CHAPTER SEVEN BANKRUPTCY

AN INTRODUCTION

            The Congress has given the Internal Revenue Service a draconian power to collect taxes.  They are allowed to garnish wages and leave you less than $400.00 a month.  They are allowed to take almost all your personal property and real estate with a very few small exceptions, and to do all that without a court order.  I am sure that if the individuals who wrote the Constitution knew the extent of the power of the IRS, they would roll over in their graves. There are very few ways to get out from under the burden of a debt to the IRS, but one way that can work is to file a Chapter 7 Bankruptcy.  You must plan for this action, however, and there are certain facts that must be true in order to qualify for bankruptcy of taxes.

            First of all, the taxes must be three years old. Secondly, returns must have been filed for at least two years.  Thirdly, the IRS must have 240 days to collect the tax from the date of assessment and there cannot be fraud present for a Chapter 7 discharge. If you have real estate and the IRS files a Federal Tax Lien before you get into the Bankruptcy Court, the IRS will have a secured lien, and your real estate can be sold by the trustee for payment. If you have other assets above the exemption amounts, these assets can also be sold to pay the IRS.

            It is for the above reasons that it is very important to plan for your bankruptcy.  If the IRS garnishes your wages, and you have not filed returns, you may want to file and negotiate with them on a Form 433A for a payment plan.  One issue that might be interesting, which has not been totally resolved is the issue of what constitutes an adequate return for purposes of the Bankruptcy Code.  For example, the IRS is supposed to file a return under 26 USC 6020 (B) before they can assess the tax.  If you are a gutsy person and want to try to make new law, you have no assets except possibly wages and you have not filed returns, you may  wish to file Chapter 7 when you are garnished and argue that a 6020 B return is adequate for provisions of the Bankruptcy Statute if it is adequate for the purposes of an assessment. After all, it doesn't seem fair that the IRS can file a return for you that creates an assessment but doesn't fulfill the requirements of filing for the Bankruptcy Code.  You will probably have to take this issue to the Court of Appeals or higher, but it might be interesting.  It has been raised somewhat in lower courts and has lost.  If you are kicked out of bankruptcy and your only debt was to the IRS and you have a no-asset case, you won't waive your right to do a Chapter 7 two years after filing your own returns; so you really have nothing to lose except some time and you might make new law.

            Now let's get into the issues of a Chapter 7.  The basic concept of a Chapter 7 is fairly simple.  You file a petition and there is a stay of creditor collection activity: This includes the IRS.  The Court will appoint a trustee to administer the case; you can exercise your exemption rights; available property is distributed to your creditors and you will be discharged from the remaining dischargeable pre- petition debts.  You will go to a hearing and you may be cross-examined by creditors. If all goes well, you will get a discharge. Of course, there are a whole bunch of rules that you must pay attention to.  These rules are in the Bankruptcy Code, which is Title 11 of the United States Code.

            A Chapter 7 case can be started by the debtor or by creditors.  We are concerned with the voluntary petition.  In order to file for Chapter 7, you must not have been a debtor in a case pending under the Code at any time during the 180 days preceding the filing of a new petition. If you had a case dismissed for "willful failure" of the debtor to abide by the orders of the court, or to appear before in the court in proper prosecution of the case," or if you requested voluntary dismissal of a previous case after you got an automatic stay.  This rule is to prevent abuse of the automatic stay.  Also, you must be an individual who resides in the United States or have a domicile or place of business in the United States.

            If you are married, you can each file petitions and you can also file jointly.  If you are living in a community property state, you need to take special care to see how your bankruptcy is affected by the community property laws of your state.

            Once you file a petition, the automatic stay goes into effect.  By the way, you only need to file the petition itself, to get the stay started.  The other forms are then due in about two weeks. The Chapter 7 will effectively freeze your problems and you will have a chance to deal with them. The IRS must definitely follow the automatic stay and if they don't, you should file a motion for contempt with the clerk of the Bankruptcy Court.   The automatic stay does not cover criminal actions or collection of property that is not the property of the estate like alimony, maintenance, or support.

            The trustee is appointed after the stay is granted His duties are to dispose of any property, which secures debts. You will have to file various statements explaining your property situation and the trustee will get his information from those forms.  The trustee will sell any property that is not exempt and the balance will be used to pay the debts.  You have both state and federal exemptions.  Some states require the use of state exemptions, some states allow you to use either exemption system.

            If you transferred property in the year preceding the bankruptcy or paid debts, you may still have to make that property a part of the estate.  If you receive property after the petition is filed, it too becomes the property of the estate.

