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Tax Protestor Dummies 2 > Cases
("Damn, We Lost Again!
And why is it
that people who sell
tax protestor materials file their tax returns anyway . . .")
are what we pay for a civilized society."
Oliver Wendell Holmes
Table of Contents
Criminal Investigation's Nonfiler initiative
Beware of Employment
Just the Facts
One of the basic tenets of our tax system is the belief
that all citizens must comply with the requirements to file
returns and pay taxes. Fortunately, the vast majority of
Americans recognize their civic duty and voluntarily comply
with their tax filing obligation. Taxpayers who fail to file
income tax returns and pay taxes pose a serious threat to
tax administration and the American economy. Their actions
undermine public confidence in the Service's ability to administer
the tax laws fairly and effectively.
Whether because of an inability to pay or severe procrastination,
some citizens drop out of the tax system. The IRS has made
attempts to make it easier for persons to voluntarily comply
with the tax laws and to bring themselves current on any
outstanding filings or tax due. Assistance is provided to
those persons to resolve issues that caused them to drop
out of the tax system and bring them back into compliance.
CI's role is the enforcement of the tax laws for individuals
who are not responsive to outreach efforts and who deliberately
fail to comply with their obligation to file and pay taxes.
CI has devoted resources to identify these individuals and
in the most flagrant cases, criminal prosecution is recommended.
CI's ability to investigate and prosecute flagrant cases
and generate publicity relating to these prosecutions is
an important compliance tool.
Ever since the 16th Amendment to the Constitution
was ratified (February 3, 1913) giving Congress the power "to
lay and collect taxes on incomes" there have been citizens
arguing that it was not properly ratified and income taxes
are illegal. Unfortunately, some citizens continue to raise
such arguments in spite of the fact that they have no basis
in law and the courts have repeatedly rejected their arguments
Unscrupulous promoters and their followers have long employed
frivolous arguments concerning the legality of the income
tax as pretexts to enrich themselves or evade their taxes.
Their motivation is usually monetary, not some legitimate
purpose or belief. Anti-taxation groups have been around
for a long time. They are small but vocal. In the past, organizations
like Your Heritage Protection Society (YHPA), The Save a
Patriot Society, The Pilot Connection, and the Freeman all
attracted followings. Though the leadership of these movements
used different arguments to gain followers, they all share
one thing in common; they received substantial sentences
in a federal prison for their activities. Their followers
paid a steep price for following bad advice. Some were prosecuted,
many more were involved in years of litigation and ultimately
had to pay all taxes owed along with penalties and interest.
Criminal Investigation's Nonfiler
IRS has implemented a multi-functional, comprehensive effort
called the National Nonfiler Strategy. The overall goal of
this strategy is to bring taxpayers back into compliance
and keep them there. In addition to nonfilers, the IRS will
reach out to individual taxpayers who are not legally required
to file but are potentially entitled to refunds or credits.
The following nonfiler relating statistics represent CI's
efforts in the past three fiscal years and the current fiscal
year (first half):
| Nonfiler Statistics*
(10/1/00 - 3/31/01)
Avg. Months to Serve (w/Prison)
Avg. Months to Serve (all Sent)
*All investigations that are initiated in one year are not
necessarily recommended for prosecution, indicted and/or
convicted in the same year.
**Incarceration may include prison time, home confinement, electronic monitoring,
or a combination thereof.
Beware of Employment Tax Schemes
Currently, the same arguments concerning the legality of
the tax system are being used in an attempt to convince employers
they do not have to withhold employment taxes. Employment
tax evasion schemes have serious consequences not only
for the employers but the employees as well. Employers are
subject to both criminal and civil sanctions but employees
also suffer because as a result of their employer's actions
they may not qualify for social security, Medicare, or unemployment
benefits (or they may qualify for reduced benefits). These
programs provide important benefits to many citizens and
will continue to grow as more citizens reach retirement age.
The health of these programs depends on everyone paying their
Just the Facts:
The United States Constitution, Article 1, Section 8,
Clause 1, states "The Congress shall have the power
to lay and collect taxes, duties, imposts and excises
to pay the debts and provide for the common defense and
general welfare of the United States."
The Internal Revenue Service (IRS) was established on
July 1, 1862, by an act of Congress.
Congress has charged the IRS with the responsibility
of administering and enforcing the Internal Revenue Code
and related statutes. Congress enacts the law, IRS enforces
The courts have unanimously held there are no
Constitutional or legal grounds for failure to file tax
returns or failure to pay taxes.
The term voluntary compliance means that each of us
is responsible for filing a tax return when required
and for determining and paying the correct amount of
Failure to file required tax returns and failure to
pay taxes may result in criminal and/or civil penalties.
