Tea Parties

As I hope everyone realizes, yesterday was tax day. It was also a day filled with civil demonstrations being called “tea parties” that took place all over the country. Some were larger than others, but the turn-out was greater than we expected it would be at Tax Masters. While we have been watching this grass roots movement from afar, we decided it was time to go ahead and comment on the situation. I want to clearly state that we don’t support or condemn this movement, but there are some things about some of the rhetoric being thrown around that concern us.

The Law is the Law

Civil demonstrations are incredibly important in a republic, especially when the press is able to cover such events and to make them known to a wider audience. The key concept in civil demonstration to us at Tax Masters is the first word in the phrase: civil.

Not only does “civil” imply courteous, but it also refers to following the rules established by law. In other words, while it is perfectly legal and in fact moral to demonstrate for or against something you believe, you must still follow all current laws in order to avoid being labeled a criminal. It is incredibly important that you not use the fervor and fanfare of these tea party demonstrations as an excuse to not pay income tax and to not file tax returns. While demonstration is a great method for delivering a message to those who have the power to change the law, it is not a method by which you should disobey existing law.

A Warning About Tax Protesters

There are many issues being cited as relevant at the tea party demonstrations, including misuse of tax dollars, deficit spending, irresponsible use of tax dollars to bail out unworthy entities, and increased federal control over certain state-run programs like unemployment. While we have no first-hand knowledge of tax protesters joining the ranks at the tea parties, we have no doubts that this contingent will attempt to influence this movement as much as they can.

Our advice to the tea parties is to keep the tax protesters at arm’s length. They can be very convincing if you don’t have all the facts and they are capable of quickly dismantling the genuine spirit with which the tea parties have demonstrated. For those who have not dealt with tax protesters in the past, the most common argument they use is that the Sixteenth Amendment was not properly ratified, or that the state of Ohio was not actually an official state at the time of ratification. This argument is simply not true and has been repeatedly challenged and upheld in United States courts of law. At a time when Stuart Varney of Fox News (www.foxnews.com) is reporting a twenty-five percent collections shortfall at the IRS so far for the 2008 tax year, being affiliated with tax protesters might not be a great move. Also be aware that these protesters advance their agenda based in large part on paranoia. This may or may not be something tea party organizers can control, but they need to be aware that the tax protest crowd has a past and a reputation.

Tax Representation for Those In Need of It

We suspect that most of the people at these tea parties are law abiding people who are a bit upset about how much they are paying in taxes and about how that money is being spent. However, we’ve been in this business long enough to know that people can make innocent mistakes that get them into trouble with the IRS very quickly. One such mistake we are seeing more of is people taking money out of their retirement accounts before they are of retirement age. This can lead to significant tax debt if the financial institution doesn’t withhold the tax and early withdrawal penalties. For those who are having problems paying their taxes, we can help at Tax Masters. We offer comprehensive tax representation services, from audit representation to settling outstanding tax debt, to suspending levies, liens, and wage garnishment. If you are having trouble with the IRS, contact us today. We can help you solve your tax problem.

A Word to the Tax Protesters

Okay, here we go. I appreciate your frustration at paying taxes, but the law of the land demands that you file yearly tax returns and pay income tax to the United States government. Plainly stated, the IRS is a legal division of the United States Department of Treasury and has the constitutional duty to collect federal income tax from the citizens of the United States. The Sixteenth Amendment argument has survived all these years because proponents mistakenly believe that the courts have refused to address the issue.

Per information put out by the IRS itself (www.irs.gov), the courts have consistently upheld the constitutionality of the federal income tax. Just three years after the Sixteenth Amendment was ratified in 1913 by forty states (including Ohio), the Supreme Court upheld the constitutionality of the income tax laws that were based on the ratification of the Sixteenth Amendment in Brushaber v. Union Pacific R.R., 240 U.S. 1 (1916).

A surge of cases were brought in the 1980’s, all set on debunking the Sixteenth Amendment. In Knoblauch v. Commissioner, 749 F.2d 200, 201 (5th Cir. 1984) cert. denied, 474 U.S. 830 (1986), the court admonished the case as having no merit whatsoever and fined Knoblauch for bringing such a frivolous appeal before the court, stating that “Every court that has considered this argument has rejected it.”

