by Brian Mahany
Most tax crimes are never prosecuted. The IRS and government simply don’t have enough resources. You may face stiff fines and seizure of your home and bank accounts but the IRS only has so many guys and girls with badges. If you are a dishonest return preparer, tax defier or promoter of phony tax scams, however, the feds always have a few extra prison cells available.
This week the Justice Department convicted Sharon Stephenson of 4 counts of tax evasion and corrupt interference with tax laws. A Tacoma jury agreed with the IRS that Stephenson was the promoter of abusive tax schemes. What is unusual is that Stephenson simply sold information and a letter writing service. For a high fee, a taxpayer could subscribe to her service. She would help taxpayers obtain a copy of their IRS transcript, “decode” the information and send “rebuttal letters.”
While the service she sold wasn’t effective, the question is whether she was criminally interfering with the IRS. (There is little dispute that she evaded her own taxes and was properly convicted of that.)
In recent years, the IRS has taken a very broad view of what constitutes an illegal tax scheme or shelter. Even the sale of information is apparently enough to land someone in jail.
While I don’t condone selling people ineffective information, the take home from this case is that judges and juries don’t like people who deliberately evade taxes or encourage others to do so.
There are dozens of websites that offer advice on how not to pay your taxes. Some of them even cite old Supreme Court cases or point out the rare acquittal. What these websites and promoters don’t tell you is that most everyone is convicted. Unfortunately, the courts have closed the door on all these arguments.
Not paying taxes because you lost your job or became disabled is not likely to land you in jail. But sending Uncle Sam coded messages or arguing that the federal income tax is not legal will get you in noticed. Some of the better arguments advanced by the tax freedom movement actually hold some appeal. They may even be true. It’s the courts that determine how the laws are interpreted, however, not some Internet guru or tax scam promoter.
According to the charges against her, Stephenson sold her information to 400 people. That’s 400 people that are likely not in compliance and facing their own criminal prosecutions.
If you are not in compliance, its probably not too late to avoid prosecution. Usually that means coming into compliance before the IRS knocks on your door. Unfortunately, most people elect to play the “IRS lottery” and only come into compliance after they are caught. By then, its usually too late. If you were a customer of Stephenson or promoter, don’t wait too long.
For more information, contact Brian Mahany at (404) 704-6731 (direct) or by email at . Our Wisconsin tax attorneys can help you anywhere in the US with a wide range of tax problems including tax compliance, audit defense and criminal tax evasion investigations.