Things are tough and getting tougher.  Since 1982, earnings have fallen by 25 percent if tax hikes are taken into account.  That means that in the last fifteen years, your spending power has decreased by 25 percent.  Employers are paying less and government is taking more.  One fourth of your spending power has disappeared in the last fifteen years!  If we take into account that health and pension benefits are also shrinking, then the real wage decline has been even greater than 25 percent.  Many employees don’t get health-care or reasonable pension benefits anymore.  We are coping with this drastic reduction in our standard of living by working more hours and by putting our children to work at “mac-jobs.” 

      Expenses are rising with the need for more people to work.  Since both the husband and wife are now working, expenses are growing faster.  Now we need two cars and baby-sitters and cleaning persons to take care of the house while both adults work.  Auto insurance and expenses increase as a result of the added mileage and maintenance of two vehicles. 

      This loss of economic station for the majority of the population has taken place during a period of economic productivity.  Productivity is rising and poverty is rising.  How can that be? Actually, the rise in income went to the top 1 percent of earners.  They gained about 90 percent.  For example, the Chief Executive Officers of the corporations did great. As a result, the top one percent of the population now owns 40 percent of the assets.  The United States has a larger percent of the GNP owned by a smaller percentage of the people than any country in the world.

      On top of all these problems, the corporations have been downsizing. More than 43 million jobs have been eliminated since 1979. Most of these lost jobs are those of higher-paid, white collar workers. Although new jobs have been created, the majority of the new jobs are low-paying jobs in the service industry.  Soon new college graduates will need an MBA to flip hamburgers and work at convenience stores.

      The number of lost jobs since 1979 exceeds the populations of both Canada and Australia combined.  Have you wondered why things are getting tougher?  The leaders of our country, who come from the rich upper class, don’t seem to care about the rest of us.  Each day more good jobs are lost and the middle class continues to lose ground.

      Millions of working Americans are extremely poor.  The retail industry, for example, employs 21 million people.  Many retail workers only make about $11,000 a year and out of that, they pay almost $3,000 in taxes which is over 20 percent.  Some of the big corporations are paying a smaller tax rate than that.  The combination of the low wages and the high taxes on the middle class and the poor is raping the American public.

      In the 1950s most families needed only one parent working.  One parent could earn enough to pay for a car, a house, healthcare, and education for the children, and still save enough for retirement.  Our country is now more productive than ever, but we have the largest percentage of poor we have had in history.

      The politicians, who serve only the interests of the rich one percent that owns the majority of the wealth in this country, do not care about us.  Our lives will get worse, wages will go down, decent jobs will be lost and taxes will continue to increase, until the sleeping population decides that they have had enough and they make the necessary changes.

            I recently talked with a fellow who has followed the methods of Pete Hendricks who wrote the book:  Cracking the Code.  I realized, as a result of the conversation, the current approach the IRS is using to punish individuals who are challenging the system.  This fellow had apparently helped his girl-friend to file an exempt W-4 form and then file tax returns based on the method discussed in Cracking the Code.

            The IRS had garnished her wages and the fellow helped his girlfriend file a request for a due process hearing.  All of a sudden, the criminal investigation got involved and the CID issued a summons for bank account records.

            So, let's discuss the underlying issues of the situation.  The IRS generally proceeds civilly but once in a while, the IRS starts a criminal case to create a victim in order to scare the rest of the population.  The purpose of criminal tax law is to scare the people.  The IRS doesn't need criminal tax law because its power is so draconian that it can reduce any citizen to a groveling street person without any criminal law.

            The IRS generally does not go civilly if it intends to proceed with a criminal investigation.  In other words, if the IRS determines that a case has criminal potential and the agency decides to use the target as a victim, it will not issue a notice of deficiency or a notice of levy.  The IRS realizes that if it were to issue notices of deficiency and then use testimony and information gleaned in Tax Court proceedings to develop criminal investigations, that the income tax system would be overturned in a couple of years due to Fifth Amendment problems.  That is why the IRS proceeds criminally first.  So, far the courts have done a good job of protecting the income tax but they may not be able to continue if the IRS switched to prosecuting criminal cases after the civil case.  Currently, the IRS prosecutes its targets criminally and then strips them naked of their assets when they are in the federal pen.