            Once the trustee has made the property of the estate available for distribution, the process begins with the filing of a proof of claim.  The proof of claim must be filed within ninety days after the first date set for the meeting of creditors under Section 341(a).  Many times, the IRS does not file a proof of claim.  If that happens and the IRS tries to argue that the taxes were not discharged, you will need to go back to the Court with an motion for the Court to decide if the taxes were discharged.

            The Bankruptcy Code also provides for different types of priority claims and secured claims.     The chances are good that you will get a discharge as long as you have followed the proper procedures.  Some circumstances will prevent a discharge. These are as follows:

            (1) The debtor is not an individual.

            (2) Property was transferred or concealed fraudulently.

            (3) The debtor destroyed, falsified, or concealed financial records without justification.

            (4) The debtor acted fraudulently in connection with the bankruptcy proceeding.

            (5) The debtor failed to explain satisfactorily any losses of assets.

            (6) The debtor has refused to       obey court orders.

            (7) The debtor committed any of the foregoing acts in connection with a separate bankruptcy involving his relatives within one year prior to filing his bankruptcy proceeding.

            (8) The debtor was granted a discharge in a case commenced within six years before the date the bankruptcy petition was filed in the current case.

            (9) The debtor waives his discharge right.

Generally most debts are discharged except for the following:

            (1) Certain taxes

            (2) Debts incurred as a result of obtaining money, property, services or an extension or renewal of credit by certain fraudulent means; for luxury goods, or for cash advances aggregating more than $1,000 in certain cases.

            (3) Certain unscheduled debts

            (4) Debts incurred as a result of embezzlement or larceny.

            (5) Alimony, maintenance, or support obligations.

            (6) Debts for willful and malicious injury

            (7) Certain fines and penalties

            (8) Certain educational loans

            (9) Certain debts that existed at the time a previous bankruptcy case was filed.

            (10) Certain debts as a result of operating a motor vehicle while legally intoxicated.

            Read 11 USC Section 727 for more details on the above lists.

            You may refuse to testify and invoke your Constitutional privilege against self-incrimination during your hearing if you are cross examined without automatically losing your right to a discharge.  If you are granted immunity in the matter in which the privilege was invoked, and you refuse to respond, the Court will deny the discharge.

            You have redemption rights in connection with the bankruptcy.  You can pay the amount of the secured claim and if the goods are exempted, you can keep your goods.

            Remember that the Bankruptcy Code does give you relief from the IRS if the procedures are followed but be careful. If you feel insecure about filing pro-se, it shouldn't be too hard to get a local attorney to help you.  After the bankruptcy, there is still the issue of the Federal Tax Lien. You will have to write to the IRS and ask for removal of the Lien.  In general you should not have a problem with this, but if you do, there are appeal procedures and you can proceed into the District Court for relief.  Good Luck!

ON CHEEK, JURIES, PATRIOTS, GOLIATH,

THE FIFTH AMENDMENT AND THE DRAGON IN ITS LAIR

            As most patriots know, the Supreme Court ruled a while back in the Cheek case that the judge must give jury instructions that relate to the concept of willfulness.  The income tax system is so complicated that Congress added the concept of willfulness into the criminal violations of the Code.

            There are, however, some severe limitations to Cheek, and it is not the help in defending many patriot issues that some people think it is.           The Courts take the position that if you were smart enough to understand and to read, your non-traditional views on the tax system have to be a disagreement with the law and not a bonafide misunderstanding.  In order to really qualify for a defense on the misunderstanding, you would have to show that you are a total dope.  In other words, a Cheeky defense is proving to be absolutely worthless; because a disagreement with the law is not a defense to an indictment for not filing tax returns.

            So, the question is: what can the Patriot movement do about that? Unfortunately, right now there are many charlatans running a round the country preaching new theories such as the non-resident alien theory.  The problem with this theory and others like it is that because of the way it is currently raised, the individuals involved will be forced into a Cheek defense if the government proceeds criminally.  Many individuals are currently filing affidavits of rescission and revocation and others are filing 1040 NR's.  If these individuals are attacked, their only possible defense in a criminal case is going to be that they misunderstood the law. This is going to be a very difficult defense to make in front of a jury and they will be laughed out of the courtroom.

            The only possible approach to take is to either pay the taxes, post bond, or raise a timely issue relating to the alleged filing requirement.  Let's take some specific examples:

            Although, I think the citizenship argument is patently ridiculous, I do believe that people have a right to raise the issue.  The issue should not be raised on a 1040 NR; and it should not be raised by writing letters to the IRS telling them that you are not filing.  If you wish to raise that issue, you should pay and file a claim for a refund written on your own paper and not on a government refund claim form, and when the claim is denied, file a suit in the Federal District Court.  If you use that approach for all the new patriot ideas, many of which will get you a one way ticket to Club Fed, you will be able to raise your issues in a refund forum in Federal District Court and not in a criminal case.