All United States citizens have the right to appeal
their taxes through the U.S. court system. However, you
do not have the right to violate and disobey the tax
Persons who are considering involving themselves in these
anti-taxation "programs" should consider the consequences.
Tax evasion is a serious crime punishable by imprisonment,
fines and the imposition of civil penalties. During the last
four fiscal years (1997, 1998, 1999, & 2000), there have
been 2249 convictions relating to tax and financial-related
crimes. Of those convicted, 80.9% were sentenced to prison
time, home confinement, electronic monitoring, or a combination
Complicated arguments against the American tax system are
built by stringing together unrelated ideas plucked from
widely conflicting court rulings, dictionary definitions,
government regulations and other sources. Some of the most
popular arguments include:
Constitutional Argument - Filing a Form 1040 violates
the Fifth Amendment right against self-incrimination or the
Fourth Amendment right to privacy.
The Truth: The courts have
consistently held that disclosure of the type of routine
financial information required on a tax return does not incriminate
an individual or violate the right to privacy
Sixteenth Amendment Argument - The Constitutional
Amendment establishing the basis for income tax was never
The Truth: The Sixteenth
Amendment was ratified on February 3, 1913, and it states "The
Congress shall have power to lay and collect taxes on incomes,
from whatever source derived, without apportionment among
the several States, and without regard to any census or enumeration."
Religious Arguments - Use the Freedom of Religion
clause of the First Amendment by taking a vow of poverty
or fraudulently claiming charitable contributions of 50%
or more of your adjusted gross income.
The Truth: Taking a purported
vow of poverty or claiming fraudulent contributions to filter
your money through a church is not legal. Fraudulent religious
organizations use funds for personal expenses.
Internal Revenue Code Arguments - (1) There is no
Internal Revenue Code that imposes taxes; (2) only "individuals" are
required to pay taxes; or (3) IRS can only assess taxes against
people who file returns.
The Truth: The tax
law is found in Title 26 of the United States Code. Section
6012 of the Code makes clear that only people whose income
falls below a certain level do not have to file returns.
Section 6201 of the Code states that the Secretary of the
Treasury is required to make assessments "of all taxes
imposed by this title [Title 26]."
Forming a Trust Argument: - Forming a business trust
to hold your income and assets will avoid taxes. A family
estate trust will allow you to reduce or eliminate your tax
The Truth: Establishing a
trust, foreign or domestic, for the sole purpose of hiding
your income and assets from taxation is illegal and will
not absolve you of your tax liability. See IRS
Publication 2193, "Should Your Financial Portfolio
Include 'Too Good To Be Trusts?'"
Some American citizens use these and other clever arguments
advocating non-compliance with the tax laws. Don't be misled.
Inspect their promotional material carefully. Aside from
being false and misleading, you will notice that it often
contains elaborate disclaimers such as "this report
is offered as vehicle for discussion and debate and for general
informational purposes only. It does not constitute legal
or professional advice and should not be relied on as a substitute
for proper research and inquiries into original sources of
authority." You will also find that many of these "tax
experts" don't even follow their own advice but choose
to pay their own taxes.
The IRS is will: (1) To assist taxpayers who have been misled
to correct their filing status, and (2) To vigorously pursue
prosecution and prison sentences for individuals who violate
the tax laws.
To report suspicious or misleading tax information by
an individual or group, contact your local IRS office or
call IRS at 1-800-829-0433.
The following case summaries are excerpts from public
record documents on file in the court records in the judicial
district in which the cases were prosecuted.
On February 4, 2000, Edward L. Kotmair of Westminster, Maryland
was sentenced to 27 months in prison and 1 year of supervised
release for failure to file federal income tax returns.
In September 1999, Mr. Kotmair was convicted of failing
to file federal income tax returns for tax years 1990, 1991,
and 1992. During those years, Mr. Kotmair operated his own
carpentry business, Commercial Installers located in Cary,
North Carolina that earned income of approximately $1.7 million.
Some of Mr. Kotmair's income was derived from subcontracting
work on Federal Government buildings in Washington, D.C.
During his three-day trial, Mr. Kotmair attempted to convince
the jury that he believed he was not required to pay income
taxes. The jury rejected this argument and found him guilty
on all counts of the indictment. United States Attorney Janice
McKenzie Cole commented that federal courts and juries have
consistently upheld the income tax laws and their applicability
Insurance Business Owner Sentenced
On October 12, 2000, Channing Nando Wilson of Durango, Colorado
was sentenced to 18 months imprisonment and fined $30,000
after being convicted of failure to file federal income tax
returns. During a three-day trial held in July 2000 the government
presented evidence that Mr. Wilson earned gross income of
at least $129,000 in 1994, $88,000 in 1995 and $61,000 in
1996 from an insurance business he owned. Mr. Wilson's tax
liability for tax years 1994-1996 was more than $45,000.