            About 1996, the Taxpayer's Bill of Rights was passed and the IRS was forced to offer due process collection hearings.  IRS enforcement slowed down and was almost non-existent for about six years, and then the enforcement started up again and various tax protest gurus started using due process collection hearings to raise frivolous issues and plug up the IRS collection process.

            So what is the IRS doing now?  It is my opinion that some of the big shots at the IRS have gotten together and decided that one way to deal with the growing protest movement in this country is to pick criminal victims from those people that have the worst cases who pursue the due process collection hearing.  It is quite simple; an individual receives a notice of deficiency and a notice of intent to levy.  The IRS is proceeding civilly, but then that individual files a due process collection hearing request and the revenue officer refers the case to the criminal investigation division.  If this is the approach the IRS is using, it is brilliant.  The civil case stops, and the IRS gets a new criminal victim.

            Therefore, if you have followed the advice of one of the conmen on the web and you have filed an exempt W-4 form followed by a "zero tax return," you have significant risk of a criminal case.  Although you may very much believe your position and although you are clearly innocent of any "willfulness" charge, it is going to be difficult to convince a jury of that fact.  If you are attacked with a wage levy and you respond with a request for a due process hearing, you give the IRS one more chance to turn the case over to the CID.  If you allow the wage levy to take place and then work to remove it using reasonable methods, you create a situation that is much less likely to initiate a criminal investigation.

            Conmen such as the fraudsters listed on my fraud page and others like them, use the due process hearing approach to collect thousands of dollars from individuals who have a received a wage levy.  It is my opinion based on an observation of current IRS behavior that some of these cases will be referred to the criminal investigation division.  Even if you win your due process case, the IRS might turn you over to the CID for punishment. 

            If you have filed an exempt W-4 or a zero return, be very careful.  You are at the top of the IRS' victim list. 

     The IRS has started issuing summonses on a regular basis.  A couple of years ago, a fellow on the East Coast, received a first-party summons and he filed a motion to quash. The court ruled that he couldn't file a motion to quash because the IRS didn't have any authority to enforce the summons.  The fellow put the decision on his website and I received hundreds of calls explaining that the IRS had been soundly defeated and it had no authority to levy or issue summonses.

            I spent weeks explaining the situation.  I am still getting calls and people are fighting their summons using this crazy theory of law.  Let me explain once again what the court meant when it said the IRS doesn't have authority to enforce a summons.  The court meant that the IRS must go to court and ask the court to enforce the summons.  Therefore the court took the position that the summons recipient could not file a motion to quash because there is nothing to quash until the IRS actually files a suit in the federal court.  Of course, if the IRS does file suit in federal court, the defendant must have a proper defense.  If the defendant then argues that the IRS doesn't have authority to enforce the summons, the defendant will lose, because it is the court that will enforce the summons for the IRS.

            There are only two valid responses to the IRS first party summons.  The first valid response is to appear and answer the questions.  The second valid response is to assert your rights under the Fifth Amendment.  Nothing else will work.  You cannot argue that the court or the IRS does not have jurisdiction.  If you have received a summons, you need to read the case of United States v. Argomaniz, 925 F.2d 1349 (11^th Cir. 1991).

However, Argomaniz is not invoking his privilege as to the contents of the documents described in the IRS summons, but as to the act of producing the documents. The Supreme Court "has emphasized that the mere act of producing documents whose contents were not privileged could be sufficiently testimonial and incriminating in nature to trigger the fifth amendment privilege." In re Grand Jury No. 86-3 (Will Roberts Corp.), 816 F.2d 569, 571 (11th Cir. 1987) (citing United States v. Doe, 465 U.S. 605, 104 S.Ct. 1237, 79 L.Ed.2d 552 (1984) and Fisher v. United States, 425 U.S. 391, 96 S.Ct. 1569, 48 L.Ed.2d 39 (1976)). To be testimonial, a "communication must itself, explicitly or implicitly, relate a factual assertion or disclose information," Doe v. United States, 487 U.S. 201, 210, 108 S.Ct. 2341, 2347, 101 L.Ed.2d 184 (1988); it must "add . . . to the sum total of the government's information. . . ." Fisher v. United States, 425 U.S. 391, 411, 96 S.Ct. 1569, 1581, 48 L.Ed.2d 39 (1975).

