How you can resist funding the government → about the IRS and U.S. tax law/policy → IRS incompetence → enforcement effort/results → failure to follow the rules during collection process

The National Taxpayer Advocate reports to Congress each year on the state of the tax system and the burden on the taxpayer. The latest report, released today, includes some tidbits about the underground economy, sources of the tax gap, and unkind enforcement follies like this one:

  • Criminal Investigation Refund Freezes. The IRS Criminal Investigation function (CI), through its Questionable Refund Program (QRP), places a “freeze” on hundreds of thousands of refund claims each year that it believes may contain indicia of fraud. CI personnel currently review the refund claims and “determine” whether they are fraudulent — without notifying taxpayers that their claims are under review and without giving taxpayers an opportunity to present documentation supporting their positions. , the Taxpayer Advocate Service (TAS) received more than 28,000 requests for assistance from taxpayers whose refunds had been frozen. TAS studied a randomly selected sample of nearly 500 cases to determine the ultimate disposition of these cases. When TAS assisted the taxpayers, CI ultimately agreed to issue the full amount of the refund claimed (or more) in 66 percent of the decided cases and to issue a partial refund in an additional 14 percent of the decided cases. Thus, taxpayers received a full or partial refund in 80 percent of frozen-refund cases brought to TAS. The median Adjusted Gross Income (AGI) of these taxpayers was $13,330, and the median refund was $3,519. Thus, the refund constituted, on average, more than 26 percent of the claimant’s AGI for the year, and the taxpayers were required to wait, on average, more than 8½ months to receive their refunds. The National Taxpayer Advocate believes that the QRP is an important program to protect against tax fraud, but the IRS must implement procedures to notify taxpayers that their refunds have been frozen, provide taxpayers with an opportunity to submit documentation, and bring cases to a quicker resolution.

This certainly affects those of us using the DON Method of tax resistance — particularly those of us who rely on getting our refunds before April 15th so we can make an IRA deposit in time to declare it on the previous year’s return.

The report also notes:

  • The Cash Economy. Underreported income (and related self-employment tax) from the so-called “cash economy” is probably the single largest component of the “tax gap.” It may exceed $100 billion per year. Because income from the cash economy is not subject to information reporting, many of the IRS’s traditional means of enforcement are unlikely to be effective in addressing it. The IRS has a number of initiatives that could be effective if coordinated and pursued more aggressively. However, no single function coordinates research, outreach, and compliance initiatives aimed at improving reporting compliance among cash economy participants. Nor does the IRS give these initiatives the same level of attention as other initiatives, such as those addressing tax shelters or the Earned Income Tax Credit (EITC). The IRS must develop a comprehensive strategy for addressing the cash economy if it is to significantly reduce the tax gap.

Expanding on this summary, the full report says:

According to the IRS, taxpayers report:

  • 99 percent of the income subject to withholding (e.g., wages),
  • 96 percent of the income subject to third-party information reporting (e.g., interest), and
  • 68 percent of the income not subject to withholding or information reporting (e.g., inventory sales proceeds).

This percentage drops to 20 percent for income earned by certain sole proprietors (called “informal suppliers”) who operate “off the books” on a cash basis in areas such as street vending, door-to-door sales or moonlighting in a trade or profession.…

The IRS has no direct estimate of the portion of the tax gap attributable to the so called “cash economy.” However, according to IRS estimates:

  • More than 60 percent of the tax gap is attributable to self-employed individuals.
  • Eighty percent of the tax gap is attributable to underreporting of tax.
  • About 43 percent of the tax gap, $134 billion to $155 billion, is attributable to underreporting by self-employed individuals.
  • Over 80 percent of all individual underreporting is attributable to understated income rather than overstated deductions.

These estimates suggest that self-employed taxpayers who file returns but underreport their income (or self-employment taxes) represent the single largest component of the tax gap, accounting for more than a third of the gap and over $100 billion per year. Further, the IRS’s estimates may understate the portions of the tax gap attributable to the cash economy because such noncompliance is inherently difficult to detect. Taxpayers, including the self-employed, primarily underreport income that is not subject to third-party information reporting, i.e., income earned in the cash economy. Practitioners confirm that the IRS is frequently unable to deter or detect underreporting among cash economy participants.