            The IRS tyrants probably spend a lot of time sitting around laughing at some of the new super silly patriot arguments.  If you are an individual who has bought into the approaches discussed above, you are going to have a real rough time in the future and Cheek won't help you out one little bit unless your IQ and intellectual skills are very, very low.  You see, the problem is that the ladies and gentleman of the jury are never going to believe that you believe that stuff, especially if you have filed an exempt W-4 or have failed to make quarterly payments with large amounts of money coming in on 1099's.

            As a friend of mine said to me recently, "Juries are made up of 12 people who weren't smart enough to get out of jury duty. "Now, that is a sad commentary on the Federal Jury System, but unfortunately there is a lot of truth in it.  Just think for a moment, how juries are chosen.  They are chosen from lists created from people who vote.  People who vote believe in the system.  They file tax returns and they don't question authority.   They pay taxes and they file returns and they are simply not going to believe that you believe you are a non-resident alien when you live in California.  That is the way it is.

            So, is there any argument that can work?  Well, that depends; it depends on how hard you want to fight.  If you aren't ready for a scrap with the IRS, you should continue to file returns as you have in the past.  The patriot movement is not a place for individuals who want to save money on taxes. Save that for the traditional tax cheats.  Let the IRS put their efforts where the money is: in traditional tax evasion.  Let's help the freedom community change this system before it destroys the country.

            There is one very great and real problem with the income tax.  That problem was discovered years ago and it has been and probably always will be the most powerful argument in the freedom arsenal.  That weapon is the Fifth Amendment.  However, most individuals in relying on the Fifth Amendment have failed to assert the issue properly.

            The government takes the position that Sullivan and Garner require everyone to file returns, but that the Fifth Amendment can be taken on the return.  However, individuals have been prosecuted for taking the Fifth Amendment on the return.  Based on litigation in the Supreme Court and various courts of appeals since the Garner case was decided, it is quite possible that individuals who file tax returns waive their Fifth Amendment rights, and the government cannot require individuals to waive their Fifth Amendment Rights.  The problem is that it is important to show that you have a reason to be concerned about your Fifth Amendment Rights.

            If you are classified as an illegal tax protestor, you certainly have a reason to be concerned; because the illegal tax protestor code on an individual's IMF creates a criminal investigation interest in your case.  Everything you give to the IRS will be given to the CID and can be used against you criminally. The act of filing a tax return can also be used against you criminally to show that at the time you filed the return, you thought that you were required to file returns. If you are classified as an illegal tax protestor and you are concerned about waiving your Fifth Amendment Rights, you might seriously consider taking action to protect your rights.  In order to protect your rights, you must assert them.

            If you wish to file a Fifth Amendment type of return, for example, in order to keep the issues in the proper place, do not put exempt on the W-4; let the employer send the money to the IRS.  You can do a claim for a refund and sue later.  That way, you will have kept the issues in the civil arena.  It is highly unlikely that the IRS will go criminally against an individual who would get a refund from over withholding if he were to file a return.  They would really have trouble with willfulness in that fact situation.

            If the patriots in the Freedom Movement would have used this approach long ago, the Income Tax Hoax might have been exposed to the public by now.  The problem is that the principal reason that people get involved in the Freedom Movement is to save money on taxes.  They do not get involved in order to expose the HOAX.

            We do not need thousands of poor patriots offering their necks to the IRS chopping block.  We do need about 100 intrepid and gutsy people who are willing to prepare their cases so that the IRS and the Courts can be backed up on these issues.  However, this approach will take lots of commitment and money.  First of all we need the 100 front liners.  Then we need a huge support organization that can donate thousands of dollars to flagship litigation.  There really is a problem with the Income Tax and Irwin Schiff popularized the knowledge of these problems a most twenty years ago.  The problem is that the focus has been that of saving money and not on that of changing the system. The IRS is an incredibly powerful and resourceful agency.  It has been given draconian powers by Congress.  The judiciary is pledged to protect the IRS and the Income Tax.  If you are going to fight Goliath in Goliath's arena, you must strive to learn tactics that will bring him down.  When he dies, it will probably be because some little guy hit him in the head with a rock, There is no reason that cannot happen here.

