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BE VERY AFRAID

March 30, 2004

About this time every year, the IRS gives us friendly reminders that while "Service" is in their name, "Revenue" comes first.

The IRS yesterday reminded us of the expensive consequences of making foolish arguments about the tax laws in court - arguments like "the income tax is unconstitional" or "there is no statute that makes me liable for the income tax." In IR-2004-41, the IRS reminds us:

   In the past year, the U.S. Tax Court
   imposed nearly $136,000 in penalties   
   on 23 taxpayers for pursuing frivolous 
   cases to delay tax collections.

They helpfully added:

   The Tax Court may impose sanctions 
   of up to $25,000 on those who misuse
   their right to a court review merely to
   stall their tax payments. Last May, the
   court imposed this maximum penalty
   for the first time, finding in the case of
   Aston v. Commissioner that the
   taxpayer’s groundless argument was
   primarily for the purpose of delay,
   wasting the court’s time and
   resources.

BUT IT CAN GET WORSE

Just in case these friendly hints aren't sufficient, the Justice Department reminds us not to try to deduct personal expenses as business expenses with the conviction of two officers of Benton Manufacturing Co. in Tennessee on tax evasion charges. From the DOJ press release:

   The defendants were accused of using
   the accounts to obtain cash and to pay
   personal expenses for remodeling
   projects, lavish vacations and vacation
   property, lawn care services, oil
   paintings, furniture, clothing and
   jewelry. Evidence at trial established
   that the defendants prepared false
   books and records which caused the
   company's return preparer to treat
   the personal expenditures as
   legitimate business expenses. The
   Stones filed fraudulent income tax
   returns which did not report those
   amounts as income, evading individual
   income taxes totaling $135,878. The
   defendants also made false
   statements and provided backdated or
   otherwise false documents to the IRS
   to conceal their ownership of real 
   estate. 

Just so we get the point, they note:

   Conspiring to defraud the IRS carries a
   maximum penalty of five years
   imprisonment, a $250,000 fine, or both. 
   Each violation of the felony income tax 
   evasion statute carries a maximum
   penalty of five years imprisonment, a 
   $250,000 fine, or both. 

Look for more friendly reminders of the need to comply with the tax laws over the next couple of weeks. Oh, and have a nice day!

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