Research suggests that the cash economy is growing. According to one estimate the “underground economy,” which includes both the cash economy and illegal activities, increased from four percent of the U.S. Gross National Product in to nine percent in . A recent study suggests that between nine and 29 percent of the workers in Los Angeles County California are paid in cash and do not have federal or state payroll taxes withheld. The cash economy may grow even faster as cash transactions move to the Internet.

To address some of this, the Advocate’s office suggests:

  • Measures to Reduce Noncompliance in the Cash Economy. The IRS estimates that the annual federal tax gap for was between $257 billion and $298 billion. The IRS receives about 130 million income tax returns each year. Thus, every taxpayer is forced to pay an average $2,000 “surtax” each year to subsidize noncompliance. IRS data show that the highest rate of noncompliance by far is attributable to transactions that are not reported to the IRS on a Form W-2, Form 1099, Schedule K-1, or similar form. These unreported transactions occur largely in the so-called “cash economy.” To reduce the tax burden on compliant taxpayers, we recommend that Congress (1) create a three-pronged reporting and payment system that encourages compliance in certain cash economy transactions by (a) instituting backup withholding on payments to taxpayers who have demonstrated “substantial noncompliance”; (b) releasing backup withholding on payments to “substantially noncompliant” taxpayers who have demonstrated “substantial compliance” and agree to schedule and make future estimated tax payments through the IRS Electronic Funds Transfer Payment System (EFTPS); and (c) providing that payors will not be required to institute backup withholding on payments to independent contractors that present payors with a valid IRS “compliance certificate”; (2) require the IRS to promote the making of estimated tax payments through EFTPS; (3) authorize voluntary withholding agreements between independent contractors and service recipients; and (4) require third-party information reporting for certain payments to corporations with 50 or fewer shareholders.

Probably easier said than done, but I wouldn’t be at all surprised to see some moves in this direction.

Another tax-gap source mentioned in the report is misreporting capital gains and losses on the sale of stocks and mutual funds. Apparently there is no reliable reporting mechanism for the price at which an investor buys such a thing (the “basis”), so when the taxpayer reports the difference between the sale price and the purchase price, the IRS has to either take it on faith or perform a full-scale audit to force the taxpayer to cough up documentation:

Many financial institutions through which investors own stocks and mutual funds (“brokers”) do not currently keep track of an investor’s basis in the stocks or mutual funds, and no brokers report basis information to both taxpayers and the IRS on a Form 1099-B. The absence of information reporting creates serious problems for many taxpayers and the government alike. For taxpayers, tracking basis can be extraordinarily complex and many taxpayers seeking to comply with the law find that they simply cannot do so with accuracy, leaving them exposed if audited. From the government’s perspective, the absence of information reporting enables underreporting by taxpayers who deliberately overstate their basis (thereby reducing their gain or even generating a loss), because they know the IRS generally cannot detect errors in basis reporting in the absence of an audit. One recent estimate puts the revenue loss to the government from such underreporting at $250 billion over the next 10 years.

The National Taxpayer Advocate’s office released its annual report to Congress . There’s a wealth of interesting information in there (well, interesting if you’ve got some tax geek in you). Some things that caught my eye:

