Tax Defiers Offers Reasons Not to Pay, but Government Disagrees
Wednesday, April 15, 2009
D.C. police Detective Michael C. Irving was looking for a way to keep more money in his pocket when he settled on a little-known "program" that he claimed exempted him from income taxes.
During a three-year period, while earning more than $450,000, he did not pay a dime to the U.S. Treasury or D.C. government. Irving had not stumbled upon an obscure tax loophole. Authorities say the respected homicide investigator was participating in an extreme form of tax cheating that they worry could be going mainstream.
As millions of Americans sweat out their tax returns due today, federal authorities say they are keeping a close eye on a relatively small group of residents who refuse to pay any income taxes.
Known as tax defiers, deniers or protesters, they cite myriad reasons for their stance that income tax is illegal. Some argue that the 16th Amendment, which allowed Congress to collect income taxes, was never ratified. Others believe paying taxes should be voluntary. A few argue that only D.C. residents or federal employees are subject to the tax laws.
The U.S. government says the theories are bogus, and the IRS recently updated a 77-page book on its Web site rebutting dozens of such arguments.
The movement had its roots in the 1960s and 1970s with angry farmers upset about losing their land, extreme libertarians and members of militia groups and white supremacist organizations, authorities and experts say. The ideas were spread in seminars and, lately, on the Internet to a nationwide audience of people interested in avoiding taxes.
In a bad economy, law enforcement officials worry that the arguments are more enticing than ever.
"This is a significant problem," said Thomas J. Perrelli, the Justice Department's associate attorney general. "This isn't the situation where people make a small error on their taxes. These are basically people objecting to the entire notion of the tax system."
Authorities say defiers either refuse to submit tax returns or file them with bogus information about their earnings. Many defiers list their income as zero, authorities say.
The IRS labels such returns as "frivolous." It received more than 10,000 of them last year and more than 90,000 pieces of related correspondence. Both numbers have held steady over the years. Usually, tax filers correct their returns after receiving a stern letter from the IRS, officials say.
The Justice Department has stepped up enforcement against tax defiers, and the IRS has referred more cases for criminal prosecution: 132 cases in fiscal 2008, up from 74 the previous year and 80 in 2006. The Justice Department also has filed about 100 civil lawsuits since 2001 asking judges to block defiers from promoting or selling related tax-preparation products.
Last month, the department filed a civil suit to stop a South Carolina tax preparer and his company, Reclaim Services, from filing frivolous tax returns on behalf of customers. Two machine shop owners, who pelted the government with letters extolling tax defier arguments, were convicted last month of tax evasion. On Thursday, a Mississippi man was convicted of filing false returns; he had argued that he was a citizen of his state, not the United States, prosecutors say.