            The economic situation is worsening for the middle class. We need to start promoting these concepts around the country. There are anxious ears that want to hear more and there are anxious hands ready to help.  We have upwards of twenty years of experience in the arena with Goliath.  We know what works and what doesn't work.  Let's put that knowledge to good use.  Let's slay the dragon in its lair.  There is no reason to be discouraged, there is simply reason to keep on keeping on and doing it better all the time.  Hang in there and remember that "the government can fool all of the people some of the time and some of the people all of the time, but it can't fool all of the people all of the time."

CRIMINAL AND CIVIL SANCTIONS: OVERKILL

The United States Congress, in attempting to enforce their abusive income tax system, has gone overboard increasing sanctions to assure its enforcement.

Generally, the IRS picks a few cases to pursue criminally, the vast majority of the cases are disposed of civilly.  Those unlucky individuals, who receive criminal harassment, later get the civil gun put to their heads. (See Spies v. US, 317 US 492 (1973); Helvering v. Mitchell, 303 US 391, 402 (1938).  Civil penalties will be asserted even though the individual has been convicted of a criminal charge and has received a severe sentence.

A friend of mine did not file his returns after he was ordered to do so by a Federal Judge.  The judge said that if he filed, he would not get any jail time even though the jury convicted him. My friend preferred to spend a year in prison to filing the returns.  One point he didn't realize is that the IRS civil penalties, standing alone, are so severe that their imposition can destroy the individual financially.  Upon leaving from prison, he was forced to file simply to get a job because the IRS would not work out a payment plan with him until he filed his returns.  Also, the Offer in Compromise and the Bankruptcy provisions are not workable unless returns have been filed. One wonders why Congress was motivated to add serious felony charges as cumulative punishment for the "tax cheat" because the civil penalties are so devastating. For years, the administrative question seemed to be: Why should a person be prosecuted for tax evasion?  Today the question seems to be: Why should a person not be prosecuted for tax evasion?  (See Balter, "A Ten Year Review of Fraud Prosecutions," 19 N.Y.U.  Inst. on Fed. Tax'n 1125 (1961).

Generally the IRS tries the criminal charges first. That means if you get a Statutory Notice of Deficiency for a particular year, the IRS is probably going to leave you alone criminally.  One case worth reading is U.S. vs. Blue, 384 US 251 (1966). This case gives one the chance to pursue the issue of the imposition of civil and criminal sanctions. The Supreme Court suggested that Blue file a motion in the district court to suppress the evidence on the basis of constitutional violations implicit in Blue being forced to file a petition in the Tax Court.  The District Court denied the motion without prejudice, but the case was pleaded with a nolo contendere and Blue's fine was suspended. The Tax Court case was then settled normally.

Another case of note is Comm'r v. Licavoli, 252 F.2d 268 (6th Cir. 1958). The Tax Court entered a decision of no deficiency because the government refused to comply with the court's order to file an amended answer referring to their allegations of fraud.  There was a criminal indictment for tax evasion pending parallel to the civil proceeding, the government argued that it could not be required to disclose its evidence because it would weaken its criminal case.

However the Circuit Court of Appeals rejected the government's argument and stated:

     On this issue we agree with the comment of the Trial Judge that the Tax Court must confine itself to its own problems.  We do not believe that a rule of pleading in civil actions, applicable in a case where no criminal action is pending, should be held not applicable in another case merely because a criminal action is pending.  The trial of a civil case is independent of a criminal action.

As you can see, civil and criminal sanctions can both be severe.  The IRS can use both against an individual.  They usually pursue the criminal action first and finish the case before they proceed civilly; and if they are proceeding civilly, there is a good chance that they will not proceed criminally as to that particular year.  It seems evident that Congress felt it must create an abusive penalty overload to support a tax system that is perceived by the public, and rightly so, as being unjust, unfair, and unreasonable.  As evidenced by the experience of civilizations throughout history, our country will learn someday that it is not possible to legislate abuse and enforce that abuse with fear and intimidation.  In the meantime, learn to protect yourselves.

Bankruptcy and Taxes:

Watch OUT!

      Yes, you must watch out if you are preparing for a bankruptcy. The IRS is striking out harder and harder at individuals who discharge taxes.  You must be sure to follow the rules very, very carefully. 

      You can discharge taxes in a Chapter 7 Bankruptcy if the taxes are three years old, if you have filed the returns at least two years preceding the filing of the bankruptcy.  The taxes must have been assessed 240 days prior to the filing of the bankruptcy.  Also, you cannot discharge taxes in a Chapter 7 if the court takes the position that you have committed fraud.  Currently, the IRS is claiming that individuals who have filed exempt W-4 forms have committed fraud and it is likely that the courts will support their position. 