  • “With regard to IRS’s stepped-up enforcement activity over the past few years, we are beginning to see signs that taxpayer rights are not being protected as well as they have been in recent years, particularly in the collection process. Perhaps this is almost inevitable when enforcement is ramped up quickly and pressure is applied to program managers to show results, but we believe it is important to highlight our concerns and for the IRS to take our concerns seriously to avoid the risk that the enforcement over-zealousness which plagued the agency in will recur.”
  • “In , the IRS reported more delinquent tax dollars as ‘currently not collectible’ than it actually collected on active balance due accounts (TDAs), installment agreement accounts, and offers in compromise (OIC) combined.”
  • “IRS studies and external experts in collection confirm that collection cases 24 months past due generally yield less than 15 cents on the dollar and after three years are practically uncollectible.”
  • “Some aspects of the [private debt collection] plans reflect dramatic departures from IRS practice and impact taxpayer rights. We would like to discuss some of the specifics in this report, but the IRS has advised us that much of the information in the PCA operational plans and calling scripts is designated as ‘proprietary information,’ and generally cannot be released without the consent of the PCAs. The operational plans and calling scripts describe such things as belated Fair Debt Collection Practices Act (FDCPA) warnings and psychological techniques used to coax debtors into paying.” (The report recommends that the private debt collection initiative be entirely scrapped.)
  • The IRS has been using an automated process of attaching 15% levies to federal payments to people with tax delinquencies. Most typically, this is used to seize a portion of Social Security payments. The IRS has used this power against people well below the poverty line, although for other sorts of levies and seizures it does take financial hardship into account.

The IRS hasn’t forgotten how to play mean. Excerpts from a Tax Court Memo:

A mentally disabled veteran… sought review of the IRS’s refusal to abate interest… for liabilities that were assessed during a period that he was intermittently hospitalized and homeless, and did not receive notices of deficiency. Acting pro se, the taxpayer had agreed to a stipulation of facts that would do little to prove his case, and that would prohibit him from presenting useful evidence. The taxpayer subsequently obtained pro bono counsel and moved to vacate the stipulations so that his interest abatement claim could be decided on its merits.

…The taxpayer was not represented by counsel when the stipulations were being drafted; the stipulations were prepared by the government’s counsel without negotiation or bargaining. Additionally, he had no legal training and suffered from a weakened mental and physical condition. The government’s argument that the taxpayer would not be prejudiced by the agreed-upon stipulations was rejected. Finally, the taxpayer did not understand the stipulation process; he believed that the government’s counsel was there to assist him, rather than to represent the IRS.

If the IRS is trying to collect from you by seizing your funds or property, make sure to ask for a receipt.

The collection of unpaid tax by the IRS generally begins with letters to the taxpayer followed by telephone calls and personal contacts by an IRS employee. The employees who make personal contact are referred to as revenue officers. They consider the taxpayer’s ability to pay the tax and discuss alternatives, such as an installment payment agreement or offer in compromise. If these actions have been taken and the taxpayer has not fully paid the tax due, the revenue officer has the authority to take the taxpayer’s funds or property for the payment of tax. Taking a taxpayer’s property for unpaid tax is commonly referred to as a “seizure.”

The IRS followed these guidelines in the vast majority of instances. Our review of a random sample of 50 seizures selected from 508 seizures conducted , identified 15 seizures involving 17 instances in which the IRS did not fully comply with a particular Internal Revenue Code requirement. While TIGTA did not identify any instances in which the taxpayers were adversely affected, not following legal and internal guidelines could result in abuses of taxpayers’ rights. The 17 instances included 7 in which expenses and proceeds resulting from seizures were not properly applied to the taxpayer’s account; 6 in which sales proceeds were applied to the taxpayer’s liability, but the required balance-due letter sent to the taxpayer did not show the correct new balance; and 4 in which the name of the purchaser of the seized property was disclosed to the taxpayer.

Some news-in-brief:

Some brief notes from here and there:

