Monday, December 18, 2006

The Wages of Tax Evasion Is Jail (Part 2)

In last week’s blog, we reported on the conviction in federal court of creation evangelist Kent Hovind and his wife Jo of numerous federal tax offenses. Facing a maximum of over 200 years in prison, Mr. and Mrs. Hovind have sadly learned the truth that the wages of tax evasion is jail. This week’s blog continues the legal session from 2002, in which LLM Attorney Terry Lee Hamilton warned Baptist preachers of a “Federal Crackdown on Tax Evasion Schemes and Scams.” At the conclusion, Attorney Hamilton offers three simple recommendations designed with the purpose of keeping you from joining Kent and Jo Hovind in federal prison.

DEPARTMENT OF JUSTICE PRESS RELEASES IN 2002

1. February 1, 1001 -- Justice Department obtains permanent injunction against Atlanta tax return preparer
A federal court issued a permanent injunction against HEH Financial Services, Inc., which had made a frivolous misrepresentation under Section 861 of the Internal Revenue Code that only income earned by U.S. citizens working abroad was subject to income tax. The defendant was ordered to turn over records identifying all clients.

2. February 21, 2002 -- Justice Department obtains permanent injunction prohibiting the sale of illegal tax plans
A federal court in Florida issued a permanent injunction against Joseph N. Sweet and EDM Enterprises, which had made the frivolous misrepresentations that paying federal income tax was voluntary and that wages are not income. The defendants were ordered to identify all persons who purchased their tax shelter plans.

3. March 5, 2002 -- Justice Department sues to halt fraudulent income tax scheme
The Department of Justice sued the Joy Foundation in Illinois for charging thousands of dollars for materials containing false or fraudulent statements about income tax laws, including a scheme for “customers to begin sending a series of letters to the IRS that will, the defendants claim, decrease the risk of IRS audit and defeat criminal charges based on willfulness.” The government asked the court “to turn over to the government a list of participants.”

4. March 27, 2002 -- Federal court in Tampa orders tax fraud promoter to stop preparing bogus tax returns, promoting fraudulent tax scheme
A federal court ordered David Bosset to stop preparing bogus tax returns and to stop promoting a fraudulent tax scheme in which he “claimed that only income from foreign sources is subject to United States income taxes.” The court ordered Bosset to provide the Justice Department a complete list of clients back to 1998.”

5. September 26, 2002 -- Justice Department sues Florida man to halt tax scam
The Department of Justice filed a lawsuit against Everte C. Farnell, one of the promoters who “falsely claim that income from sources in the United States is not subject to federal income tax.” A Department of Justice attorney explained that Promoters of this scam line their pockets, while getting their customers in serious trouble.”


PENALTIES FOR PURSUING FRIVOLOUS TAX ARGUMENTS
Preachers preach about the wages of sin. What are the wages of tax evasion? In United States v. Sloan, 939 F.2d 499 (7th Cir. 1991), the Seventh Circuit Court of Appeals noted the following:

[Like moths to a flame, some people find themselves irresistibly drawn to the tax protester movement’s illusory claim that there is no legal requirement to pay federal income tax. And, like moths, these people sometimes get burned.]

In the 1980’s, Congress stiffened the penalties, up to $25,000, against taxpayers who bring frivolous claims before the courts. In Coleman v. Commissioner, 791 F.2d 68 (7th Cir. 1986), the Seventh Circuit explained Congress’ rationale, as follows: “Once the legal system has resolved a claim, judges and lawyers must move on to other things. They cannot endlessly rehear stale arguments. . . [T]here is no constitutional right to bring frivolous suits.” Please consider a couple of penalties imposed by the Tax Court in the year 2000 against taxpayers (and even their lawyers!) who had filed frivolous lawsuits.

• $25,000 against the Defendant Nis family and $10,600 against their attorney for pursuing “a strategy of noncooperation and delay, undertaken behind a smokescreen of frivolous tax-protester arguments.”
• $25,000 against Defendant Madge for pursuing frivolous arguments that his income was not taxable and that only foreign income was taxable.

In United States v. Remple, the federal district court for Arkansas considered frivolous arguments filed by the Rempels, noting the following:

[It is apparent to the court from some of the papers filed by the Rempels that they have at least had access to some of the publications of tax protester organizations. The publications of these organizations have a bad habit of giving lots of advice without explaining the consequences which can flow from the assertion of totally discredited positions and/or meritless factual positions.]