      Tragically, there are currently many individuals around the country who are stopping withholding through the use of exempt and inflated W-4 Forms.  These individuals are going through a process of "untaxing" which is a concept that does not work; but the gurus selling these "untaxing" programs are selling ideas that didn't work twenty years ago and that still will not work today.  Please be aware of the fact that if you are an employee and you eliminate withholding, the IRS may eventually garnish your wages for taxes plus interest. You will not be able to effectively use a Chapter 7 Bankruptcy to escape the problem because the IRS will maintain that you filed a fraudulent form. 

      If you file returns after the IRS has filed a return for you, the IRS may try to claim that you cannot satisfy the two-year rule.  However, you must file to get the two-year period running.  The IRS cannot refuse to permit you to do this.  See Phillips v. Commissioner, 86 TC 433 (1986); Millsap v. Commissioner, 91 TC 58 (1988). Remember that mere testimony that the debtor mailed the return may not be enough to overcome the I.R.S. claim that no return was received; it may require a  retur receipt or some other proof of mailing. In re O'Neill, 134 B.R. 48 (M.D.Fla 1991).  The three-year rule, the 240-day rule, and the two-year rule have all been held tolled during the time the debtor was in bankruptcy. See Matter of Stoll, 132 B.R. 782 (N.D.Ga. 1990).

Ruminations on our Current Political and Economic Situation

      Let's first take a look at thinking of several famous thinkers in the arena of government and economics.

"Nothing appears more surprising to those who consider human affairs with a philosophical eye than the easiness with which the many are governed by the few and the implicit submission with which men resign their own sentiments and passions to those of their rulers. When we inquire by what means this wonder is effected, we shall find that, as force is always on the side of the governed, the governors have nothing to support them but opinion.  It is, therefore, on opinion only that government is founded, and this maxim extends to the most despotic and most military governments as well as to the most free and most popular."--David Hume, Of the First Principles of Government (1758).

      Eric Fromm commented on our society:

"This is a society which needs to make man fit in a complicated and hierarchically organized system of production with a minimum of friction. It creates the organization man, a man without conscience or conviction, but one who is proud of being a cog, even if it is only a small one, in a big and imposing organization.  He is not to ask questions, not to think critically, not to have any passionate interests, for this would impede the smooth functioning of the organization.  But man is not made to be a thing, he is not made to shun asking questions.  Hence, in spite of 'job security,' 'old age pensions,' and the satisfaction of belonging to a large and 'nationally known' outfit, man is disquieted and not happy."

      H. L. Mencken, a famous critic of government made the following observation:

      "Governments, whatever their pretensions otherwise, try to preserve themselves by holding the individual down...Government itself, indeed, may be reasonably defined as a conspiracy against him.  Its one permanent aim, whatever its form, is to hobble him sufficiently to maintain itself."

As you can see, we have the thoughts of three famous thinkers about the dilemma that we face at this time in our country.  The current Anti-IRS activity in the country is a case in point.  When even a few people get the information and motivation to organize and protest, the feeling of powerlessness begins to fade. Hume was well aware that force is on the side of the people and when enough people wake up and realize that filing tax returns is voluntary, the governors will no longer have opinion on their side.  Fromm knows very well that people have the ability to challenge the status quo and that given enough dissatisfaction, they will do so. Mencken knows that the purpose of the IRS is to hobble the population and keep it in its place to perpetuate its own survival.

      It is important for our leaders to keep us isolated and cleansed of information in order for them to maintain their control.  The Worldwide Web may be the greatest factor in history in the liberation of humanity from tyrannical government practices.  Now, for the first time in history, it is possible for anyone at any place to search for and obtain information on virtually any subject and the nature of man is certain to conflict more and more with the nature of government as this mountain of accessible information grows.

      People are subjected to massive thought control from the day they are born. We have all been programmed to accept the Federal Income Tax situation without questioning.  But we can change and we can ask questions and seek answers; and this is what the IRS, as the enforcement arm of a tyrannical government must fear.  With knowledge comes power and as the knowledge base against the income tax continues to grow, the IRS will find increasing difficulty in dealing with the fact that millions of individuals have ceased to voluntarily file tax returns.  The future should be quite exciting so hang in there and keep learning and studying and help to raise the consciousness of others.

            Many people ask why it is that juries are so quick to convict tax patriots for crimes under the Internal Revenue Code.  There is a good scientific explanation for the phenomenon.  In the 1950s, Soloman Asch, a researcher, conducted a series of experience to determine the ability of individuals to make independent judgments in the face of group opposition.  Only 20 percent of the subjects were capable of independent judgment.  Asch concluded that:

‘…social life makes a double demand on us: to rely upon others with trust and to become individuals who can assert our own reality…We may suppose that this aim can be achieved under favorable circumstances, but even then not without struggle...But there are conditions less favorable for development which, while encouraging the individual to live in a wider and richer world than the individual can encompass alone, also injure and undermine him.  This happens when social circumstances stifle the individual’s impulses and deny them expression. (Quoted in David Burston, The Legacy of Erich From, Harvard University Press, 1991, p. 153.)