  • The Treasury Department’s Inspector General found that the IRS doesn’t always follow the rules when it seizes property. In fact, in almost half of the seizures in the random sample they studied, the IRS had screwed up at least once. Errors included not applying the proceeds of the seizure to the correct account, and not providing a correct accounting to the taxpayer of what was seized and what liability it was being applied to.
  • Among the winners in the recent European elections was Joe Higgins, who won Ireland’s Dublin-based seat. Higgins “once spent a month in prison for offences related to a bin tax protest.” The bin tax revolt is one I haven’t much looked into.
  • Finally… Craig T. Nelson and Fox News are still trying to hint at a conservative tax resistance campaign without being willing to actually commit to it themselves. The interview as a whole is nearly incoherent, and I don’t think you can blame it on the rushed transcript. But here’s the meat on the tax resistance part:
    HANNITY:
    …You’re thinking, is it true about not paying income taxes?
    NELSON:
    Well, what I’m thinking is that, if I’m a fiscally-responsible person and investor, I’m going to invest my money in a company that’s bankrupt? I’m going to go to a bank that is not — doesn’t have any fiscal acuity? And that’s our government.
    HANNITY:
    That is — it’s worse than that.
    NELSON:
    And I’m saying to myself, “Wait a minute. What if each of us withheld as much as Timothy Geithner withheld?” As Americans, and said, “You know what? We’re not going to pay that.”
    HANNITY:
    You do that, I do that, we’re going to be arrested. Listen, I mean it sincerely, Timothy Geithner…
    NELSON:
    Do you think that a lot of us, en masse, doing the same thing, standing up — we’re not a representative form of government any more. We’re not being represented. We have lobbyists who are petitioning for certain favors, certain grants. And here we are…
    HANNITY:
    So you’re saying we hold back what tax cheat Geithner didn’t pay? Hold back that amount of money?
    NELSON:
    Just that amount, would change a lot of things.
    HANNITY:
    I like that.
    NELSON:
    At least would, would say…
    HANNITY:
    I like that idea. Now the IRS is going to arrest me with you. Great.
    NELSON:
    It would say to the government, you know, we’re protesting the way you’re doing things. I didn’t know I was responsible for this bailout. I really didn’t know. I wasn’t asked about it. There were companies that went under. Aren’t we a capitalistic system? Aren’t we free to do that?

In , the U.S. Congress’s Joint Committee on Internal Revenue Taxation issued a report called “Investigation of the Special Service Staff of the Internal Revenue Service.”

The focus of the report was on the Nixon administration’s use of the IRS to go after political opponents, though the “Special Service Staff” project itself dated to the Kennedy administration and was ostensibly designed to gather information on “extremist” groups and individuals and “Ideological Organizations.”

Because of this focus, in addition to going after people on Nixon’s “enemies list,” the Special Service Staff also targeted war tax resisters — under its mandate to “coordinate activities in all Compliance Divisions involving ideological, militant, subversive, radical, and similar type organizations.” The group would come to track 8,585 individuals and 2,873 organizations — and about 800 of these involved war tax resisters.

In , as the Watergate and related scandals were kicking up dirt, the IRS commissioner said that the Special Service Staff would stop investigating subversives in general, and the IRS would stick to investigating only those groups and people that promoted or practiced tax resistance. According to the Joint Committee report, after this point:

…except for 230 cases relating primarily to war tax resisters, no field referrals were made from SSS files after .

The IRS focus on war tax resisters as such did not begin until , according to the Joint Committee report:

Field referrals on war tax resisters

In the SSS began to take account of what it called “war tax resisters.” A “war tax resister” generally was defined as an individual or organization that refused to pay Federal income or excise taxes as a protest against the United States’ participation in the Vietnam war or who encouraged others to refuse to pay taxes. (However, the staff reviewed several cases included by the SSS in the war tax resister group of cases where noncompliance occurred because of a tax protest that was not directed toward the Vietnam war.)

The SSS classified approximately 800 files as “war tax resisters,” and it referred to the field 550 of these cases. These referrals occurred in two groups, the first a group of 320 cases during , and the second a group of 230 cases during December 1973, after the SSS had been terminated. Unlike the other field referrals… where the SSS recommended that the field take specific action, the tax resister referrals were sent out for the information of the field offices and for whatever action they “deemed appropriate.”

