Tax Lawyer's Blog

This one’s a real trip.

Sellers of this bottle of magical elixer claim that there is a legal way for taxpayers to take themselves off the taxpayer rolls and never pay taxes again.

The promoter explains that he is the holder of a special secret (how he became privy to it, we’ll never know) that he is willing to share for a small fee (small because “what’s $10,000 if you’re gonna save a lifetime’s worth of taxes?”).

Of course he’s full of crapola, but that fact doesn’t deter him because at any given time there is always a fresh sucker ready to give him the 10k for the right to puff his chest in pride at the thought that he has outsmarted the United States government.

Don’t you be that sucker.

There is no legal way other than making a vow of abject poverty that you can remove yourself from the tax rolls.

Don’t believe anyone who tells you otherwise. They’re either,

1. a crook;
2. a liar;
3. a sociopath; or
4. all of the above.

These charlatans will charmingly and passionately brainwash you into believing that their method of eliminating taxes is fool-proof and tested, but when its time to defend (i.e. you get audited) the “airtight” letters and documents that they have prepared for you they refuse to associate their name with them.

You sign everything and you take all the risk.

The reason they do this is obvious: It allows them to make a plausible denial should you get caught, which you will and they know it.

Applicable Case Law

Courtesy of Quatloos! here are several Court cases that involving taxpayers who have used the untaxing scheme and their shyster promoters:

United States v. Andra, 218 F.3d 1106 (9 th Cir. 2000) – in affirming the conviction of a promoter of an untaxing scheme for tax evasion and conspiracy, the court found that it was proper to include the tax liabilities of persons Andra recruited into a tax fraud conspiracy when calculating the effect of his actions for sentencing.

United States v. Clark, 139 F.3d 485 (5 th Cir.), cert. denied, 525 U.S. 899 (1998) – the court upheld convictions of defendants involved with The Pilot Connection Society for conspiracy to defraud the United States and aiding and abetting the filing of fraudulent Forms W-4.

Robinson v. Commissioner, T.C. Memo. 1995-102, 69 T.C.M. (CCH) 2061, 2062 (1995) - the court quoted language from Hanson v. Commissioner, 696 F.2d 1232, 1234 (9th Cir. 1983) that “[n]o reasonable person would have trusted this scheme to work.

King v. Commissioner, T.C. Memo. 1995-524, 70 T.C.M. (CCH) 1152 (1995) – the court found King, who had followed the Pilot Connection’s “untaxing” techniques, liable for penalties for failure to file returns and for failing to make sufficient estimated tax payments.

United States v. Raymond, 228 F.3d 804, 812 (7 th Cir. 2000), cert. denied, 121 S. Ct. 2242 (2001) – the court affirmed a permanent injunction against taxpayers who promoted a “De-Taxing America Program,” forbidding them from engaging in certain activities that incited others to violate tax laws. The court said, “[W]e conclude that the statements the appellants made in the Just Say No advertisement were representations concerning the tax benefits of purchasing and following the De-Taxing America Program that the appellants reasonably should have known were false.

United States v. Kaun, 827 F.2d 1144 (7 th Cir. 1987) – the court affirmed the district court’s injunction prohibiting the taxpayer from inciting others to submit tax returns based on false income tax theories.

United States v. Krall, 835 F.2d 711 (8 th Cir. 1987) – the court held that the trusts used were shams. The defendant, an optometrist, exercised the same dominion and control over the corpus and income of the trusts as he had before the trusts were executed. The court further found the defendant illegally attempted to assign his earned income to the various trusts.

United States v. Scott, 37 F.3d 1564 (10th Cir. 1994) - the court concluded the true grantor of the trusts was in substance the purchaser, who was also the trustee, as well as the beneficiary. It was as if there were no transfers at all. Therefore the purchaser was subject to tax on all the income of the various trusts. The defendants were the promoters of a multi-tiered trust package marketed to purchasers as a device to eliminate tax liability without losing control over their assets or income.

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