Code of Silence: Time for the IRS to Answer The Question!

I STILL HAVE DOUBTS WHETHER THE NAME OF VERNICE B. Kuglin, who lives in Memphis, Tenn., will someday leap off the pages of America's history books along with those of Patrick Henry, Nathan Hale, and Rosa Parks. I do know that Ms. Kuglin must be a woman of some personal courage.

Ms. Kuglin, a 58-year-old pilot for FedEx, made news a few days ago when a federal court jury found her not guilty on six charges of tax evasion and willful failure to file federal tax returns. During her testimony, Ms. Kuglin said that over the last eight years she had sent numerous letters to the Internal Revenue Service requesting that the agency tell her specifically which law in the federal code requires her to pay individual taxes.

To this day, she says, she has not received an answer to that simple question. It's not, mind you, that she has received an answer she considers unsatisfactory or unclear. It's that she hasn't received an answer of any kind.

The reason I still have doubts about Ms. Kuglin's durability as a true American heroine has to do with the methods she used to make her point. (Among other things, she claimed 99 exemptions on her W-4 form.) But after watching her case?and those of other tax protesters?for the last several months, I can't help thinking they have something of an argument. And I think the IRS continues to be extraordinarily dim-headed in its response on at least two important fronts.

First, if indeed the obligation of every U.S. citizen to pay federal taxes is legitimately codified, then it shouldn't be all that difficult for the IRS to demonstrate for a layman like Ms. Kuglin just exactly how those laws apply. For some years, some pretty smart people have put together a pretty persuasive argument that the tax laws are a sham, that they have been cobbled together in an extraconstitutional manner allowing Uncle Sam to collect huge sums of money without a clear basis in law.

If these folks are wrong, more and more taxpayers are asking, why should it be so hard for the IRS and the federal government to prove the case? Why, when a minister like Gene Chapman camps out for a "fast to the death" on the steps of an IRS building, demanding an answer to the question, "Where is my tax liability in the law?"?why doesn't the IRS just provide a simple and transparent answer?

Indeed, I have actually been skeptical in the other direction. I have regularly dismissed the so-called tax-protest movement as a group of crackpots who want so badly to prove the federal government wrong that they concoct harebrained theories that can't possibly hold water. But the longer the feds and the IRS stonewall, the less skeptical I get.

Second, why must the federal government be so heavy-handed in its response to a few of the more outspoken tax protesters? Protester Irwin Schiff finds himself in federal court in Nevada this week, fighting a possible six-month jail sentence for continuing to sell his book, The Federal Mafia. The government contends that he is engaged in commercial enterprise to encourage citizens to break the law?which means that every time Mr. Schiff does anything to sell another book, he finds himself in contempt of court.

Protester Larken Rose, meanwhile, says he isn't even trying to sell anything; without advocating any particular action, he just tells people through lectures and literature what he thinks the law really says?and for that, he claims, he has had his office and home ransacked by IRS agents.

WORLD and its board and management are not tax protesters. We take seriously Christ's command to "render unto Caesar the things that are Caesar's, and unto God the things that are God's." And we understand that in a secular society, that may often mean we end up paying taxes even for causes that we find repugnant to our consciences.

At the same time, it's altogether right for citizens in a free society to call on Caesar to tell us the truth about our obligations, and to do so in a civil manner.

In Memphis a couple of weeks ago, after the jury that had exonerated Ms. Kuglin had been dismissed, the U.S. attorney who had unsuccessfully prosecuted the case asked the presiding judge to order the defendant to file her forms, pay her taxes, and "obey the law." The judge responded discreetly by noting that such a response was outside his duties.

If the judge was simply saying, "Make your law clear, sir, and maybe the lady will obey," I think he had a pretty good point.

I also am for the national sales tax and simultaneous repeal of the income tax. The national sales tax would be a modern-day equivalent of the excise tax of the founders' time. I am for anything that helps restore as much of the original intent of the Constitution as possible and gets the Fed off our backs.

Until the 16th Amendment was ratified on Feb. 3, 1913 (with Connecticut, Rhode Island and Utah never ratifying it), the primary form of taxation was through duties, imposts and excises. Excises are an internal tax levied on the manufacture, sale, or consumption of a commodity. Imposts (and some excises) are any of various taxes on privileges often assessed in the form of a license or fee. A duty is primarily a tax on imports. The 16th Amendment introduced an income tax on top of the Fed's power to levy excises, imposts, and duties — none of the latter forms of taxation were repealed.