Mr. Wilson testified at trial that according to his interpretation
of the tax laws, he did not believe he was required to file
income tax returns. The jury rejected these arguments and
convicted him on all counts.
Dallas Police Officer Sentenced
On July 7, 2000, Nixon Wayne Mixon, a Dallas police department
narcotics detective pled, guilty to failing to file income
tax returns for years 1991-1997. On September 22, 2000, Mr.
Mixon was subsequently sentenced to 180 days home confinement,
placed on 5 years probation and ordered to pay restitution
of $30,073.52. Mr. Mixon was required to resign from the
Though Mr. Mixon had worked with federal agents, including
IRS agents on a number of joint investigations, he failed
to accurately report his exemptions resulting in no income
taxes being withheld from his salary. Mr. Mixon claimed that
the IRS did not have the constitutional authority to collect
United States Attorney Paul E. Coggins commented that "Police
officers are not above the law. They have to file returns
and pay taxes like everyone else. We required as part of
the plea agreement that he resign from the police force because
this officer speciously claimed that the tax laws were unconstitutional
and didn't apply to him. The IRS will continue to diligently
investigate professionals who violate the tax laws and my
office will vigorously prosecute them."
Real Estate Developer Sentenced
On February 22, 2000, a Santa Rosa Beach, Florida resident,
George Dana "Doodles" Harris received 18 months
in prison, followed by a period of supervised release and
was ordered to pay a fine of $40,000 after he pled guilty
to income tax evasion. During the period 1990 through 1993,
Mr. Harris a prominent real estate developer attempted to
evade his income taxes by failing to file his income tax
returns and concealing his income through the use of sham
corporations and cashiers checks.
During tax years 1990 through 1993 Mr. Harris earned more
than $2,000,000 on which over $800,000 in taxes were due.
Mr. Harris had previously pled guilty to income tax charges
in 1983 and spent approximately 40 months in prison after
paying over $1,000,000 in taxes.
Adult Bookstore Owner Sentenced
On February 17, 2000, a Parsippany-Troy Hills man who operated
an adult bookstore in Union, New Jersey, was sentenced to
21 months in prison and fined $10,000 for failing to file
a corporate tax return, filing a false personal tax return
and attempting to obstruct the IRS. Jack Chesner pled guilty
on June 15, 2000 to a three-count information. Mr. Chesner
admitted he failed to report money received from investors
in proposed adult entertainment businesses. Instead he converted
these funds to his own use and destroyed and concealed business
records sought by the IRS.
Mr. Chesner also admitted that he failed to file corporate
income tax returns for this company Chez Sez III Inc., which
was doing business as Moviethon. Moviethon received substantial
income from the sale and rental of videos.
Periodontist Convicted of Failure to File Tax Return
On January 18, 2000, Dr. Fred O. Sakamoto of Lewis Center,
OH, pled guilty to failing to pay income and self-employment
taxes on his 1993 income. Dr. Sakamoto admitted that he received
taxable income to $246,499 during that year upon which over
$81,191 in income and self-employment taxes (social security
taxes) were owed. Dr. Sakamoto was sentenced on June 29,
2000, to probation for three years, which included one year
of home confinement with electronic monitoring, and 500 hours
of community service. Dr. Sakamoto was also ordered to cooperate
with the IRS to pay all taxes due and owing.
Using False Social Security Numbers
Stuart Baer of Raleigh, NC, was sentenced on October 3,
2000, to 16 months imprisonment for income tax evasion. Mr.
Baer failed to file federal income tax returns in 1993, 1994,
and 1995. According to the indictment he attempted to conceal
his income by providing false social security numbers to
his employer and bank and used a false name on a bank account.
Mr. Baer earned taxable income of $69,071.96, $75,865.55,
and $39, 297.18 during tax years 1993-1995 respectively.
In addition to the period of incarceration he received, Mr.
Baer was sentenced to one year of supervised release, ordered
to perform 100 hours of community service and file all delinquent
* * * * * *
Over the last three fiscal years (1998, 1999, & 2000),
843 individuals have been convicted for failing to file a
tax return. Experienced IRS Special Agents, using complex
financial investigative techniques, have investigated these
cases and forwarded them to the Department of Justice for
prosecution. On average, more than 79% of those convicted
have been incarcerated-- the average term of incarceration
is 41 months and may include prison time, home confinement,
electronic monitoring, or a combination thereof.
Return to Tax Protestor Exhibit