RECOMMENDATIONS
As mentioned in the opening paragraph of this section, “tax evaders are not only breaking the law but also becoming a poor testimony for the name of our Lord and Savior Jesus Christ.” Sadly, enticing tax evasion schemes and scams will continue to lure many Christians into making decisions that could cost them dearly, not only in loss of dollars, but also in loss of reputation.

LLM makes three simple recommendations:
1. As a good Christian and patriotic American, abide by the tax laws of America.
2. As a good steward, be a tax minimizer, not a tax evader.
3. If you are intrigued or enticed by any scheme such as those listed above, please seek competent legal counsel. Our staff will gladly review any documents supplied to LLM on behalf of a concerned Independent Baptist preacher to determine if those documents give “. . . lots of advice without explaining the consequences which can flow from the assertion of totally discredited positions. . . .”

Monday, December 11, 2006

The Wages of Tax Evasion Is Jail (Part 1)

In the December 2006 issue of Light on the Law, a publication of Lighthouse Legal Ministries, LLM Attorney Terry Lee Hamilton reported on a sad day in American legal history:

[On November 2, 2006, creation evangelist Kent Hovind and his wife Jo were found guilty by a 12-person jury in a Florida federal court of numerous federal tax offenses. He faces a maximum of 288 years in prison, and she a maximum of 225 years. In previous seminars, Attorney Hamilton has pointed out that Mr. Hovind was following discredited legal theories which resulted in the conviction of several others. We are sad to see such a man (and his wife) follow the same path and now face the same consequences.]

In 2002, at LLM’s Eighth Annual Lighthouse Legal Seminar, Attorney Hamilton conducted a legal session on the topic of “Federal Crackdown on Tax Evasion Schemes and Scams.” The following is from the first part of that legal session:

FEDERAL CRACKDOWN ON TAX EVASION SCHEMES AND SCAMS

In November 1995, when Lighthouse Legal Ministries covered Taxes for Pastor and Church at its first legal seminar, the first specific topic covered in that session was entitled, “The Tithe Is the Lord’s; the Tax Is the Government’s.” LLM’s position then is the same as it is now: “As good stewards, we should be tax minimizers, not tax protesters.”

The government is both Biblically and legally authorized to assess and collect taxes against individuals. Tax protesters and tax evaders are not only breaking the law but also becoming a poor testimony for the name of our Lord Jesus Christ.

For the last several years, there has been much talk about a huge overhaul of the methods by which America assesses and collects taxes. Until that time, we must abide by the current system of tax laws.

Before you read the following information, allow me to take two disclaimers:
• I have never been an employee of the IRS.
• I have never been a tax preparer.
My only interest is helping preachers save money and avoid having to pay huge back tax payments, huge interest payments, and huge penalties.

TESTIMONY OF IRS COMMISSIONER BEFORE THE SENATE FINANCE COMMITTEE ON APRIL 11, 2002

Some of the persons and organizations which perpetrate tax schemes and tax scams eloquently, but falsely, claim that the IRS is a rogue agency which intentionally misrepresents the nation’s tax law to unlawfully gouge unwitting taxpayers. Such arguments, frankly, are laughable.
• The IRS enforces laws passed by Congress.
• The IRS is accountable to and reports to Congress annually and as requested by Congress.

On April 11, 2002, Charles O. Rossotti, Commissioner of the Internal Revenue Service, reported to Congress on the continued efforts of the IRS to “identify and combat actively promoted tax schemes,” declaring that such an effort “is our highest compliance priority.” The IRS is not only taking enforcement action against promoters of tax schemes, but also identifying and taking “enforcement action against participating taxpayers, including audits, civil penalties and criminal investigations.” Commissioner Rossotti cited four broad categories of tax schemes, as follows:
1. False description of the law to claim exemption from tax.
2. Misrepresentation of the facts to claim improper deductions and credits.
3. Use of trusts and/or offshore bank accounts to hide income.
4. Abusive tax avoidance transactions.

CONCLUSION

It was a sad day when creation evangelist Kent Hovind learned the truth of the title of this blog article—The Wages of Tax Evasion Is Jail. I do not want any Baptist preachers (and their wives) joining Kent and Jo Hovind in a federal prison. In our next posting, I will finish reprinting the 2002 legal article on “Federal Crackdown on Tax Evasion Schemes and Scams.”