You are correct that the Left will never permit eliminating the income tax, but neither will anyone else in the political class. Some Republicans have talked a good game on this issue, but I notice that when they have the power to at least raise it as a public issue and attempt to pass legislation, they haven't done squat.

By the way, the 16th Amendment was introduced and passed by Congress in 1909 during the first term of President William Howard Taft. Both houses of Congress at the time were controlled by Republicans.

From the IRS website

B. Contention: Payment of tax is voluntary.

In a similar vein, some argue that they are not required to pay federal taxes because the payment of federal taxes is voluntary. Proponents of this position argue that our system of taxation is based upon voluntary assessment and payment.
The Law: The requirement to pay taxes is not voluntary and is clearly set forth in section 1 of the Internal Revenue Code, which imposes a tax on the taxable income of individuals, estates, and trusts as determined by the tables set forth in that section. (Section 11 imposes a tax on the taxable income of corporations.) Furthermore, the obligation to pay tax is described in section 6151 , which requires taxpayers to submit payment with their tax returns. Failure to pay taxes could subject the noncomplying individual to criminal penalties, including fines and imprisonment, as well as civil penalties.
In discussing section 6151, the Eighth Circuit Court of Appeals stated "when a tax return is required to be filed, the person so required 'shall' pay such taxes to the internal revenue officer with whom the return is filed at the fixed time and place. The sections of the Internal Revenue Code imposed a duty on Drefke to file tax returns and pay the . . . tax, a duty which he chose to ignore." United States v. Drefke, 707 F.2d 978, 981 (8 th Cir. 1983).
Relevant Case Law:
United States v. Bressler, 772 F.2d 287, 291 (7 th Cir. 1985) - The court upheld Bressler's conviction for tax evasion, noting, "[he] has refused to file income tax returns and pay the amounts due not because he misunderstands the law, but because he disagrees with it . . . . [O]ne who refuses to file income tax returns and pay the tax owing is subject to prosecution, even though the tax protester believes the laws requiring the filing of income tax returns and the payment of income tax are unconstitutional."
Schiff v. United States, 919 F.2d 830, 833 (2d Cir. 1990), cert. denied, 501 U.S. 1238 (1991) - The court rejected Schiff's arguments as meritless and upheld imposition of the civil fraud penalty, stating "[t]he frivolous nature of this appeal is perhaps best illustrated by our conclusion that Schiff is precisely the sort of taxpayer upon whom a fraud penalty for failure to pay income taxes should be imposed."
Packard v. United States, 7 F. Supp. 2d 143, 145 (D. Conn. 1998) - The court dismissed Packard's refund suit for recovery of penalties for failure to pay income tax and failure to pay estimated taxes where the taxpayer contested the obligation to pay taxes on religious grounds, noting that "the ability of the Government to function could be impaired if persons could refuse to pay taxes because they disagreed with the Government's use of tax revenues."
United States v. Gerads, 999 F.2d 1255, 1256 (8 th Cir. 1993) - The court stated that "[taxpayers'] claim that payment of federal income tax is voluntary clearly lacks substance" and imposed sanctions in the amount of $1,500 "for bringing this frivolous appeal based on discredited, tax-protestor arguments."

the IRS changed its mission to "showing the public the tax laws that apply" or sumping like that in order to obscure the voluntary nature of the income tax.

