The I.R.S. Takes Cindy Sheehan to Court

Yesterday the IRS took war tax resister Cindy Sheehan to federal court to ask a judge to compel her to turn over information about her finances so they could find assets to seize.

And the agency completely struck out. The judge told them that if they want Sheehan to come in and talk to them, they should ask her nicely. But can’t you make her come in and answer our questions? they asked. Maybe I could but I won’t, the judge said.

There is a second hearing scheduled for at which time the judge may reconsider.

During the hearing, the judge said others have made political statements with tax protests while still managing to comply with the law.

“It strikes me as a civilized way to protest uncivilized acts,” Moulds said, bringing tears to Sheehan’s eyes inside the courtroom and again at the news conference afterward as she recalled his words.

“Finally, someone in this government recognizes my pain,” she told reporters.

Sheehan has agreed to meet again with the IRS, but not to answer their questions or to pay the taxes the agency says she owes. “No matter if the government says I owe a penny or $100,000, I’m not paying one penny to them,” she told supporters outside after the hearing.

The Treasury Inspector General for Tax Administration, J. Russell George, presented a report to the House Oversight and Government Reform Subcommittee on Government Organization, Efficiency, and Financial Management .

The IRS had recently bragged to the press that it had successfully blocked over 200,000 fraudulent tax returns this year that claimed over $1.15 billion in refunds. But George will tell Congress that: “We have found that the issuance of fraudulent tax refunds based on false income documents is significantly greater than the amount detected and prevented by the IRS.”

How significantly greater? To the tune of $14 billion, says George. To put that into perspective, that makes issuing fraudulent tax refunds a bigger federal budget item than, for instance:

  • The entirety of the Department of the Interior ($12.057 billion) — that includes the National Park Service, Bureau of Indian Affairs, Fish and Wildlife Service, Bureau of Land Management, and others
  • The total budget of the Internal Revenue Service ($13.285 billion)

The Internal Revenue Code permits the IRS to slap a $5,000 “frivolous filing penalty” on anyone who files a tax return that “(A) does not contain information on which the substantial correctness of the self-assessment may be judged, or (B) contains information that on its face indicates that the self-assessment is substantially incorrect, and … (A) is based on a position which the Secretary has identified as frivolous… or (B) reflects a desire to delay or impede the administration of Federal tax laws.”

The IRS has been abusing this authority to fine people who file full and correct tax returns but who also include with their returns letters of protest indicating why they are not paying the full amount or why they feel their taxes are being misspent.

The law pretty clearly says the penalty only applies to filings that both assert a legal position the IRS considers frivolous or designed to delay or impede tax collection and accompany a tax return that is incomplete or incorrect.

But the IRS has a trick up its sleeve: in order to challenge an unlawful fine like this, according to the IRS’s own rules on the subject, you must first pay the fine. Tax resisters who are unwilling to give money to the IRS are thereby locked out of the appeal process, and the agency can fine them whether or not they have the legal authority to do so. The agency seems determined to continue abusing its authority in this way.

The law students who have taken on Vickie Aldrich’s case plan to pursue this angle in their defense strategy.