            In another famous experiment by Stanley Milgram, subjects were made to believe that they were shocking an actor hidden behind a screen.  When the actor, gave an incorrect response to a question, the subject was instructed to administer increasing shock.  Incredibly, most of the subjects would administer shock when ordered to do so, even though they believed the actor was suffering terribly.

            The moral of the story is that most individuals  cannot  take a position independent of the majority and most people are obedient to authority even if that authority goes against their reasoning and values.  Truth endorsed by authority is likely to be accepted as such by a majority of people. Is it any surprise that juries continue to convict patriots for “willfulness” in spite of substantial evidence of non “willfulness?”

            With these points in mind, it is necessary to be very careful when you stand up for your Constitutional rights. 

The Screwing of the

American Taxpayer

            Under our economic system, the ordinary guy pays twice for most things.  First of all, he pays as a taxpayer, he provides subsidies and then as a consumer, he buys high-priced commodities and services.  New technologies like nuclear energy, electronics, etc, are developed and paid for by taxes, but then the technology is given to private industry for private gain.  For example, AT & T has control of the entire satellite communications system, even though the taxpayers paid the original billions to develop it. 

            The U.S. government also spends billions to help U.S. companies move to overseas markets with cheaper labor and the government has poured more than $500 billion into the savings and loan associations. 

            The government uses taxation as a means of redistributing income to the rich.  The wealthiest 3 percent of the population earn 33 percent of income (as reported) but pay only 15 percent of taxes.  The rest of us together earn only 67 percent of the nation’s income but pay 85 percent of the taxes.   ( See Washington Post, February 1, 1990).

            Corporations are paying much less tax now than they did forty years ago.  Corporate revenues amounted to 50 percent in 1945.  Today, they are 8 percent.  The revenue loss has been made up by increase in taxes on the middle and lower classes.  In 1983, a working mother with three children making $10,000 per year paid more taxes than Boeing, General Electric, Du Pont, Texaco, Mobil and AT&T combined.  After the tax reform act of 1986, sixteen major corporations paid no taxes, including General Motors, IBM, Hewlett-Packard and Greyhound in spite of the fact that they made combined profits of ten billion dollars. (The Corporate Tax Comeback, study by Citizens for Tax Justice-Washington, D. C. ; September 1988.)

            The current federal tax system is a regressive tax because it allows many write-offs for business and big-earners that are not available to the rest of us.  In forty-five of the fifty states, the poorest 20 percent of the population pay higher state and local taxes than the richest 1 percent. In Washington State, the tax difference between poor and rich is 17.4 to 3.4 percent in Texas, 17.1 to 3.1 percent in South Dakota, 10.8 to 2.2 percent; in Connecticut, 11.9 to 4.2 percent: A Far Cry from Fair, report by Citizens for Tax Justice, Washington D. C., April 1991.

            Today the government is spending so much that it must borrow against the future earnings of the American people.  The national debt was $43 billion in 1940 because of the cost of the New Deal.  The cost of World War II brought the total debt to $259 billion.  By 1981, it was $908 billion.  Reagan tripled the debt and then Bush added to it so that by 1994, the debt was increasing at a rate of $1 billion every two days.  The accumulated budget outlays from 1982 to 1993 were $12,699 billions from Congress and $12,692 billions from the White House, not an appreciable difference:  Jerome Grossman, “Blame Game,” Nation, October 26, 1992 p. 457.

            The debt is growing at such an excessive rate because of the great tax cuts to the rich, the incredible spending on the military-industrial complex and the tremendous increase in interest payments.  Right now, over 80 percent of the money collected by the government goes to pay interest on money previously borrowed.

            So the government has been using social security to hide the deficit.  Almost half the taxpayers pay more in social security tax than they pay in income tax.  Americans don’t complain about social security tax very much because they think they will get something back from the government, but social security taxes are currently used to offset deficits in the budget.  The Clinton administration has ignored the methods that would help to solve the national debt problem.  If he would raise corporate taxes and take the burden off the middle class, reduce the incredible military budget and put the money into sectors of the economy that would create jobs and growth, he could make a dent in the current problems.  It doesn’t seem that our politicians really have any interest in seeing to it that the middle class survives. (This article was written thirteen years ago, things are now worse.)

