alpert@nanook.DEC (10/26/84)
*** Things the IRS won't tell you ******************************* #3 ***
NOTE: I am omitting the usual disclaimer of "for informational purposes
only, don't go out and try this!" from this note. The following
technique for dealing with audits has been widely used by people
both inside and outside the tax reform movement. The bulk of this
information is from the book "How Anyone Can Stop Paying Income
Taxes" by Irwin Schiff. Be forewarned this note is a long one,
but there is quite a bit of material to cover.
>>>>>>> FLAME ON! <<<<<<
***** WHY NO ONE NEED SUBMIT TO AN IRS AUDIT *****
"Only the rare taxpayer would be likely to know that he could
refuse to producde his records to IRS agents..."
-United States Court of Appeals
United States v. Dickerson , 413 F2nd 1111 (1969)
There is little that strikes terror into the heart of the average
taxpayer like the prospect of an audit by Our Favourite Federal
Agency, the IRS. However, what most people do not realize is that
there is absolutely no legal compulsion to turn their books and
records over to the IRS!
An excerpt from the IRS "Handbook for Special Agents" (section
342.12) tells us the following:
"An individual may refuse to exhibit his books and records
for examination on the ground that compelling him to do so
might violate his right against self-incrimination under
the Fifth Amendment and constitute an illegal search and
seizure under the Fourth Amendment"
(Note that the Handbook misstates the reason for refusal under
the Fifth Amendment. This issue is the more general case of
being "a witness" against oneself, not one of "self-incrimination".)
Section 342.15 of the same book provides additional information...
"The privilege against self-incrimination (sic) must be specifically
claimed or it will be considered to have been waived..."
It continues to provide a case history for the aspiring IRS stormtrooper:
"In the Nicola case...the taxpayer permitted a revenue agent to
examine his books and records. The taxpayer was indicted for
income tax evasion and invoked his Constitutional rights under
the Fifth Amendment for the first time at the trial... The court
said, on the question of waiver:
But he did not refuse to supply the information required.
Did he waive his privilege? The constitutional guarantee is
for the benefit of the witness and unless invoked is
deemed to be waived...After the Government had gotten
posession of the information with his consent, it was too
late for him then to claim constitutional immunity."
In the case cited by the Handbook, the mistake Nicola made (and the
mistake that all too many people make) was to object for the first
time AT HIS TRIAL. The court denied his objection on the grounds that
he VOLUNTARILY turned over his books and records to the government.
Thus we see that it is necessary to assert ones Fifth Amendment rights
FROM THE OUTSET in an audit situation.
Also at issue is the Fourth Amendment to the Constitution, which affirms:
"The right of the people to be secure in their person, houses,
PAPERS and effects against unreasonable searches and seizures
shall not be violated."
A "reasonable" search is one in which the government has probable cause
to believe that one posesses something illegal (i.e. untaxed liquor,
murder weapon, etc.). A search warrant signed by a judge and based on
probable cause allows law enforcement officers to search one's premises
for that specific item.
By contrast, an IRS search through your books and records is a "fishing
expedition"! That is, the government does NOT have any probable cause to
believe that you have done something wrong or filed falsely on your
return (if you filed one). What they want to do in reality is to fish
through your records to see if you MAY have done something wrong. Such
actions are prohibited by the Constitution, as is illustrated in the
Supreme Court ruling in the case of Boyd vs. United States:
"It does not require actual entry upon premises and search
and search for and seizure of papers to constitute an
unreasonable search and seizure within the meaning of the
Fourth Amendment; a compulsory production of a party's
private books and papers, to be used against himself or his
property in a criminal or penal proceeding, or for a
forfeiture, is within the spirit or meaning of the Amendment."
-Boyd v. U.S., 116 US 616
As you can see, the Supreme Court has ruled that your Fourth and Fifth
Amendment rights provide grounds for refusing to turn your records over
to the IRS.
HOW THE IRS TRICKS PEOPLE INTO WAIVING THEIR RIGHTS
A typical letter from the IRS informing a taxpayer of an impending
audit is cleverly worded to trick him/her into believing that they
must submit. Space considerations prevent me from reproducing a sample
here, but common tricks are:
1) An agent will send the letter saying that he wants to meet with
you to "discuss" your tax liability for a specific year or years.
NOWHERE in the letter will it state that the meeting is for the
purpose of auditing or examining your books and records, or that
you are required to turn them over.
2) However, the letter will ask that you "please" make your records
and books "available". The conclusion most people jump to when
they see this is to assume that IRS agent are legally entitled to
see such records. As we have seen, THIS IS NOT TRUE, but it is
the impression that the IRS wishes to convey! There is invariably
NOTHING in such letters to state that the records are to be made
available, or turned over to, the IRS agent!
3) Then, they will generally tell you that they will be at your
residence at a specific date and time. The letter carries the
implication that you are ORDERED to be there at that time, but
that is not so! This is typical of IRS style, by not ASKING if
the time is convenient for you, they trick you into believing
that your appearance is mandatory. This type of intimidating,
leading language is seen in almost all communications with the
scoundrels.
There are various tactics that may be used to combat this. For
example, telephone the IRS agent the day before the scheduled meeting
and simply break the appointment (any good-sounding reason will suffice).
This may be done repeatedly. Another excellent tactic is to ask the
IRS agent to PUT IN WRITING the questions he wishes to "discuss". When
at some point you finally do agree to meet them...
THE TWO MAGIC QUESTIONS
When the IRS attempted to audit Irwin Schiff some time ago, he used the
above tactics to delay his meeting with the IRS, but finally did keep
an appointment with them.
