Tax: January 2008 Archives
The subject of this massive document was “Filing of Amended Return, and Tax Statements” and Snipes made numerous claims throughout:
1.He doesn’t have a Social Security Number or Tax ID number
2. his name is Wesley Trent Snipes, not WESLEY TRENT SNIPES
3. his advisors had filed that amended Form 1040 for 1997 in his name and he now issued a “sincere apology about the 1997 filing”; he claimed that when he filed the amended return in 2001, he “didn’t have the legal skills” that he does now and admitted that the “refund attempt may have been illegal.”
4. he complained that he was being both ignored and persecuted
5. he made it clear that he has not waived his sovereign immunity
6. he asserted that he is a “nontaxpayer” not a taxpayer and is therefore free from taxes
7. after claiming that he is a nonresident alien and instead of finally filing a normal Form 1040, he submitted a blank amended Form 1040NR-EZ and stamped “NOT LIABLE” on it in huge block letters
8. he called the prosecutor and IRS people “public dis-servants” among other insults
9. he threatened “significant personal liability” for anyone who tried to collect from him
10. “Warning: pursuit of such a high profile target will open the door for your increased collateral risk.”
As everyone now knows, the actor Wesley Snipes begins the process of jury selection in his Federal criminal tax fraud trial today. Mr. Snipes is charged with various Federal offenses including tax evasion for, primarily, taking the position and advising others, that the United States can only tax your income generated in other countries, not your income generated in the United States. This position has been rejected on numerous occasions and is more appropriately attributable to tax protestors than to big screen actors.
Tax protestors are those that make varying, often nonsensical, assertions about the inability of the United States to tax their income, an example of which is the assertion that the 26th Amendment to the United States Constitution was never ratified and that therefore the IRS does not have the authority to tax your income. For the most part, the IRS pursues tax protestors through the civil process and those protestors pay monetary penalties for their conduct. Mr. Snipes, however, is facing 16 years in jail for his protesting conduct.
Seems harsh? Yes, it is. Watch the newspapers in the months of March and April. Particularly, the first or second week of April. You will see a very well known person pursued criminally for tax evasion. This is all about compliance. For the most part, the IRS relies on individuals to govern themselves and be honest about the amount of their income and expenses and pay their fair share of tax. That self- governance is kept in check through deterrence. The theory of deterrence is that if the public sees a well known person prosecuted for a tax crime right around the time they themselves are supposed to be honest and pay their taxes, that they will be more inclined to do so. That works. If Wesley Snipes is on trial for tax evasion, it is news. Today, it is a lead on every Internet news site and most television and print media outlets are running the story,
Mr. Snipes submitted claims for refund which are amended tax returns and on those returns, Mr. Snipes apparently took the position that his income from acting was not taxable by the United States. Mr. Snipes is defending his conduct of submitting those refund claims by saying that he didn't act willfully to defraud the United States by asking for refunds on that basis, but rather, that by making those claims for a refund, he was merely asking the IRS if his position was correct. The problem with the "I was asking a question" defense is that you have an obligation to submit only refund claims with "questions" for which there is some basis in law. If there is no basis whatsoever for your claim or worse, that the basis for which you make your claim is one that has been rejected as frivolous on numerous previous occasions, than your claims can be deemed those of a tax protestor.
The United States wants the tax protestors to stop. They have tried everything from prosecuting the tax protestor individuals, the promotors who sell books and other materials to help tax protestors or create them, their accountants and their lawyers...and now, unfortunately for Mr. Snipes, he will be the new face of tax protestor deterrence; take a plea bargain, Mr. Snipes....it's a bad case and there is no take two.
John Hanamirian
From the annals of crime comes an interesting opinion from the Ninth Circuit.
Lawrence Cohen, along with two others, owned and operated a storefront business where they sold books, tapes, videos and other instructional materials explaining how to legally stop paying income taxes. Frequently, as part of his consultation services, Cohen advised clients to file a “zero return,” a tax return with zeros placed on the income reporting lines which generate refunds if someone has had income tax withheld during the course of the year.
The Justice Department does not take kindly to such enterprises and it charged Mr. Cohen with various federal tax and other criminal offenses; he was convicted in the District Court. All criminal acts generally require that there be some intentional conduct and in tax crimes that intent is couched in terms of willfulness. On appeal, Mr. Cohen argued that he did not have that requisite willfulness but that he could not prove this defense when the court precluded his psychiatric expert who had opined that Mr. Cohen suffered a “mental disease …bearing on … the issue of guilt.”
The expert had diagnosed Mr. Cohen as suffering from a narcissistic personality disorder and concluded that he “did not intend to violate the law, as would be the case with a criminal who acted out of a desire for personal gain” but rather “[h]is behavior is driven by a mental disorder as opposed to criminal motivation…Although it is true Mr. Cohen was not delusional or psychotic and was in possession of basic mental faculties, his will was in the service of irrational beliefs as a result of narcissistic personality disorder.” The report also noted:
Because [Cohen’s] beliefs are fixed and have led him to significant adverse consequences, he is irrational to the point of dysfunction, demonstrated by his stubborn adherence in the face of overwhelming contradictions and knowledge of substantial penalty. …Despite evidence to the contrary, his psychological needs dominated his mentation…This is the nature of the narcissistic personality in which the sufferer could essentially pass a lie detector test when asked commonsensical questions while giving improbable answers.
The United States Court of Appeals for the Ninth Circuit reversed, concluding that psychiatric expert testimony on narcissistic personality disorder is admissible to help a jury determine intent. The Court of Appeals reasoned that the expert testimony could have helped Mr. Cohen counter the government’s arguments that he knew the “zero returns” were false because, once Mr. Cohen obtained a belief about the validity and legality of his conduct, he would cling doggedly to that belief even in the face of overwhelming contradictions.
So that rude patron at the next table exhibiting a socially repugnant level of narcissism while out to dinner just may be building a criminal tax fraud defense.
John Hanamirian