The Joint Committee staff examined about 10% of the war tax resister case files in the course of its investigation. Here is what it found:

Origins of SSS Activity on War Tax Resisters

Information in the SSS files indicates that SSS employees first began to take account of the war tax resistance movement early in ,1 when the SSS began receiving FBI reports on this activity. However, it appears that the SSS began to focus on war tax resisters around mid-. On , members of a war tax resistance organization held a demonstration at the National Office of the IRS in Washington, D.C. According to an SSS report, the SSS acquired copies of a tax resistance publication shortly after this demonstration and by mid-, the SSS had used this publication to establish a list of 192 individuals and organizations active in the war tax resistance movement. An SSS report also states that during , the SSS received from the FBI a list of underground newspapers in the United States and a list of the editors of these papers.2

During , the SSS received additional FBI reports on tax resistance organizations and individuals, and publications the SSS received had begun to carry more articles on this topic. The SSS files also contain information indicating that some IRS offices were having additional problems with tax resistance. (However, it is not clear whether the SSS became aware of these problems during .)

At the end of , the Washington Post carried an article on war tax resisters. memoranda in the SSS files indicate that this article came to the attention of Commissioner Johnnie M. Walters. These memoranda also indicate that Mr. Walters was concerned about tax resisters, and his concern was communicated to the IRS employees charged with tax compliance. Memoranda in the SSS files indicate that the SSS participated in drafting a report on tax resisters (dated ) to the Commissioner from the Acting Assistant Commissioner (Compliance) John F. Hanlon. Mr. Walters returned this report with comments directing increased IRS action in this area. Thereafter, the SSS apparently intensified its activity dealing with war tax resisters.

Sources of War Tax Resister Files

The names for the SSS tax resister files were derived from several sources. One major source was publications, such as tax resistance newspapers and underground newspapers received by the SSS. These publications contained lists of individuals or organizations active in tax resistance. They also contained signed letters to the editor and articles on tax resistance activities. (As noted above, the names of a number of newspapers were provided to the SSS by the FBI.)

The SSS also received names of tax resisters from other units in the IRS. IRS Service Centers sent the SSS the names of tax protesters who had come to their attention because of information on returns filed with the Service Centers or letters of tax protest received by the Service Centers. Additional names and information were referred to the SSS by other IRS offices (including letters from the public complaining about the attitudes and activities of the tax resisters).

A third major source was FBI reports. As noted above, the SSS received a number of FBI reports on tax resistance individuals and organizations, and also received a list of underground newspapers.

Field Referrals of War Tax Resister Cases

According to information supplied by the IRS, the SSS had compiled files on approximately 800 war tax resister individuals and organization. Of these 800 cases, 550 were were referred to the field. The referrals of war tax resister cases were transmitted to the field in two groups, the first, a group of 320 cases sent out during , and the second, a group of 230 cases sent out on (after the SSS had been formally terminated)… The 550 total field referrals of “war tax resisters” included 397 individuals and 153 organizations.3

First group of field referrals. — The first group of field referrals was transmitted by the SSS under a memorandum from the Assistant Commissioner (ACTS) to the District Directors. The SSS transmittal memorandum, entitled “War Tax Resisters,” contained a discussion of the war tax resistance movement and a number of exhibits designed to acquaint the District Director with the scope and activities of this movement. A list of the individuals and organizations located in the particular IRS district to which the memorandum was sent was attached to the transmittal letter, along with tax filing history for these individuals and organizations, where this information was available. Unlike the other field referrals… these referrals did not recommend that specific action be undertaken by the field offices, but said that the district should take action as it “deemed appropriate.” The transmittal also asked that a memorandum of any actions taken and results obtained by sent to Paul Wright. (The transmittal memoranda did not mention that the referrals came from the SSS.)

The staff examined a 10-percent random sample of the SSS files on this first group of war tax resister field referrals. The sample included 27 individuals and 6 organizations. The reports from the field included in the SSS files examined by the staff indicate that the referral resulted in field activity in a minority of the cases and that the field activity was by the Audit or Collection Divisions, with no indication that any Intelligence Division action occurred.

The staff examination indicates that some of these field referrals were made without previous analysis to see if there was likelihood of a tax violation. The SSS files on one of the cases referred to the field contained no evidence that the SSS had obtained and reviewed tax information (such as an Individual Master File printout) to determine whether the taxpayer may have failed to comply with the tax laws. In another case the Individual Master File printout showed that tax returns had been filed for all prior years with no balances owed; on this printout an SSS employee had noted that there was no basis for audit action. However, approximately one month later this case was referred to the field.