In United States v. Stahl, 792 F.22d 1438, 1441 (9th Cir. 1986), cert. denied, 479 U.S. 1036 (1987), the court upheld Stahl’s conviction for not filing returns and for making a false statement. The court clearly declared that “the Secretary of State’s certification under authority of Congress that the Sixteenth Amendment has been ratified by the requisite number of states and has become part of the Constitution is conclusive upon the courts.”

In Miller v. United States, 868 F.2d 236, 241 (7th Cir. 1989) (per curiam), the court sanctioned the plaintiffs for having advanced a “patently frivolous” position. The court stated that “We find it hard to understand why the long and unbroken line of cases upholding the constitutionality of the Sixteenth Amendment… and those specifically rejecting the argument advanced in The Law That Never Was, have not persuaded Miller and his compatriots to seek a more effective forum for airing their attack on the federal income tax structure.”

The Tax Masters Conclusion

At Tax Masters, we believe it is our duty and privilege to pay our fair share of income tax to the government of the United States of America. Our role as a tax representative and tax resolution firm is based solely on our ability to help taxpayers regain compliance, settle outstanding tax debt, avoid unnecessary interest and penalties, and get back in the good graces of the IRS.

We stand ready to assist any US taxpayer who is in need of our services. To the tea party demonstrators and organizers, we stand behind your right to demonstrate, but we strongly encourage you not to use this movement as an excuse to avoid filing and paying your federal income tax. Running afoul of the IRS at a time of shortfall is tantamount to running headfirst into a brick wall. You’ll probably survive, but it sure is going to hurt.

Until you need us,

Patrick Cox Tax Masters

One of the tax consultants that works for us here at Tax Masters shared some particularly sad news with me this week. He had been working with a potential client to customize a solution that would eventually free the potential client from some significant IRS tax problems.

Unfortunately before we could get the process started to help this individual, we learned from family members that he had taken his own life. The family cited the man’s IRS tax problem as a key contributing factor in the suicide.

First, we want to offer our condolences to the family. Losing a loved one is always difficult. But to lose a loved one because of IRS problems or financial problems must be incredibly difficult. We wish you peace and healing in this time of loss.

Next, I want to express to everyone reading this that no matter how bad your IRS problems seem, they are never bad enough to cause you to take your own life. Particularly as tax day approaches, many people are feeling the stress and anxiety of having to deal with the IRS. Don’t let mistakes from your past get the better of you. No matter how you wound up with the tax problems you have–whether you failed to file a return, made honest mistakes about deductions, or even if you outright lied to the IRS or are being prosecuted for tax evasion–there’s always a way out. While that way out may not be exactly the outcome you wanted, we all know that life is not perfect. Mistakes happen. Don’t let tax debt turn into something more than it is. At the end of the day, it’s just debt.

If you are having tax trouble, seek representation. We would prefer that you call us, but even if you don’t, call someone and get the help you need before it gets to be too overwhelming. Whatever mistakes have led to your tax problems, they can be overcome with the right help. As a good friend said to me recently, it is always easier to regret a poor decision than to make the right decision in the moment. Doing the right thing is seldom easy and is often the most difficult path. But there are people who can help.

When you get to the point where you can’t see a way out and you feel like you have no one you can talk to, there’s a number I want you to call. If you are considering taking your own life, please make a call first to the National Suicide Hotline at 1-800-784-2433. They are always on and always ready to talk and to listen. If you are a person of faith, I would encourage you to call or visit a spiritual leader in your community just to talk about the things going on in your life. Sometimes talking things through helps you see the best way through a crisis.

If you want to talk specifically about your tax issues, we are here. You can reach any of the departments at Tax Masters listed below:

Tax Consultations: 888.497.5937 | Billing and Finance: 877.668.8082 | Operations: 800.682.3679

In particular, if the IRS is harassing you unlawfully, we can generally get them to curb their behavior. And if we can’t do it on our own, we know how to deal with the National Taxpayer Advocate’s Office, or your Congressman,  to get them to rein in unlawful and outlandish collections behaviors of agents at the IRS.

I would just like to close this email with a final simple statement.

You have been given a life to use as you wish. It is yours and no one else’s. You can do what you want. But before you take drastic action, please consider the effects your actions will have on those you love and on those who love you.

Patrick Cox

Why Not Represent Yourself with the IRS?

I had a conversation this week with a bright enough fellow. He had gotten behind with bills and taken his 401(k) out to live on. Before he knew it, he was hit with the early withdrawal penalty and was soon in serious trouble with the IRS, owing tens of thousands without a way to pay it. He basically called to get as much information as he could out of us in hopes of taking what little information he could glean from our conversation so he could represent himself with the IRS. I strongly encouraged the gentleman not to take that course of action, but at the end of the day, sent him on his way with our best wishes and the reassurance that we would be here to help pick him up even after he made all the mistakes he was sure to make with the IRS. For the record, the worse off your problem, the harder it is to fix, the more it costs to fix, and the longer it takes. So the sooner you address your issues in the right way, the better off you’ll be.

From the Horse’s Mouth

I commented in January about Nina Olson’s report from the National Taxpayer Advocate’s office regarding her take on just how well the IRS did in 2008. One of the things she discussed at length is the fact that the tax code has become so complicated and convoluted that an entire industry is currently being supported by taxpayers who are simply trying to comply with existing tax laws.

It comes as no surprise that she goes on to discuss the fact that taxpayers with serious tax issues tend to benefit from IRS tax representation. Based on the statistics given by Ms Olson, we were able to draw the natural conclusion she could not explicitly state because of political reasons: Taxpayers are achieving more favorable results if they engage a qualified IRS tax representative.

Dangers of Engaging the IRS on Your Own

I’m going to remove my TaxMasters-hued glasses for a moment and simply record some things you might expect from the IRS if you are one of the self sufficient few who insists on doing this yourself. Before I continue, let me emphatically state that I do not recommend that you engage the IRS by yourself unless you are an enrolled agent, CPA, tax attorney, or another type of tax professional accustomed to dealing with the IRS routinely. With that caveat out of the way, here’s what the IRS has been reported to do when engaging in audits and aggressive collections activities. The IRS can:

• Assume the worst about you–that you are a tax cheat, that you are lying, that you are intentionally and criminally defrauding the US Treasury of funds
• demand that you pay immediately all the money you owe
• When you inform them you can’t pay the full amount they say you owe, set up payment plans you might not be able to afford because the IRS doesn’t ask you about all your expenses and you don’t know which expenses qualify, which don’t qualify, and how to present your bills to benefit your case
• File returns for you when you fail to file, excluding any non-standard deductions to which you are entitled, and then send you a bill to pay the full amount immediately along with all penalties and interest
• Ask you questions in an audit specifically designed to catch you off-guard to uncover additional information the IRS can use against you to collect even more revenue
• Ask your family, friends, neighbors, coworkers, clients, business associates, and employers leading questions about your financial situation, your purchases, your habits, and even your criminal history (whether you have one or not) in an attempt to get as much information against you as possible; and if they refuse to cooperate, there is always the fear of the IRS looking more closely into their affairs
• Take your money and assets regardless of how much you need to make payroll or to pay the bills necessary to keep your household or business solvent

The TaxMasters Benefit

We have made a living at TaxMasters by knowing what to expect from the IRS and by using their own rules, tendencies, and habits to protect our clients. For the do-it-yourself tax negotiators, I have a vital point to make. If you are facing an IRS problem, regardless of how you arrived at that problem, you are different from TaxMasters in one very important aspect. While you are facing uncertainty and fear about facing the IRS head on, we don’t have that fear at TaxMasters. We don’t fear negotiating with the IRS because we know their rules and we study their tactics and tendencies. We don’t get caught off guard or surprised by the IRS tactics that tend to strike fear into taxpayers.  We are successful at negotiating with the IRS because we do it every day and understand what constitutes a real threat and what IRS actions amount to nothing more than a toothless bark. It’s far easier to stop a punch if you know exactly when and how it will be thrown.

It’s Your Call

So think about it, yes? Those of you feverishly working through the latest do-it-yourself book or tax prep for dummies paperback, take a minute to think this through. Even if you are up to all the technical aspects of negotiating with the IRS, do you know when your negotiation tactic can be considered criminal? Do you know what questions the auditor can ask in an audit and how to redirect the auditor if they step out of line? Are you ready to use the law not only to represent yourself, but to hold the IRS agent pounding on your door accountable?

But even more important than any of these things… If you are afraid of the IRS, they will exploit that fear and are likely to take from you far more than you, or we, think is fair.

Until you need us,

Patrick Cox TaxMasters