By producing documents in compliance with the IRS summons, Argomaniz would be establishing the existence and authenticity of the documents listed in the summons, as well as verifying that these documents were in his possession. Doe v. United States, 487 U.S. 201, 209, 108 S.Ct. 2341, 2347, 101 L.Ed.2d 184 (1987). He would actually be informing the government that he had income in the years in question yet failed to file income tax returns. This act of production would be sufficiently testimonial and incriminating to activate Argomaniz's fifth amendment privilege. [emphasis added]

The government's final argument, that there was no fifth amendment justification for Argomaniz's blanket invocation of the privilege against self-incrimination, is also without merit. It is true that a blanket refusal to produce records or to testify will not support a fifth amendment claim. United States v. Roundtree, 420 F.2d 845, 852 (5th Cir. 1969). However, Argomaniz did not refuse to comply with the summons in a blanket manner. Instead, Argomaniz followed the general rule that a taxpayer "must present himself with his records for questioning, and as to each question and each record elect to raise or not to raise the defense." Id. Argomaniz answered the non-incriminating questions posed by the IRS officer, and, in response to each incriminating question or document request refused to answer and cited his privilege against self-incrimination. When the IRS officer realized that Argomaniz would raise the privilege in response to each of her document requests and to each of her questions concerning Argomaniz's tax liability for the years in question, the IRS officer terminated the interview.[fn14] Argomaniz could not respond to questions that he was not asked. Thus, the effect of the interview was as if the IRS officer had asked all relevant questions and for each document listed in the summons, and Argomaniz had responded by repeatedly raising his fifth amendment privilege in response. Under the circumstances in this case, a blanket invocation of the privilege against self-incrimination did not occur.

            The moral of this story is that you cannot expect to use magic in a summons.  I am sure that the IRS absolutely hates the Argomaniz case, because if you follow the court's logic to a reasonable conclusion you come up with the following question:

            If the IRS cannot compel answers to questions when it issues and enforces a summons, how can it compel answers to questions on tax returns that do not have a court enforcement order behind them?  The answer is that it cannot and that is why the IRS refers to the filing of returns as voluntary.  If filing returns were required, there would be a definite problem.  The government however, will continue to prosecute a few individuals each year who do not file, and the juries, will practice reverse jury nullification and convict individuals for not giving information to the government voluntarily that they cannot be required to give the government in response to a summons.  If this analysis doesn't make you mad, it should.

            Hang in there and remember the above analysis is not legal advice and I am not a lawyer.  It is in this blog for general information purposes only.

     The IRS' war on the middle class is exploding.  In the 1980s there was a big war on the middle class but by 1996, there was so much dissent going up to the congress, that there were hearings and a Taxpayer Bill of Rights was passed. For another six years, the IRS laid low, the agency did very little, and wage levies were down considerably.  Then a couple of years ago, the IRS started coming on strong again.  People who had followed the advice of conmen were caught in an incredible storm and that is today's situation.

            You have to realize that the IRS' doesn't care about you and it doesn't care about your rights. The government is desperate for money and taxes have been removed from the rich, it is now the middle class that is the fountain of wealth for Uncle Sam. Let's talk about the phone calls I got yesterday, on a Saturday.  One fellow called me who is working two jobs to make ends meet.  He is desperate to support his family.  He has trouble getting a job because so many jobs have gone overseas.  The IRS is auditing him on a trucking business that he tried to get started, but the business failed.  He has lost records and he is terrified of the IRS.  The agent he is supposed to go see audited his father a few years ago and terrorized him, the father's death was partly due to the stress he had during the audit. 

