Beware of Bogus Tax Protests

There are plenty of legal ways to reduce or eliminate income taxes. There are also plenty of people promoting illegal strategies. There is a current ad campaign being waged by a group called We The People that they call “Wait to file until the trial.” They are supposedly putting the entire US income tax system on trial by having IRS head honchos respond formally to their idiotic tax protestor arguments. They claim to believe that the IRS will admit defeat and cancel the entire income tax system; so filing a tax return would be an unwise move.

After earlier agreeing to a public confrontation on these issues, IRS has announced that they have changed their mind and will not appear at the “trial.” They are instead taking the very misguided approach of ignoring this tax protestor group and assuming that they will just go away. I have explained on too many occasions why this approach by IRS has the exact opposite effect. To tax protestors and their gullible followers, silence equals assent.

Whatever IRS does about this group, I just want to make one more warning about the dangers of following the lead of tax protestors. That can result in some serious penalties, including the loss of everything you own. If you are serious about reducing your taxes, there are plenty of legal methods to do that.

While I have long been a big fan of filing tax returns well after April 15, my reasons are very different from what We the People is promising. The biggest difference is that we do eventually file tax returns. I have never advocated not filing tax returns. In fact, I often encourage filing tax returns even when none is legally required as a self defense measure against charges of tax fraud, which are possible forever if no tax return is submitted to IRS. But delaying your tax return with the hope that it will never be required is just plain stupid and very dangerous.

KMK

Response From CBA

I received the following response from the Calif. Board of Accountancy. Having worked on audits with some of the Big 8 (what it used to be), I know that audits of organizations in multiple states utilize local auditors whenever possible. Does this mean that Enron had no offices in California?

What is surprising to me is the lack of a proactive approach to this problem. Arthur Andersen’s defense to their conflict of interest will be that “everyone else is doing it.” While this is very true, that does not make it proper. I can still recall my college auditing class (taught by a recently retired Arthur Andersen partner), where we discussed the very issue of independence. Owning stock in the client and being involved in the management decisions were both considered big No-Nos.

KMK

X-Lotus-FromDomain: BOARDOFACCOUNTANCY

From: msantaga@cba.ca.gov

To: Kerry Kerstetter

Date: Thu, 7 Feb 2002 12:39:15 -0800

Subject: Re: How did AA get away with its conflict of interest?

X-RCPT-TO:

In response to your February 5, 2002 email, please note that Mr. Morgan did not provide consulting services. He provided bookkeeping services that impaired his independence under AICPA Rule 101-3.

With regard to Enron, to date the California Board of Accountancy has not identified that any California licensees are involved; however, the Board is monitoring the Enron matter.

Sincerely,

Michele Santaga

Enforcement Analyst