We are the Fed’s Suckers

            Today, the United States is the world’s largest debtor.  We owe more money than any country in history.  In the last 20 years, the politicians in Washington have spent three trillion dollars that they do not have.  Now “a trillion” may not seem like that much to you, but just imagine:  A trillion seconds ago was back in the Stone Age, in the year 29,697 BC.

            Anyway, it seems like congress is spending a lot of bucks on themselves and while they tax us to death, they have unleashed the most powerful Gestapo in the history of civilization to destroy our substance: the IRS. 

            The politicians don’t seem to care a whit about us and our standard of living.  They easily take 50% of our substance and offer very little in return.  In the meantime, the IRS treats us worse than the kings of the Middle Ages treated their peasants.  Actually when it comes to politics there isn’t any difference between wasted money and money well spent.  The politicians actually do better when they pour money down the toilet.  They make a few rich guys happy and get the votes.  Believe it or not, politicians get paid for wasting money.  Yes, that is right!  Let’s take defense, for example, the Grace Commission estimated that $100 billion a year could be saved just by instituting sound management practices in the Pentagon.  Today, we are spending a hundred billion a year to defend Europe from the Soviet Union, a nation that doesn’t even exist.  We are dumping billions into Iraq and we spend fifty billion a year to defend Japan.  Just who are we defending Japan from?

            Yes, the politicians have bankrupted America by running large deficits.  You and your descendents are going to pay big time in the future for their wastefulness

A TIME FOR CHANGE

     Through the years, Congress, in a desperate attempt to satisfy their addiction to money has made the IRS a stronger and stronger agency. The mention of the IRS or an encounter with the IRS puts a terrible fear into the minds of most Americans.  The fear level is a definite situation that has been created by our government to assure that Americans continue to volunteer information and money to the government every April Fool’s Day.

           It is very difficult to get justice against the IRS because so many special exemptions and situations have been written into the law relative to the IRS and its employees.  For one thing it is very difficult to take action in court against the IRS because of the Anti-Injunction Act.

           Federal Judges can all find themselves under the gun of the IRS if they rule in a manner that is unfavorable to the agency.  The IRS could easily classify a judge as an illegal tax protestor simply for deciding against the IRS.  Elected representatives are also subject to the harassment of the IRS.  As many readers know, Senator Long of Missouri, Senator Montoya of New Mexico and Representative George Hansen, have been harassed by the IRS.  Supreme Court Justice William Douglas was harassed by the IRS' leaking of his tax return information because he ruled against the IRS. Judge Abe Fortas's career was destroyed after his nomination as Chief Justice in 1968 by the leaking of IRS information.

           In Denver, Colorado, several years ago, A Federal Judge, told Bill Conklin that if he ruled in Conklin's favor, it would destroy the Federal Tax System and he was not in a position to do that. Of course, the judge sat on Conklin’s Motion for summary Judgment for several years and then sanctioned him for arguing the frivolous argument of law that we are required to file fax returns. (See Conklin’s book:  Why No One is Required to File Tax Returns. ) What is the good judge afraid of? Certainly if he agrees with Bill Conklin, he could be audited, classified as an Illegal Tax Protestor and otherwise harassed by our good Gestapo.

           The IRS has so much incredible power with their dozens and dozens of civil penalties that the Congress should get rid of the criminal tax laws. It is absolute overkill.

           Fortunately the American Public is not waiting and hoping that things will change from within the government.  Around the Country, brave patriots have put their challenges to the IRS and slowly but surely, they are making an impact.

           There is one issue that will cause tremendous havoc with our voluntary tax system and that is when the average guy on the street finally figures out that he has been fooled by the IRS all these years.  He has been voluntarily filing returns and voluntarily waiving his Fifth Amendment Rights.  Once it becomes clear that we are involved in such a situation, the voluntary filing system will crumble and the laws will drastically change.

          The IRS’ big problem is created by the alleged requirement to file a return and the use of previously filed returns in criminal tax cases.  The government cannot have its cake and eat it too.  They cannot require individuals to file Federal Tax Returns and then turn around and enter evidence of the act of filing in criminal tax cases to show willfulness. But, unfortunately, the courts are currently letting the IRS get away with this incredible travesty of justice.

           Tax Attorney, Charles Adams, who has authored a book titled: For Good and Evil: The Impact of Taxes on the Course of History makes several good suggestions to resolve these problems.

           First of all, the IRS has too much power.  It doesn't need all that power.  IRS Districts should be the same as congressional districts; then the Congressman would have a reason to get real upset about IRS behavior.  Federal Officials and Judges should have their tax returns handled by the G.A.O. and not by the IRS.  Taxpayers should be able to sue the IRS.  He also thinks that we should get rid of the criminal tax laws, as they are simply a form of overkill.