Not all of the cases in the first group of referrals involved “war” tax resisters. One organization referred to the field was a tax protest group generally classified as an “extremist White racist” group; there was no indication that this group was anti-war. Similarly, another case involved an individual who opposed the progressive income tax rate structure, and there was no indication this individual was anti-war.

Second group of field referrals. — The second group of field referrals was sent out on , using a different form of transmittal memorandum than was used with the first group. The transmittal memorandum for these referrals was entitled “Information Items” and the District Directors were advised that the attached materials were forwarded for their information and for whatever action they “deem appropriate.” The memorandum also advised that it was not necessary to report any action taken, as was required with the earlier group of referrals. (Apparently no reply was requested because the SSS had been terminated.) Finally, there was attached a list of the individuals and organizations with their tax filing history, if this information was available.

The staff also examined the SSS files of a 10-percent random sample of this group of field referrals. This sample included 22 individuals and one organization. Printouts from the Individual Master File were obtained by the SSS for all of the 22 individuals examined; a master file printout was requested by the SSS for the one organization (but none was found because the organization had never obtained an Employer Identification Number). In comparison with the first group of field referrals, the SSS files on these referrals contained considerably more information indicating possible noncompliance with the tax laws, to support the referral of these cases to the field. (According to the SSS files, two of the names in the staff sample did not involve tax resisters and two of the names were derived from the Justice Department’s “Inter-Divisional Information Unit” list…)

  1. IRS concern generally with the failure to pay Federal taxes as a war protest had developed much earlier. For example, the Internal Revenue Manual contained guidelines for the handling of war tax resistance cases as early as . The guidelines originally pertained to failures to pay Federal income taxes, but by they also included telephone and transportation excise taxes.
  2. According to a , memorandum from Paul Wright to the Director of the Collection Division, the SSS considered that underground newspapers were important to the examination of the war tax resister group because they acted as a “conduit for their movement,” and contained numerous articles on how to file false returns and otherwise confuse IRS operations. “Underground newspaper” was defined to include newspapers of anti-establishment orientation which advocated violent or subversive means to achieve their ends. According to the IRS, the SSS had files on 148 underground newspapers.
  3. The staff examination of administrative files and the other field referrals indicates that prior to , there were several referrals of cases which could be classified as war tax resisters. A number of underground newspapers were also referred to the field under regular field referral procedures. The SSS also several times sent information concerning war tax resisters to field offices on an informal basis.

The SSS was so tainted by Nixon’s use of it that the IRS Commissioner told Congress that after it completed its investigations, he would try to have its files destroyed. This also made it difficult for the IRS to use information gathered by the SSS in its ongoing actions against war tax resisters.

So some such actions were abandoned in mid-stream: Notably, the seizure and sale of Ernest and Marion Bromley’s home. In , after the IRS had already seized and auctioned off the house, the agency (under sustained pressure from the Peacemakers and their supporters) backed off, canceled the sale, and dropped its enforcement actions against the Bromleys and the Peacemaker movement (see The Picket Line ).

When Nixon got caught using the IRS to go after his political enemies, one of the consequences was that the agency — though on the cusp of victory in its battle to seize the home of war tax resister Ernest Bromley — surrendered and returned the home to its rightful owners.

IRS reverses seizure of home owned by pacifist group

Washington, D.C. (AP) — A pacifist group’s scheduled protest rally at Internal Revenue Service headquarters turned into a victory celebration after the agency reversed its seizure of a home owned by members of the organization.

While about 40 members of the Peacemakers danced and sang outside, IRS Commissioner Donald Alexander received several of their leaders in his office to confirm the decision to drop all assessments against the 25-year-old group.

