Tax Law

07
Apr
2011

Illegal Tax Protests – The Fool’s Path to Jail

Taxes stink, of course; that’s why we are filled with dread, rather than with the mood to party, on April 15 (or this year, April 18, due to local holidays respected by the IRS.)  Both substantively and procedurally, taxes are no fun; it stinks to pay them and it stinks to bear the procedural burden of payment and calculation.

Some people would like to tell you that you don’t have to pay U.S. taxes.  Some will sell you books, pamphlets, memberships in cute organizations, etc., to convince you that taxation is voluntary.  If you live in, work in, own assets in or bear civic allegiance to the United States, it is not.  It is true that the calculation method of U.S. taxes is “voluntary” in a defined technical sense, namely, that we send the government our returns prepared through our voluntary participation and sweat.  In some countries, taxpayers get a bill before filing a return to protest the bill or making a payment; that’s not our system.  However the burden of taxation is NOT a voluntary burden; if you owe, you owe, even if you decline to assent to owing.

If you are a U.S. citizen or lawful permanent resident you are taxable under U.S. law and under most states’ laws on your worldwide income, unless exempted by statute or treaty.  Income is income regardless or source, regardless of form and is taxable unless exempted.  If you live or earn in the United States you are subject to taxation on your U.S. sourced income and possibly other income, unless exempted.  If you wish to cease being taxed in the U.S., you must:

  • Give up your citizenship
  • Abandon all income-producing assets and activities in the United States of America, and
  • Leave permanently (except MAYBE to visit as a tourist only.)

Some very wealthy Americans have surrendered their citizenship, and left.  Any other choice (if you are an American citizen or lawful permanent resident) submits you to the continuing tax jurisdiction of the United States.

Tax scams vary. Some claim that African-Americans are exempt from taxation because of broken promises to freedmen of 40 acres and a mule; this tax claim is false, its historical moral merit notwithstanding. Some will claim that Social Security is voluntary; it is not, although its original authorizing language used that adjective. Some will say that the federal government cannot tax certain types of income; this is almost false (state bond interest being an exception to the general rule.) What illegal tax protestors (or protesters, one sees both spellings) WON’T tell you is how many people have lost their homes, their jobs and their freedom by playing a “grown-up” version of cops and robbers or Dungeons and Dragons with the IRS. PLEASE READ this Wiki about illegal tax protestors, which will give you a good understanding of the sorts of aggressive stupidity and consequences that follow from illegal tax protestor foolishness.

Here’s a general question for you. Why hasn’t Bill Gates exempted himself from U.S. taxation if it’s doable? Why not Donald Trump? – he’s no big government “pinko” (or so most would agree.) Why haven’t Sergey Brin and Larry Page and Mark Zuckerberg done so? After all, they know enough people and have enough money to make it worthwhile, if it’s legit!

The answer is that these wealthy and successful Americans are simply not going to fall prey to illegal tax protestor (excuse me, Sister Marie) bulls***; they have tax lawyers to guide them through their exceptionally complex tax statuses.  So you should do likewise; hire a tax lawyer and consult with her or him, if you need one.  You will find none who will entertain tax protestor foolishness.

If you don’t file taxes when you have received income above the filing threshold and are otherwise required to file, you run the risk of severe penalties, interest and in rare cases criminal prosecution. Not very many people get prosecuted for tax crimes, but those who do generally do not enjoy the experience. The IRS has a special program to go after illegal tax protestors; it does so not to be vicious (though it can be) but to purge out the disinformation.  Read how the Department of Justice handles illegal tax protestors.

Please file your taxes if you owe, and work out a payment arrangement or an installment agreement or an offer in compromise if it’s just impossible to pay. Whatever you do, don’t join the illegal tax protestors unless you enjoy the food in Petersburg. Where’s Petersburg? It’s a medium security federal prison south of Richmond in a town of the same name. I know a highly skilled attorney (disbarred, now reinstated maybe 15 years later) who went there for tax evasion and he comprehensively disliked the experience; he was something of a ladies’ man, and the lack of ladies disappointed him. If you dislike swill beer, remember: in prison they don’t serve bad beer, they serve NO beer.

Please note: none of this is an endorsement of taxation, politically.  There’s nothing wrong with arguing for a change in the law; that’s absolutely constitutionally protected.  Maybe taxes are a hideous idea, and should be abolished.  You definitely have the right to criticize taxation, and to do so in severe language.  You have the right to protest against the IRS as much as against anyand to condemn tax laws as immoral, un-American and an offense against Mighty Thor, if those are your beliefs.  What’s fraudulent and illegal is lying to people about what the law IS NOW with the intent that they will spend money on you, and then taking their money, knowing how they are damaging their own interests by believing your lies.  That’s what many tax protestors do, all the way to the bank, until prosecuted.