           As you can see, many people around the country are doing important things to make sure that the situation changes soon.  Hang in there, and keep supporting your favorite Freedom fighters.  Don't get on the front lines unless you really know what you are doing.

That Nasty IRS

            The IRS very well may be the nastiest organization in the world.  It is certainly the nastiest group of bureaucrats in the United States and it is the most powerful bureaucracy in the most powerful country in the world.  That is why my phone keeps ringing.  The IRS has no interest in doing a good job and treating people right.  All they care about is collecting money and they don't care who they step on to get it.  Congress has made the situation very bad by giving the IRS unbridled power.  The average collection officer has the power to garnish wages, take assets and ruin a person's life without a court order.  The IRS can proceed based on a phony assessment under Section 6020(b) and the burden of proof is on the individual to prove that the IRS is wrong.  Recently the IRS grabbed vehicles owned by other people to pay taxes of an Anti-IRS Subscriber.   Incredibly enough, the IRS found out that the individual who owed the taxes did not own the vehicles and they proceeded to the sale anyway.  Such an attitude shows how dangerous it is to give individuals such incredible power over the lives of the populace.

            Yes, the IRS is the largest bunch of goons in the United States and they have unlimited power.  IRS agents abuse their access to information.  For example one IRS report stated that 360 employees of its southeast regional branch in Atlanta had been investigated for browsing taxpayer accounts just for fun. In the Agency's internal computer system, less than one half of the agents were disciplined.

            Most people in this country think that the burden of proof lies with the government against the citizen.  Unfortunately however, in civil tax cases, the burden is on the citizen and the IRS takes full advantage of this fact.  The agency has independent authority to impose civil penalties and they don't have any legal obligation to wait for any court order before they start seizing paychecks, cars and other property.  Remember the old adage:"power tends to corrupt and absolute power corrupts absolutely."  Well, when it comes to the IRS, that old adage is really true.  Volumes could be written about IRS abuse.  It is more common in the United States than motherhood and apple pie.

            The IRS depends on the fear factor.  However, because of the incredibly complex tax code and the high tax rates, citizen cooperation is breaking down.  The tax laws are so complicated that virtually everyone can be branded as an illegal tax protestor at the whim of an IRS agent.  An IRS memorandum quoted in the March 1980 Saturday Review explained: "Agents should be able to discover errors in 99.9 percent of all returns if they want."

            The IRS has declared war on the self-employed.  The IRS is attempting to get most of the nation's five million independent contractors reclassified as employees.  If an individual is an independent contractor, a business is not required to withhold taxes and the contractor pays directly to the IRS.  However the IRS doesn't trust the self-employed so they are trying to force as many people as possible to subject their earnings to tax withholding.  The IRS has assessed millions in penalties and back taxes since 1988; and they have forced businesses to reclassify hundreds of thousands of independent contractors as employees. 

            The problem is that the IRS has a bottomless war chest to attack businesses and individuals.  The only way that we will ever defeat the IRS is if each one of us can fight back without the cost of hiring attorneys.  If you have to hire an attorney to fight the IRS for you, you can never have enough funds to fight back.  That is why individuals must learn to fight back and they must use their knowledge to help others.  We will have a bottomless war chest to fight back if we can empower ourselves to fight back.

            Currently, the number of persons working at home is growing nearly five times as fast as the overall U.S. work force.  The IRS is trying to make it harder for people to work at home by making the criteria for deducting home-office expenses more stringent than ever.  The Los Angeles Times reported in 1993 that the IRS violated its own rules on deductibility of home-office expenses by issuing erroneous instructions in Publication 587 and then penalizing taxpayers who take deductions based on those instructions.  The system is so complicated that people cannot be expected to understand it.  The Internal Revenue Code now totals over 2,000 pages plus more than 10,000 pages of regulations that have the force of law.  That does not even include the 200,000 pages of IRS and court interpretations.  A study by the Arthur D. Little Company revealed that, during 1985, businesses and individuals spent over 5.4 billion hours on federal tax compliance activities.  This is the equivalent of three million people working all year long on federal tax compliance activities at a cost of about a quarter of all federal tax collected.

            During 1992, for example, the IRS issued over three million levies affecting almost two million individuals.  The IRS also issues liens on property and each year the IRS prosecutes about 6,000 people for violations of the tax code.  The American public now spends about $13 billion a year fighting IRS enforcement actions.  It currently costs about 65 cents to collect a dollar in taxes.  Collection of taxes is the single most expensive government expense.

            Isn't it about time that we got rid of the Nasty IRS?