            Another lady called who had received a levy on her bank account for over $20,000 for just one year.  She and her husband had followed the advice of a conman by the name of Edward Fitzsimmons.  She had torn up all the letters she received from the IRS.  She claimed she had even allowed sufficient withholding a work but since she destroyed the Notice of Deficiency, she had no idea how the IRS had come up with the bogus amount of tax liability.  When the IRS levied the bank account, her husband had committed suicide.

            Her problems can be solved, but her husband is gone. 

            It is very important that you pay attention to me.  Do not follow the advice of individuals that promise you that you can have a job and a house and file exempt W-4 forms.  Don't ignore letters from the IRS, especially certified letters.  If you ignore a Statutory Notice of Deficiency, the amount the IRS alleges you owe becomes a legal liability and the IRS will proceed toward enforced collection even if you do not owe the tax.  The burden of proof is on you to prove that you do not owe the tax.

            If you have a friend or a family member who appears to be depressed and possibly suicidal as a result of an action by the IRS, please call 911 immediately and ask for help.  You have to take suicidal thoughts and suicidal behavior seriously.  I expect to see the suicide rate go up as the IRS increases its heavy duty attack against the middle class.  People, who are already on the edge, can easily be pushed over the brink. 

            If the IRS has levied your wages and your bank account, don't despair, give me a call.  Your problems can be solved, but they cannot be solved by continuing to follow the advice of conmen.

             I suspect that as the IRS increases the misery level, the pain and suffering of the middle class will increase, and the conmen on the web who are selling magic will also increase.  Please be very careful, don't follow advice that sounds too good to be true.  If you have filed an exempt or inflated W-4, reconsider your actions immediately.

            I hope I don't get as many sad phone calls today. Hang in there and have a great weekend.

Our tax system is based on individual self-assessment and payment, not upon distraint.

---United States Supreme Court, in Flora v. United States.

     For the average American, offshore tax shelters are a good way to get scammed.  The rip-offs vary from the obvious to the more complex.  The conman will take your hard earned cash, he promises to invest it for you and hide it from the IRS.  Then he disappears with the funds. Some of the more complex scammers offer to set up trusts to hide assets and income.  These trusts have been losing in court for the thirty plus years I have been monitoring the tax system, but the scammers keep up the dirty work. 

      If you are extremely wealthy, there are possibly some things that you can do for asset protection overseas, but it will cost boo coo bucks.  If you don't live in Hollywood, forget it.

     I have heard so many sad stories. More than once I have seen a poor older person ripped off of his entire life savings by these conmen.  Typically, the conman will convince his victim that he can eliminate his taxes with a magic packet produced by the conman, and then when the victim takes action, the conman will sell him a foreign investment.  The scammer then takes the money and puts it into his own overseas bank account.  The poor victim now owes back taxes, plus the early withdrawal penalty on his retirement and he has lost the whole principal.  I have seen this scam over and over again.  If anyone tells you to withdraw your IRA and give him the money for an overseas investment, don't do it.  You are going to make the conman rich and he will be sipping a on his cold Screwdriver in Tobago while you are fighting with the IRS over the early withdrawal penalty on the IRA you have lost.

     The new bankruptcy law continues to destroy the middle class.  It is extracting more money from "desperate debtors" and the estimated costs for a typical Chapter 7 bankruptcy have doubled.  The new bankruptcy process is more complicated and costly.  Lawyers are unsure how to interpret the new law and they have raised fees to cover their uncertainty. Some lawyers and judges say the law is so complex and poorly written that they can't figure out what it means. 

     The IRS meanwhile has stepped up its harassment of the middle class.  Audits are up on small businesses.  Quite frankly, many individuals running small businesses simply can't pay the high taxes and stay in business.  When they are audited, the IRS slams them; the agency knows full well that the little guy cannot afford to fight back.