Posted by Bruce Godfrey in Tax Law
05
Oct
2010

Joe Miller (R-AK Senate candidate) says unemployment benefits are unconstitutional, BUT….

his wife received them immediately after she was terminated from her job – at his magistrate judge’s office – upon getting fired for violating nepotism rules as the wife of a magistrate judge.

Got that? They are unconstitutional, except when my household collects them when my wife gets them after losing her job due to anti-nepotism rules for being my wife.

Go read the comedy: http://www.huffingtonpost.com/2010/10/05/joe-millers-wife-received_n_750809.html.

Unemployment benefits’ constitutionality seems pretty clear to me under the “general welfare” clause of Congress’ enumerated powers, but hey, maybe we have been unconstitutional for 80 years and Joe Miller is the first to realize it.  But only AFTER spending his wife’s UI benefits.  That she got after losing her job.  For being the wife of a judge.  Right.  My bet – he won’t reimburse the U.S. and Alaskan taxpayers and neither will she.  (For the record, both state and federal taxes support the unemployment benefits system.)

Posted by Bruce Godfrey in commentary, Tax Law, Unemployment, 0 comments
04
Oct
2010

Too Good to Be True Tax Claims

Watch out for incorrect tax advice on these topics.

1. Anyone who tells you that you can deduct “educational” expenses generally, without a narrowly tailored definition of those expenses or the justification for those expenses, is presumably wrong. There are a number of credits, deductions and exemptions that apply to different aspects of educational expenses such as student loan interest for low – to moderate-income taxpayers, lifetime learning and HOPE educational tax assistance and in LIMITED circumstances tuition and books for a course of study or degree that advances a specific career or career path in which one is already qualified to practice. In some limited circumstances, an educational course may be considered a necessary and ordinary business expense, but the rules are quite narrow.

2. Your work clothes as a business or other deduction. In general, attire is not deductible if it is useful for any purpose other than the job. A fire suit, medical scrubs, protective/safety gear, work uniforms, costumes and related gear are usually deductible in theory. Bozo the Clown’s red rubber nose is pretty safe. But ordinary business attire, ordinary (not costume) hairstyling, etc., are not deductible in the United States. The IRS loves to audit this deduction. Rule of thumb: if you bought it at a department store, rather than at a professional supply store or uniform store, the presumption is that it fails.

3. Mileage. No substitute exists for a mileage log even if you are deducting total expenses of a vehicle, rather than taking the mileage rate. You need to have the beginning and ending mileage for a given tax year and a mileage log showing every trip for which you are seeking ANY deduction, the odometer at the beginning and end of the trip and the purpose of the trip and the date. The IRS is somewhat forgiving on the business substance of your trip; if the main purpose of the trip is to drive 100 miles to Greyville to do business you won’t lose the deduction for stopping for gas and a soda at a rest stop and don’t need to list really incidental stops like that. IRS regulations require CONTEMPORANEOUS records for mileage and related incidental expenses; constructing it back the following year may well fail. Deducting a commute – from your home to your regular place of business, or your trip home from anywhere – is prohibited, though mileage from your home to a TEMPORARY job site may be deductible for some taxpayers who have a regular place of business elsewhere.

4. Home Office. The Service LOVES to audit this deduction; taking it is an invitation to an audit. In general, you may deduct the portion of your rent or mortgage interest as a business expense, along with related proportions of property taxes, utilities, etc., that is proportional to the amount of space that is used EXCLUSIVELY (important – capitalized for a reason) for a business. If this means you need to go buy cubicle walls, or need to move the clothes out of the closet, do it. If you deduct part or your mortgage interest or taxes as a business expense on Schedule C, you CANNOT also deduct that fraction on Schedule A as home mortgage interest or state/local taxes. In general, it’s more advantageous to take a valid deduction on Schedule C if it is lawful to do so, but you may not double deduct any home office or other tax items.

5. “You Don’t REALLY Have to Pay Taxes.” Before there were 419 scams and “please send me money honorable Sir to release my Estate” email phishing, there were people ready to tell you that American taxes were voluntary. The term “voluntary” refers to the procedural method of calculation and filing taxes by a form completed by the taxpayer, NOT to the substantive duty to pay taxes. All income earned in the U.S. and by U.S. citizens anywhere is taxable under the Internal Revenue Code unless exempted by statute or treaty, period. If you want not to pay U.S. income taxes – a legitimate goal – you need to pay the following civic retail price: a) give up U.S. citizenship, b) leave the United States and c) divest of all U.S. income sources. Anything else will get you assessed by the U.S. government on part or all of your income.

Posted by Bruce Godfrey in Pro Bono Services, Tax Law, 0 comments