The action meant the return of the Cincinnati, Ohio, home of Peacemaker founder Ernest Bromley and several friends active in the organization. Earlier this year, the IRS technically seized the house against a claim of $33,000 the group allegedly owed in back taxes for the years . None of the occupants was forced to move out.

Talked With Bromley

A spokesman for Alexander said the IRS district office in Cincinnati decided to reverse its lien upon the property following an interview with Bromley. As to why Alexander personally met with Peacemaker leaders, the aide would say only “he talks with various groups from time to time.”

Bromley did not attend [the protest/celebration, presumably —♇] because of illness, friends said.

The tax assessment against the Peacemakers had followed a probe in of that group and other anti-war organizations by the now-defunct Special Service unit of the IRS. According to revelations which surfaced during the Watergate scandal, the unit developed an “enemies” list of about 11,000 individuals and groups with anti-war views.

Alexander has long acknowledged that activity as improper and has promised that the list would no longer be used in tax investigations.

Politically Tainted

In the meantime, the Peacemakers protested the levy on grounds that the case was politically tainted and, moreover, that ownership of the Cincinnati house was not tied directly to the organization and hence was not liable to seizure.

The case attracted considerable controversy in the Cincinnati area, including an 8-1 vote of the City Council to request a congressional investigation of the IRS action.

One Peacemakers spokesman, Chuck Matthei, said the group thanked Alexander for the reversal “despite the recalcitrance” but also told him of suspicions that Special Services files are still active in IRS regional offices.

Moreover, said Matthei, the group vowed to continue its advocacy of non-payment of federal taxes so long as any portion of them go to support the defense program. Matthei said he and most of the other pacifists still active in the group deliberately live below the taxable income level to avoid criminal liability.

Some bits and pieces from here and there:

Some bits and pieces from here and there:

Some bits and pieces from here and there:

  • The creative activists of the Free Keene movement are at it again. This time they’ve formed a group called “Robin Hood of Keene” that shadows parking enforcement officers on their rounds and quickly fills expired meters before they can reach them to write out tickets.

    Members of the group place cards under windshield wipers that read, “Your meter expired; however, we saved you from the king’s tariffs, Robin Hood and his Merry Men. Please consider paying it forward,” and includes an address where donations can be sent.

    Alleging that the Robin Hooders have “repeatedly and intentionally taunted, interfered with, harassed, and intimidated” the meter officers, the city has filed for a restraining order (the activists insist that this has nothing to do with any intimidation or harassment on their part, but with the city’s loss of revenue from the thousands of parking tickets they have prevented).

    In the filing, parking enforcement officer Linda Desruisseaux said, “Besides following me, crowding around me, making video recordings of my activities, and placing coins in expired meters to prevent me from writing tickets, these individuals repeatedly taunt and harass me, asking why I am stealing peoples’ money and telling me to get another job… In particular, Graham Colson likes to taunt me by saying, ‘Linda, guess what you’re not going to do today — write tickets.’… The taunting and harassment tends to get worse when there is a group, as they try to one-up each other at my expense.”

  • The IRS scandal that all the frogs are croaking about is largely a steaming pile of political bullshit… but the winds are blowing the smell directly into the offices of the IRS, which which is making it an unpleasant place to do business:

    A former Internal Revenue Service official who ran the unit now at the center of scandal says the agency is about to be hit by a wave of resignations that he fears will hobble its operations.

    “I think there’s going to be a significant number of departures from the agency,” said Marcus Owens, a Washington attorney who served as director of the exempt-organizations’ office .

    The same post is now occupied by Lois Lerner, who has come under fire for her agency’s treatment of conservative groups. “That’s going to have an impact on tax collections and tax administration,” said Mr. Owens, who said he thinks the controversy has been overblown.

    Mr. Owens, who worked for the IRS for 25 years, said a number of IRS officials have talked to him about their plans to leave. He said the investigations underway have crushed morale, while some IRS officials are starting to get threatening anonymous calls at home.

