are "illegal" but failing to follow them results in negative consequences from the government? That sounds backwards to me.

Legal doesn't mean "right" and illegal doesn't mean "wrong". All that matters is what actions prompt harmful responses from the government. The Mormon Extermination Order was not right, but it was legal until it was repealed 100 years later.

[webhick]

The laws are "illegal" but failing to follow them results in negative consequences from the government? That sounds backwards to me.

My understanding of the concept is that they're "illegal" because the founders never intended for them to happen, or the constitution didn't allow it, or there's been some misinterpretations...or something like that. I don't take notes, but it seems like the story keeps changing.

Legal doesn't mean "right" and illegal doesn't mean "wrong". All that matters is what actions prompt harmful responses from the government.

Agreed.

[.]

verbal pixie dust

It's magic!