Originally published on Forbes.com July 19th, 2013
According to the Taxprof, whose word is law in the tax blogosphere, this is Day 70 of the IRS Scandal. I’m hoping that Paul Caron has figured out what criteria he will use to declare the scandal is over. There are nearly 100,000 people working for the IRS. The IRS has an Inspector General who keeps busy and issues reports. When the Inspector General issues a report there is always something that somebody, somewhere has done wrong.
So the scandal can go on forever, unless media people start reading the reports of the umpteen other inspector generals that just about every agency has. I hope they don’t decide to go after the Park Rangers, but here it is if you must know:
We initially set out to determine if USPP could account for all military-style weapons in its inventory, whether USPP had intentionally concealed missing weapons, and whether officers used USPP weapons for their personal use. Our efforts to definitively address the allegations were hindered by a failure of the USPP property and firearms custodians to provide a baseline inventory and accounting of firearms. We found credible evidence of conditions that would allow for theft and misuse of firearms, and the ability to conceal the fact if weapons were m1ssmg.
Most of the “scandals” are the type of things that happen in large organizations. If publically held companies had to have internal auditors as tough as the ones working for the federal government and the reports of those internal auditors had to be disclosed to the shareholders, it would be entertaining to say the least
At any rate, it may be that the “scandal” is finally working its way into case law. As you recall, the original “scandal” had to do with the Cincinnati gang that couldn’t sort straight either targeting or not targeting organizations based on political criteria. Well, now we have Jeffrey Azis arguing to the Eleventh Circuit that summonses the IRS issued for his bank records should be quashed. Among the reasons for quashing them is that the IRS is auditing Mr. Azis because of his political beliefs. The District Court had ruled against Mr. Azis:
During the hearing, the magistrate judge heard testimony from IRS agents Tilo Alexander and Heather Cole, who testified that Azis was selected for audit because (1) he was a non-filer with unreported income; (2) he had purchased a product from Robert Schultz, an individual who promoted and sold tax avoidance schemes; and (3) he had participated in a lawsuit, with Schultz and the nonprofit organization We The People, against the government in which he had stated that he would violate the law by not paying income taxes. Agent Cole further testified that, based on her investigation, she saw no reason to believe that Azis was selected for audit because of his political beliefs.
You can google Robert Schultz and We The People (Don’t get the latter mixed up with the petition site the White House runs.) It is another long story. Mr. Schultz apparently also likes to quash summonses.
So here is the logic. You have a political belief that the income tax is illegal. So you don’t file. The IRS shouldn’t be able to do anything about it, because that would be targeting you for your political beliefs.
Azis also testified that Agent Alexander questioned him about his involvement in WTP, and asked him whether he believed that the income tax was illegal. However, asking Azis whether he believed the income tax was unlawful when, at the time, he had not filed an income tax return for a previous year, was a legitimate question, and did not reveal any improper purpose.
The Eleventh Circuit is not buying the argument, at least not yet.
As the magistrate judge stated, and the district court adopted, Azis “was not selected for an audit in retaliation for his involvement in We the People; rather, he was scrutinized as someone who affirmatively disavowed his taxpayer obligations and ultimately selected for audit when he revealed himself to be a non-filer.”
There were other objections to the summons including questioning the authority of the agent that issued it. Keep in mind, that this is just the litigation about a summons for bank records for 2007 and 2008 tax returns. Assuming the audit results in a deficiency, there is Tax Court, which can be appealed. Then there is not paying the deficiency. When the IRS finally does something beyond sending annoying letter to collect, there is the right to a collection due process hearing, which can be appealed to Tax Court. If Mr. Azis is determined, there could be over a decade before he has to actually pay anything.
Of course, by that time, it will be Day 3,700 in the IRS scandal and Mr. Azis will have testified before Congress three times about how he has been targeted. The scandal will finally end as the last dozen people charged with collecting taxes are sent to prison. The government will be run on voluntary contributions from patriotic citizens. President Ron Paul will award Robert Schultz the Medal of Freedom along with the Browns, who stockpiled weapons in their New Hampshire home demanding that they be shown the law that said they had to pay taxes. Ron Paul compared them to Gandhi and Martin Luther King.
You can follow me on twitter @peterreillycpa.
Afternote: If you believe that there is no law requiring ordinary Americans to pay income taxes, your comments are welcome. I would appreciate it if you read this first, but it is not a requirement.