Decriminalize Tax Denial?

[LPC]

In the recent threads on Wesley Snipes, and in the NY Times articles on the Snipes verdict, there have been suggestions that the word "willfully" needs to be better defined by Congress, or that willful failure to file should be decriminalized. My own thoughts:

1. It should NOT be a crime to file a frivolous tax return or refund claim, as Snipes did, as long as the taxpayer's position is clearly disclosed on the return. Any other result puts the taxpayer in a "catch-22" position of not being able to seek a judicial resolution of their claims without risking criminal prosecution. The idea that taxpayers can adjudicate their claims in a civil proceeding is an explicit part of the Supreme Court's decision in Cheek, and should be respected. Deluge the idiot with frivolous return penalties, of course, but no criminal penalties.

2. I can also support making willful failure to file a civil offense, and not a criminal offense. The charge of tax evasion will still be a deterrent for those who take affirmative steps to go "under the radar," but simply not filing a return should result in an assessable penalty of 100% or 200% of the tax assessed. Let's stop putting the idiots in front of potentially sympathetic juries and giving them a public forum as martyrs.

3. However, I say leave the definition of "willfully" alone. The courts have developed what seem to me to be workable standards and getting Congress involved is too likely to result in nothing but a different set of uncertainties and problems.

[Joey Smith]

I agree; criminal penalties should still be included (and perhaps even made harsher) for promoters of frivolous theories however.

[Levendis]

I disagree and agree. "Willfulness" is in a state of disrepair, as are most mental states under the Code. Willfulness under 6701 is, under some strange textualist theory, the same as willfulness under 7206, which is why you never, ever see 6701 cases. (Section 6701 could eliminate most TP promoters and most aggressive marketed products, e.g. transfer pricing studies.) Similarly, section 6713 imposes a strict liability penalty on preparer's using or disclosing return info for an improper purpose. Section 7216 imposes a misdemeanor criminal penalty for willful or reckless improper disclosure and use. Then Circular 230 comes in and applies a willful standard to disclosures and uses of return info contrary to the Code. Presumably the willfulness standard would be civil. So how does that piggyback on 6713 or 7216. (The IRM adopts the traditional civil and criminal definitions of willfulness for most purposes.)

[Nikki]

How about:

Taxpayer gets one bite at the apple -- a filed tax return (or reasonable facsimile), WITHOUT ALTERED JURAT, with a specific IDIOT POSITION DISCLOSURE FORM clearly stating whatever flakey protest/evasion/avoidance theory has been used in computing the income and taxes. No penalty for any argument, no matter how absurd, shopworn, or overruled in the past.

The IRS's newly-created division of Correspondence at a Third-Grade Reading Level With Looney-Bin Filers responds to the Taxpayer with a clear rebuttal of the specified arguments citing appropriate court decisions, etc.

The taxpayer then has a choice: Accept the IRS's rebuttal, refile a proper return, and pay all taxes due (interest clock did NOT stop) OR pursue administrative / court resolution of his issues. However, option 2 carries a mandatory $5,000 frivolous filing penalty AND assessment of all IRS and Court costs against the taxpayer in the event he loses.

No jail time at risk.

Caveats:

Once the opriginal return has been rejected by the IRS CTGRLWLBF Division, it can not be re-filed with different arguments. That will be subject to criminal evasion prosecution.

Once the original arguments have been rebutted, they can not be used in any subsequent year. That, too will be subject to criminal prosecution.

Failure to include the IDIOT POSITION DISCLOSURE FORM means the return is automatically rejected as a non-return, and the taxpayer is notified that the failure-to-file clock has started. Any subsequent filing (if received after the deadline) will have the appropriate penalties imposed.

1040X or the equivalent can not be used.

[Burzmali]

Doesn't that benefit the rich? If I had a large enough tax bill, it might be worth risking a sizable fine to evade.

[Nikki]

Doesn't that benefit the rich? If I had a large enough tax bill, it might be worth risking a sizable fine to evade.