  • Dan Carpenter uses the occasion to note how the IRS treats anti-war tax protesters — along the way mentioning or quoting war tax resisters Julie Garber, Phil & Louise Rieman, Kenneth & Viona Brown, and Lonnie Valentine.
  • In the other IRS scandal, the one that to me seems more actually scandalous, the agency has backed down from its repulsive legal opinion that Americans have no legitimate privacy expectations in their email communications, so agency investigators should feel free to rifle through them without bothering to get a warrant. The new policy says the agency won’t aim to read your email at all if it is only pursuing a civil action against you, and will “in all cases” obtain a warrant when trying to get your email from whichever Internet service provider is storing it, when pursuing criminal cases.
  • Fran Quigley at Counterpunch takes another look at the Transform Now Plowshares case, and in particular how the government progressively ratcheted up a misdemeanor trespassing charge against the three pacifists until now they stand convicted of federal terrorism felonies, awaiting sentencing from jail as they’ve been deemed violent criminals too dangerous to release.
  • The fabled Greek crackdown on tax evasion seems mostly for show: “of the estimated 13 billion euros that government officials say is owed by Greece’s 1,500 biggest tax debtors, only about 19 million euros [≈0.1%] has been collected in .”

If you file a U.S. federal income tax return that is inaccurate or incomplete and you justify this by taking explicit positions that the IRS has ruled to be legally “frivolous,” the agency can hit you with an instant $5,000 frivolous filing penalty.

So, for instance, if you were to take a “black tax credit” or “war tax deduction” on your 1040 form, or if you were to submit a blank form along with a letter claiming that you have a 5th Amendment right not to answer questions about your finances, you might get hit with such a fine.

But several American war tax resisters found that they were getting fined in this way even when they submitted complete and accurate tax returns, just because they accompanied the returns with a letter explaining their reasons for not paying the complete amount shown as due. (Here is some background.) This appeared to be overreaching on the part of the IRS, but it was difficult for war tax resisters to challenge this because the agency demands that you pay the fine before you can appeal it.

So instead of appealing, somebody contacted the Taxpayer Advocate Service about this problem, and one of the program analysts there got on the case. I just learned that the IRS Office of Chief Counsel has issued a memorandum (POSTF‒153168‒12 — “Application of Section 6702 Penalty to Taxpayer Who Files a Return with War Complaint”) that states:

When the taxpayer timely files a correct and complete return, the section 6702 [frivolous filing] penalty should not be assessed based solely on the fact that the taxpayer enclosed a letter with the return explaining why the taxpayer is not paying the self-assessed tax due. If a penalty has been assessed, it should be abated.

And, more explicitly:

If a taxpayer submits a document with a frivolous argument to the IRS, a penalty under section 6702(a) will apply only if the taxpayer files a purported tax return that either does not contain information on which the substantial correctness of the self-assessment may be judged or contains information that on its face indicates that the self-assessment is substantially incorrect. I.R.C. §6702(a)(1). As explained in legislative history, “the penalty could be imposed against any individual filing a ‘return’ showing an incorrect tax due or a reduced tax due, because of the individual’s claim of a clearly unallowable deduction, such as… a ‘war tax’ deduction under which the taxpayer reduces his taxable income or shows a reduced tax due by that individual’s estimate of the amount of his taxes going to the Defense Department budget, etc. In contrast, the penalty will not apply if the taxpayer shows the correct tax due but refuses to pay the tax.” S. Rep. No. 97‒494, 97th Cong., 2d Sess. 277–78, reprinted in U.S. Code Cong. & Ad. News. 781, 1024 (emphasis added).

The section 6702 penalty should not be assessed against a taxpayer who encloses with, or attaches to, an otherwise accurate and complete tax return documents articulating frivolous arguments. Congress did not intend for the section 6702 penalty to apply in this limited circumstance. In such circumstances, the return does not contain information insufficient to determine the substantial correctness of the self-assessment, or indicate that the self-assessment is substantially incorrect. Instead, the attachments state the grounds upon which the taxpayer is refusing to pay the properly reported tax.

A few more interesting bits and pieces that flew past my eyeballs in recent weeks:

Some recent tax resistance links of interest: