The courts rarely spend much time on tax protesters. While optimistic and deluded folks may spend lots of time submitting documents trying to convince the judge that he is sitting in an admiralty court or something, courts rarely rise to the bait. They typically dismiss the nonsense filings this way, in language arising from Crain (CA-5, 1984):
We shall not painstakingly address petitioner’s assertions with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable merit.
The Tax Court made an exception yesterday. A taxpayer whose tax information apparently appears on a well-known tax protester site showed up before Judge Buch, and the judge decided to take advantage of a teaching opportunity:
The Court has taken the time, however, to address those arguments because Mr. Waltner appears to be perpetuating frivolous positions that have been promoted and encouraged by Peter Hendrickson’s book Cracking the Code: The Fascinating Truth About Taxation in America (2007). Indeed, it appears not merely that Mr. Waltner’s positions are predicated on that book but that his returns and return information have been used to promote the frivolous arguments contained in that book. Consequently, a written opinion is warranted.
I have mentioned Mr. Hendrickson before. His most recent appearance here involved an appeal of his sentence on tax convictions. Needless to say, if Mr. Hendrickson has “cracked the code,” a lot of good it did him. Judge Buch addresses some of the contentions Mr. Hendrickson’s book makes, including the idea that most of us aren’t “persons” subject to the tax law and that “private sector” income is non-taxable. Judge Buch addresses Mr. Hendrickson’s qualifications in tax law (let’s just say they are non-traditional, including a firebombing conviction).
The opinion describes Mr. Hendrickson’s main tax tactic:
This misguided view leads to the author’s strategy for filing tax returns, which was mirrored by Mr. Waltner’s returns. The author recommends “correcting” Forms 1099 by including a declaration that nothing that was received was taxable. Mr. Waltner did this. The author recommends creating substitute W-2s by changing only the amount of the reported wages. Mr. Waltner did this. The author recommends filing a Form 1040 based on these inappropriately revised forms. Mr. Waltner did this. The author recommends including FICA taxes amongst the taxes withheld. Mr. Waltner did this.
In the end, this long Tax Court opinion comes to the same conclusion as all of the shorter ones addressing the same arguments, concluding that they don’t work. The taxpayer, Mr. Waltner, was hit with a $2,500 penalty for making frivolous arguments.
The Moral: No matter how many words they throw out there, tax protest arguments don’t work. Also, it’s unwise to take tax advice from advisors whose arguments can’t keep themselves out of prison.
Cite: Waltner, TC Memo 2014-35
Related: Russ Fox, He Cracked the Code (but Won’t be Happy with the Result)
William Perez, Tax Credits for Families with Children
Jack Townsend, Another Sentencing of UBS Client. In case you think bank secrecy still works.
Len Burman, Hidden Taxes in the Camp Proposal (TaxVox):
The plan resurrects the 1960s era add-on minimum tax—the granddaddy of today’s uber-complex Alternative Minimum Tax. Effectively, the surtax can be0 thought of as an additional tax on certain preference items such as the value of employer-sponsored health insurance, interest on municipal bonds, deductible mortgage interest, the standard deduction, itemized deductions (except charitable contributions), and untaxed Social Security benefits. Although the list of preference items differs from the old add-on minimum tax, the idea is eerily similar.
The more I see of the Camp plan, the less it seems like reform.
Clint Stretch, 10 Reasons Democrats Should Like the Camp Tax Bill. (Tax Analysts Blog) Generally reasons why it doesn’t count as actual reform.
Joseph Rosenberg, How Does Dave Camp Pay for Individual Tax Cuts? By Raising Revenue from Corporations (TaxVox)
Kay Bell, GOP’s tax reform bill DOA
TaxProf, The IRS Scandal, Day 295
Johannes Schmidt, New Soda Tax Proposed in Illinois (Tax Policy Blog). That must mean it only applies in Southern Illinois, because it’s (properly) called “Pop” everywhere else in the state.
News from the Profession: Big 4 Firms Making Necessary March Madness Preparations as Usual (Going Concern)