     I recently received an email from a fellow who is paralyzed from the chest down due to an ATV accident.  He lives on SSDI.  He borrowed some money from his mother and used it for day trading.  The trading company reported to the IRS his sales of stocks and future contracts but not his purchases.  He made $700,000 worth of sales but never made money.  Now the IRS wants over $350,000 in taxes from him because he didn't keep good records of his purchases.  Of course, the moral of this story is that if you are going to do day trading, you must keep excellent records and then you must be prepared for a big fight when the IRS comes after you.  It is much easier for the IRS to attack a guy in a wheel-chair than to attack a big corporation.

            I have had various questions regarding the proper procedure to use when responding to a letter from the IRS.  Generally there is no standard response that works.  You need to know something about IRS procedures and focus your response on the exact situation.  However there are some letters that the IRS sends out that require much care.  The IRS is required to issue a Notice of Deficiency if it wants to create an assessment different from the assessment on the tax return.  If an individual doesn't file a tax return, the IRS can file one for him and issue a Notice of Deficiency.  If you get a Notice of Deficiency, be very careful because once the 90 days expires, you legally owe the amount on the Notice, even if in reality you do not owe the amount on the Notice.  Therefore you must be very careful.  If you receive a Notice of Deficiency and you cannot afford to pay the amount on the Notice and you disagree with the assessment, you must consider filing a petition with the United States Tax Court.  Then you will be in a petition to effectively argue your case.  Do not ignore a Notice of Deficiency. 

            Sometimes the IRS sends out letters that make a change of the tax due based on a computational error.  Be very careful with these letters.  If you receive a letter from the IRS stating that you owe more money based on a mistake on the tax return; you need to send a letter immediately requesting an abatement; ask the IRS to issue a Notice of Deficiency.  Recently, I have seen cases in which the IRS has effectively make a new assessment but covered it up as a computational error.  This is a grave violation of due process rights because it eliminates your opportunity to contest the issue in Tax Court.  Therefore, be sure that you always request abatement if you get a letter stating you owe more money based on computational error.  Of course, if you agree that the IRS is right, you don't need to contest the issue, just send Uncle a check, he needs the money because he is spending more than he makes.

            The bottom line is that you should not ignore letters from the IRS; you cannot answer a Notice of Deficiency with a letter.  It won't work.  And if you get a summons, you need to be quite concerned; do not ever ignore an IRS summons and never respond to an IRS summons with a letter.  Hang in there and learn to fight smart.  Don't become a victim of the world's most powerful tyrant. 

THE ATTESTED SUMMONS: CONTEST ALL THIRD AND FIRST PARTY SUMMONSES ON THIS ISSUE.

(The following article was written in 1991; however, the IRS is still capable of making this mistake.  If you get an unattested summons, raise this issue).

            As many of you know, there was a great case in the Nebraska District Courts where a patriot blasted an IRS summons because it did not follow the statue properly regarding the required attestation.  The IRS appealed the

case to the Eighth Circuit and in December of 1991, the IRS won the issue.  Except that the Eight Circuit said  "As the IRS has now been alerted to the requirements for an attested copy, future summonses should comply with this holding."

            However, the interesting point to watch is that the issue has prevailed in two other District Courts.  In the United States District Court for the Middle District of Florida, the Court ruled that the IRS did not comply with the attested summons issue.  This case was a first party case and the name of the case is United States of America, v. Glenn S. Davis, case No. 91-333-MISC-ORL-19.

            Another District Court ruled against the IRS in the United States District Court for the District of South Carolina, Greenville Division in the case of James and Mary Henderson v. United States, which is a third party summons case; In the case of Henderson v United States the Court ruled that the "summons must have a written and signed certification or memorandum that the copy is a true and correct copy of the original."

    Well what do you know! You can get the two District Court wins in our favor.  If you are in the 8th Circuit, do it too, and if you are in any other circuit, contest all third party summonses on this issue.  If you get a First Party Summons, add this issue to your Fifth Amendment Issue. 

            Good luck and don't let them get you down, they make a lot of mistakes.