From the super secret public web site at the IRS

. The Voluntary Nature of the Federal Income Tax System

A. Contention: The filing of a tax return is voluntary.

Some assert that they are not required to file federal tax returns because the filing of a tax return is voluntary. Proponents point to the fact that the IRS itself tells taxpayers in the Form 1040 instruction book that the tax system is voluntary. Additionally, the Supreme Court's opinion in Flora v. United States, 362 U.S. 145, 176 (1960), is often quoted for the proposition that "our system of taxation is based upon voluntary assessment and payment, not upon distraint."
The Law: The word "voluntary," as used in Flora and in IRS publications, refers to our system of allowing taxpayers to determine the correct amount of tax and complete the appropriate returns, rather than have the government determine tax for them. The requirement to file an income tax return is not voluntary and is clearly set forth in Internal Revenue Code §§ 6011(a) , 6012(a) , et seq., and 6072(a). See also Treas. Reg. § 1.6011-1(a).
Any taxpayer who has received more than a statutorily determined amount of gross income is obligated to file a return. Failure to file a tax return could subject the noncomplying individual to criminal penalties, including fines and imprisonment, as well as civil penalties. In United States v. Tedder, 787 F.2d 540, 542 (10 th Cir. 1986), the court clearly states, "although Treasury regulations establish voluntary compliance as the general method of income tax collection, Congress gave the Secretary of the Treasury the power to enforce the income tax laws through involuntary collection . . . . The IRS' efforts to obtain compliance with the tax laws are entirely proper."
Relevant Case Law:
Helvering v. Mitchell, 303 U.S. 391, 399 (1938) - The U.S. Supreme Court stated, "[i]n assessing income taxes, the Government relies primarily upon the disclosure by the taxpayer of the relevant facts . . . in his annual return. To ensure full and honest disclosure, to discourage fraudulent attempts to evade the tax, Congress imposes [either criminal or civil] sanctions."
United States v. Tedder, 787 F.2d 540, 542 (10 th Cir. 1986) - The court upheld a conviction for willfully failing to file a return, stating that the premise "that the tax system is somehow 'voluntary' . . . is incorrect."
United States v. Richards, 723 F.2d 646, 648 (8 th Cir. 1983) - The court upheld conviction and fines imposed for willfully failing to file tax returns, stating that the claim that filing a tax return is voluntary "was rejected in United States v. Drefke, 707 F.2d 978, 981 (8 th Cir. 1983), wherein the court described appellant's argument as "an imaginative argument, but totally without arguable merit."
Woods v. Commissioner, 91 T.C. 88, 90 (1988) - The court rejected the claim that reporting income taxes is strictly voluntary, referring to it as a "tax protester type" argument, and found Woods liable for the penalty for failure to file a return.
Johnson v. Commissioner, T.C. Memo. 1999-312, 78 T.C.M. (CCH) 468, 471 (1999) - The court found Johnson liable for the failure to file penalty and rejected his argument "that the tax system is voluntary so that he cannot be forced to comply" as "frivolous."

United States Tax Court
VERNICE B. KUGLIN,
Petitioner v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent

Docket No. 2657-00L
Date of Decision: February 25, 2002
Judge: Foley, Maurice B.

Tax Analysts Citation: 2002 TNT 38-20
Parallel Citations: T.C. Memo. 2002-51
Principal Code Reference: Section 6330
Section 6673

Summary
Provided by Tax Analysts. Copyright 2003 Tax Analysts. All rights reserved.
IRS TRANSCRIPTS ARE ENOUGH TO VERIFY ASSESSMENTS.
The Tax Court has held that an IRS appeals officer's reliance on
IRS transcripts to initiate a collection action against a tax-
delinquent individual met the requirements for assessment
verification.
The IRS made assessments for Vernice Kuglin's 1994-1995 taxes and
issued a hearing and levy notice. Kuglin requested a due process
hearing and contended that there was no "valid summary record of
assessment." The appeals officer printed out computer transcripts of
IRS records and held a telephone hearing with Kuglin. The IRS, relying
on the transcripts to verify the assessments, issued a determination
notice sustaining the proposed collection action against Kuglin. The
IRS didn't give Kuglin copies of the transcripts or Forms 4340 before
making the determination but did so a month before trial.
Tax Court Judge Maurice B. Foley, sustaining the IRS's
determination, held that the appeals officer didn't abuse his
discretion by relying on the transcripts to verify the assessments.
The court noted that the transcripts had the requisite information and
that the officer wasn't required by section 6330(c)(1) to produce Form
23C for assessment verification. The court concluded that Kuglin
wasn't prejudiced when the IRS provided the transcript copies after
the hearing but before the trial, and it found that Kuglin failed to
show any irregularity in the assessment procedure. The court declined
to impose damages for delay against Kuglin.
Full Text
Provided by Tax Analysts. Copyright 2003 Tax Analysts. All rights reserved.
UNITED STATES TAX COURT

