However, tax experts say that if you want to really annoy the IRS, you could do one of three things: Fail to file a return completely; loudly maintain that the tax code doesn’t apply to you; or cheat on employment tax filings for your workers. Stack appears to have done all three. And if the tone of his letter is any indication, he not only hit all of these IRS hot buttons, he hit them with a belligerent attitude that could have further exacerbated his tax woes.
“The IRS is toughest on people who reject the whole concept and authority of the system, who are not accepting that we do have income tax laws that we are all subject to,” said Philip J. Holthouse, partner at the Santa Monica tax law and accounting firm of Holthouse, Carlin & Van Trigt. “If the anger expressed in this posting is consistent with how he interacted with the government representatives, it would not have enhanced their compassion.”
Stack’s note refers to meeting with “a group” in the early 1980s who were holding “tax readings and discussions” that zeroed in on tax exemptions that make “the vulgar, corrupt Catholic Church so incredibly wealthy.” He said in the post that he then began to do “exactly what the ‘big boys’ were doing.”
“We took a great deal of care to make it all visible, following all of the rules, exactly the way the law said it was to be done.”
Since Stack wasn’t a church, this is like waving a red flag at a bull. The IRS apparently considered this foray into tax avoidance the real corruption. Stacks letter says: “That little lesson in patriotism cost me $40,000.”
Incidentally, the notion that anyone (other than a legitimate charity) doesn’t need to pay income taxes is one that’s well familiar–and refuted–by not only the IRS but every legitimate tax preparer in the country. So-called tax protestors or “tax defiers” take bits and pieces of the law, string them together in incomprehensible ways to come up with arguments that they say exempt them from tax. They can sound convincing, so the IRS publishes a long list of “frivolous” tax arguments on its web site, explaining when and where each argument was refuted, in an effort to keep innocent taxpayers from drinking the tax protest KoolAid.
But that wasn’t all. Stack also says in his letter that he drained a retirement account and didn’t pay tax on any of that money–didn’t even file a return. The penalties for not filing a tax return are roughly ten times worse than for not paying your taxes. That’s one of the reasons that accountants tell their clients to file returns, even when they don’t have the money to pay, said Holthouse.
Finally, Stack rails about independent contractor rules.
Experts said the only way this rant could make sense is if Stack started a company that employed other people, who he maintained were independent contractors rather than employees. If an employer maintains he’s hired only independent contractors, he doesn’t need to pay Social Security and Medicare taxes on their wages. But the IRS audits these claims carefully. When an employee is improperly classified as an independent contractor so that the employer can avoid these taxes, the IRS prosecutes aggressively because it considers it tantamount to stealing from workers Social Security and Medicare accounts.
Notably, the IRS has a Taxpayer Advocate’s office that helps resolve disputes when taxpayers have a legitimate problem with the agency. People who can’t pay tax bills promptly; have a dispute over the validity of a deduction or think they’ve been improperly penalized are often given some slack.
But these are not areas where you’re going to get a lot of sympathy.
thinkahol * on 17 Sep 10With the November elections quickly approaching, the majority of Americans will be thinking one thing: "Who cares?" This apathy isn't due to ignorance, as some accuse. Rather, working people's disinterest in the two party system implies intelligence: millions of people understand that both the Democrats and Republicans will not represent their interests in Congress. This begs the question: Whom does the two party system work for? The answer was recently given by the mainstream The New York Times, who gave the nation an insiders peek on how corporations "lobby" (buy) congressmen. The article explains how giant corporations - from Wall-mart to weapons manufacturers - are planning on shifting their hiring practices for lobbyists, from Democratic to Republican ex-congressmen in preparation for the Republicans gaining seats in the upcoming November elections: "Lobbyists, political consultants and recruiters all say that the going rate for Republicans - particularly current and former House staff members - has risen significantly in just the last few weeks, with salaries beginning at $300,000 and going as high as $1million for private sector [corporate lobbyist] positions." (September 9, 2010) Congressmen who have recently retired make the perfect lobbyists: they still have good friends in Congress, with many of these friends owing them political favors; they have connections to foreign Presidents and Kings; and they also have celebrity status that gives good PR to the corporations. Often, these congressmen have done favors for the corporation that is now hiring them, meaning, that the corporations are rewarding the congressmen for services rendered while in office, offering them million dollar lobbyist jobs (or seats on the corporate board of directors) that requires little to no work. The same New York Times article revealed that the pay for 13,000 lobbyists currently bribing Congress is a combined $3.5 bil
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