Evasion = criminal = jail time PLUS you still owe all taxes, interest, and penalties.

Even it the Taxpayer files the official looney application and loses, he's still on the hook for takes plus interest.

Remember, the fine is in ADDITION to the taxes, penalties, interest, and prosecution / collection costs.

Unless the taxpayer's return on his cash on hand is substantially higher than the government's statutory interest rate, plus all the add-ons, he doesn't gain anything financially.

[grixit]

Perhaps willfullness should be taken out of the equation. We should establish that any use of a frivolous argument constitutes tax evasion, pure and simple. Want to give them one bite? Ok, the first time, the filing gets rejected and the frivolous position pamplet gets sent. Second time, sorry that's evasion.

[Ned Netterville]

LPC wrote:

I can also support making willful failure to file a civil offense, and not a criminal offense. The charge of tax evasion will still be a deterrent for those who take affirmative steps to go "under the radar," but simply not filing a return should result in an assessable penalty of 100% or 200% of the tax assessed. Let's stop putting the idiots in front of potentially sympathetic juries and giving them a public forum as martyrs.

Gee, Dan, why not just eliminate jury trials altogether, or at least in all tax cases? It is a know fact, at least among lawyers, that jurors are among a dumb lot and the root cause of courts being clogged with cases. And why not make the assessable penalty 10 or 20 times whatever amount the irs determines should have been paid? Tax rates could be increased substantially across the board, and tax revenues would then increase exponentially, because no one would have the temerity not to pay. Then the government could provide munificent benefits for all of its citizens from cradle to grave. Of course with such good benefits we'd have to close the doors to immigration and keep the lid on population growth, perhaps with mandatory birth control or by rejuvenating local draft boards, so that those who weren't paying sufficient taxes would become our brave fighting forces. With all that revenue and so many soldiers we could well afford more wars against Islamo-fascists, terrorists, communists and jack Quakers. Why not go all the way? Why not follow your line of reasoning to its logical conclusion?

[LPC]

Gee, Dan, why not just eliminate jury trials altogether, or at least in all tax cases? It is a know fact, at least among lawyers, that jurors are among a dumb lot and the root cause of courts being clogged with cases. And why not make the assessable penalty 10 or 20 times whatever amount the irs determines should have been paid? Tax rates could be increased substantially across the board, and tax revenues would then increase exponentially, because no one would have the temerity not to pay. Then the government could provide munificent benefits for all of its citizens from cradle to grave. Of course with such good benefits we'd have to close the doors to immigration and keep the lid on population growth, perhaps with mandatory birth control or by rejuvenating local draft boards, so that those who weren't paying sufficient taxes would become our brave fighting forces. With all that revenue and so many soldiers we could well afford more wars against Islamo-fascists, terrorists, communists and jack Quakers. Why not go all the way? Why not follow your line of reasoning to its logical conclusion?

It's always interesting to hear rants from people who object to the penalties of their peers being lowered.

[Imalawman]

Gee, Dan, why not just eliminate jury trials altogether, or at least in all tax cases? It is a know fact, at least among lawyers, that jurors are among a dumb lot and the root cause of courts being clogged with cases.

A pedicab driver telling me, a lawyer, what is a known fact among lawyers - interesting....

[Judge Roy Bean]

Oddly enough, ask the losing litigant what they think of a jury and they'll imply or even outright say they were at best, ignorant, or worse, influenced. Conversely, the winning client believes they are reasonable people.

How anyone would tie jurors to the number of cases being filed is indicative of Ned's "logic." Hint, Ned: Most civil cases never get before a jury.

[Demosthenes]

I thought the jury in the Snipes case took their job quite seriously and I respect their decision, even if I disagree with some of it.

[Joey Smith]

I thought the jury in the Snipes case took their job quite seriously and I respect their decision, even if I disagree with some of it.

Yeah, seems about right to me too.