Filed February 25, 2002

Joyce Griggs, for petitioner.
Ross M. Greenberg, for respondent.
MEMORANDUM OPINION

[1] FOLEY, Judge: The issue for decision is whether respondent has met the requirements of section 6330.1
Background

[2] On June 16 and July 16, 1997, respondent issued notices of deficiency relating to Vernice Kuglin's 1994 and 1995 Federal income taxes, respectively, but petitioner did not seek redetermination of the deficiencies.
[3] On December 4, 1997, petitioner's counsel requested a copy of the assessments relating to petitioner's 1994 and 1995 income taxes. On June 28, 1999, respondent issued a Notice of Intent to Levy and Notice of Your Right to a Hearing. On July 15, 1999, petitioner filed a Request for a Collection Due Process Hearing (i.e., Form 12153) and contended that there was no "valid summary record of assessment". On September 16, 1999, respondent's Appeals officer printed out computer transcripts (transcripts) of respondent's records. The transcripts contained petitioner's Social Security number and the first four letters of her last name; monetary figures representing amounts assessed, identified by respondent's transaction codes; and petitioner's adjusted gross and taxable income. In a letter dated December 13, 1999, the Appeals officer responded to petitioner's request for a hearing and scheduled a telephone hearing, which was held on January 25, 2000.
[4] On February 16, 2000, respondent issued a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 (determination), sustaining the proposed collection action. In making the determination, respondent relied on the transcripts to verify the assessments. Respondent, before making his determination, did not give petitioner copies of these transcripts or Forms 4340, Certificates of Assessments, Payments, and Other Specified Matters (Forms 4340).
[5] On March 7, 2000, petitioner, who was residing in Memphis, Tennessee, filed her petition for review of the determination with the Court. Respondent provided petitioner with copies of Forms 4340 on December 4, 2000. At trial, on January 8, 2001, respondent moved for the imposition of a section 6673(a)(1) penalty.
Discussion

[6] Section 6330(b)(1) provides that if a taxpayer requests a hearing, "such hearing shall be held by the Internal Revenue Service Office of Appeals." Section 6330(c)(1) provides: "The appeals officer shall at the hearing obtain verification from the Secretary that the requirements of any applicable law or administrative procedure have been met." Section 6330(d) provides for Tax Court review of the Commissioner's determination relating to the section 6330 hearing.
[7] Petitioner contends that the Appeals officer abused his discretion by relying on the transcripts to verify the assessment, and that section 6330(c)(1) requires the production of Form 23C. Respondent contends that an Appeals officer, in verifying the assessments, may rely on computer transcripts that contain the requisite information.
[8] We agree with respondent. Section 6203 authorizes the Secretary to make assessments. The assessment officer, appointed by the Secretary, makes the assessment by signing the summary record of assessment. Sec. 301.6203-1, Proced. & Admin. Regs. The summary record of assessment must "provide identification of the taxpayer, the character of the liability assessed, the taxable period, if applicable, and the amount of the assessment." Id. Section 6330(c)(1), however, does not require that the Commissioner verify the information by using a particular source (i.e., the summary record itself rather than a computer transcript). The transcripts respondent used for the verification contained the requisite information. Respondent's reliance on such transcripts was not an abuse of discretion.
[9] Where the Commissioner provides the taxpayer with Forms 4340 (i.e., proof of assessment) after the hearing and before trial, and the taxpayer does not "show at trial any irregularity in the assessment procedure that would raise a question about the validity of the assessments", the taxpayer is not prejudiced. Nestor v. Commissioner , 118 T.C. ___, ___ (2002) (slip op. at 9). At trial, petitioner did not show any irregularity in the assessment procedure. Accordingly, we sustain respondent's determination.
[10] Respondent contends that petitioner's position is frivolous and instituted primarily for delay and that, pursuant to section 6673(a)(1), the Court should impose a penalty on petitioner. We decline, however, to impose such a penalty in this case. Contentions we have not addressed are irrelevant, moot, or meritless.
[11] To reflect the foregoing,
[12] An appropriate order and decision will be entered
FOOTNOTE
1 Unless otherwise indicated, all section references are to the Internal Revenue Code as amended.
END OF FOOTNOTE

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