At this meeting, the agent held his hand across the table and said,
"May I please see your books and records?". Had Schiff, or should you,
at that point VOLUNTARILY hand over any information, AT THAT MOMENT,
all protections under the Fourth and Fifth Amendments would have been
waived.
Schiff replied, "...your letter merely REQUESTS that my
books be available. They are AVAILABLE here, where I can refer to
them, if needed." The agent insisted that he was there to see Schiff's
books and records and was again answered, "...where does your letter
state that my books and records are to be made available to YOU?"
At this point, the time was right to spring the two Magic Questions.
(Note that it is best to have witnesses present.)
1) "Mr. <agent's name>, if I turn my books and records over to
you, can the government use any of this information against
me?"
IRS: "Well, yes..."
2) "Do I have a legal obligation to give you any information that
can be used against me?"
At that point theere is little the agent can do but get up and leave;
since the taxpayer (Schiff in this example) could not be TRICKED into
turning over his books the meeting held no purpose.
Then in short form, this is what to do if you get an audit letter
from the IRS (do any or all of these):
* Write a letter to the IRS agents asking that any questions they
have be put in writing.
* Call or write the agent(s) and inform them that you do not wish
to waive your Fourth and Fifth Amendment rights, and you decline
their offer to audit you.
* Keep the appointment and stand on your constitutional rights
at that time, refusing to turn over your books.
THE IRS SUMMONS
If the IRS *really* is hot to see your books and records, they may send
you a summons, which DOES have the force of law behind it. However, ALL
YOU HAVE TO DO is SHOW UP with your BOOKS AND RECORDS SEALED IN
BOXES and ask the two Magic Questions. The same answers will result, at
which point you can pack up your boxes and walk out, having fulfilled
the requirements of the summons. However, when dealing with taxpayers
who know their rights, the IRS is unlikely to issue such a summons.
Refer to section 363 of the IRS Handbook for Special Agents:
"When a taxpayer or witness refuses to submit requested information,
all surrounding circumstances should be fully considered before a
summons is issued. The likely importance of the desired information
should be carefully weighed against the time and expense of obtaining
it, the probability of having to institute court action, AND THE
ADVERSE EFFECT ON VOLUNTARY COMPLIANCE BY OTHERS IF THE ENFORCEMENT
EFFORTS ARE NOT SUCCESSFUL."
Also, the IRS Supplemement of Jan. 10, 1979 states:
"...However, summons of a taxpayer's books and records for
such return information is NOT RECOMMENDED."
Finally, the use of one's Fifth Amendment rights to defeat an IRS summons
is documented in section 342.12 of the Handbook:
"The privilege against self-incrimination does not permit a
taxpayer to refuse to obey a summons issued under IRS 7602
or a court order directing his appearance. He is required to
appear and cannot use the Fifth Amendment as an excuse for failure
to do so, although he may exercise it in connection with specific
questions. He cannot refuse to bring his records, BUT MAY DECLINE
TO SUBMIT THEM FOR INSPECTION ON CONSTITUTIONAL GROUNDS."
RECORDS FROM THIRD PARTIES
The IRS cannot get your personal records, but they CAN get information
from third parties (such as banks). They can subpoena your bank records
and get copies of your cancelled checks. They can also subpeona records
from persons and firms you do business with. Because U.S. banks do not
resist the IRS's attempts to get such information, it is up to the
individual to take steps to protect him/herself.
I personally make out all checks with pens containing "non-reproducible"
ink. These are available at stationary and art stores, they are used
by graphic artists in doing page layouts (I know, I used to be one myself).
The ink used in these pens will not be picked up by the bank's photocopy
and microfilm equipment.
CONCLUSION
The IRS, in its usual fashion, uses tricks and outright lies to fake
people out and make them believe that they must submit to an "audit".
In fact, the IRS own internal publications admit that there is little
they can do against the informed citizen who refuses to turn over his
or her personal records.
>>>>>> FLAME OFF! <<<<<<
NOTE: Copies of the IRS Handbook for Special Agents can be ordered by
sending $5.00 to:
Freedom of Information Room
Internal Revenue Service
1111 Constitution Avenue, N.W.
Washington, DC 20224
******* Next time: How the IRS ILLEGALLY seizes property and how *******
******* to protect yourself against it. *******
Bob Alpert
...!decwrl!rhea!nanook!alpertdee@cca.UUCP (Donald Eastlake) (11/08/84)
So you don't have to give the IRS any records if they try to audit you.
So what. This is about as silly as the first message about how you don't
have to file forms, and you go into it an great and ponderous length.
These tid bits are of some interest, but if you look at the income tax
statute, it imposes taxes at the maximum rate on income. Then it lets
you take some deductions, etc., if you can prove it. If you won't submit
your records for audit, you can expect to get deductions you are refusing
to prove disallowed, etc., and eventually have the IRS, with the force
of law, seize what it thinks your taxes are.
--
+ Donald E. Eastlake, III
ARPA: dee@CCA-UNIX usenet: {decvax,linus}!cca!deeron@brl-tgr.ARPA (Ron Natalie <ron>) (11/12/84)
> So you don't have to give the IRS any records if they try to audit you. > So what. This is about as silly as the first message about how you don't > have to file forms, and you go into it an great and ponderous length. > These tid bits are of some interest, but if you look at the income tax > statute, it imposes taxes at the maximum rate on income. Then it lets > you take some deductions, etc., if you can prove it. If you won't submit > your records for audit, you can expect to get deductions you are refusing > to prove disallowed, etc., and eventually have the IRS, with the force > of law, seize what it thinks your taxes are. Showing them proof that your deductions are legitimate is different from letting them go fishing through your books "looking." -Ron