Tax Lawyer's Blog

“We all have private ails. The troublemakers are they who need public cures for their private ails.”

- Eric Hoffer -

I try not to parry with the paranoid, but in this case I will make an exception just to show how wackozoid tax protesters can be.

Over the years I have been confronted by several dozen tax protesters peddling the gamut of tax protester arguments from “the states never properly ratified the 16th amendment ” to “income taxes are a form of slavery prohibited by the 13th amendment.”¹

This brings us to Andrew Joseph Stack, otherwise known as the Austin Tax Bomber. Fortunately, Stack left behind a four thousand word diatribe against the IRS (and just about everyone else) that provides a shining example of the conspiratorial, paranoid nature of tax protesters and their fantastical arguments.

Let’s get into them, shall we?

Stack’s comments are in blood red and mine follow in black.

1.  No Taxation Without Representation

Stack:

We are further brainwashed to believe that there is freedom in this place, and that we should be ready to lay our lives down for the noble principals (sic) represented by its founding fathers. Remember? One of these is “no taxation without representation.”

Me:

America is a representative democracy, not a direct democracy.²  Consequently, the phrase “no taxation without representation” merely means that you have the right to vote. There is nothing whatsoever to be found in that creed that would require that your guy be elected or that if he is elected he will pass laws to personally benefit you.

Democracy means you’re going to lose a lot. If you don’t like that, find a totalitarian regime with which you agree and move there. But for the love of God, don’t pretend to love democracy when you’re in the majority and then hate it when you’re not. We expect more from our five year olds.

2.  Nobody Loves Me  

Stack:

I can say with a great degree of certainty that there has never been a politician cast a vote on any matter with the likes of me or my interests in mind.

Me:

More self-pitying nonsense. Mr. Stack had a wife and children, a house, a job and was a private business owner. Here is a just a partial list of laws that have been passed or expanded in the last 25 years that were designed solely to benefit people like him:

• Home mortgage deduction
• Child care credit
• Increased dependent exemptions 
• No Child Left Behind
• The Tax Reform Act of 1986 ³

3.  A Complex Tax Code Equals Totalitarianism

Stack:

Here we have a system that is, by far, too complicated for the brightest of the master scholars to understand. Yet, it mercilessly “holds accountable” its victims, claiming that they’re responsible for fully complying with laws not even the experts understand. The law “requires” a signature on the bottom of a tax filing; yet no one can say truthfully that they understand what they are signing; if that’s not “duress” than what is. If this is not the measure of a totalitarian regime, nothing is.

Me:

The tax code is too complex, but that doesn’t change the fact that the great majority of tax returns signed and filed by American taxpayers every year are rather easy to understand.

My clients understand their tax returns because I make sure they understand them before they sign them. I am quite sure this how most reputable tax preparers operate.

Stack is merely piling on more tax protestor, I-hate-the-IRS, I-hate-the-government, claptrap. It’s an excuse for not paying income taxes rather than a logical argument against their wisdom or legality.

4.  Taxation: The American Nightmare

Stack:

My introduction to the real American nightmare starts back in the early ’80s. Unfortunately after more than 16 years of school, somewhere along the line I picked up the absurd, pompous notion that I could read and understand plain English. Some friends introduced me to a group of people who were having ‘tax code’ readings and discussions.

Me:

Here is one of Stack’s many contradictions. In complaint number 3, above, Stack said that the tax code was impossible for anyone to understand. So much so that he didn’t even understand his own tax returns.

But if Stack truly found the tax code impossibly complex, how can it also be true that he found it to be written in “plain English.” Moreover,  how is it possible that he, a man without a legal or tax background, was one of the few people alive who managed to figure out what the tax code really meant?

This is where your average tax protester gets hoisted by his own petard. He starts with the premise that the tax laws are so complex that no one can understand them and then proceeds to explain them to you. And his explanation, of course, always results in some version of the assertion “I don’t have to pay taxes.” 

5.  Tax Exemptions for Churches

Stack:

In particular, [we] zeroed in on a section relating to the wonderful “exemptions” that make institutions like the vulgar, corrupt Catholic Church so incredibly wealthy.

Me:

Here Stack is referring to the tax exemption for non-profit churches, but seems less upset that the Catholic Church was avoiding taxes than that he was not allowed to avoid them. His argument may be paraphrased as follows:

I have been trying to avoid paying taxes for years. I even started a group to “analyze” the tax code in order to prove to the government that I shouldn’t have to pay taxes. It hasn’t worked for me, but the Catholic Church, organized religion and big business have gotten away with it. 

6.  Tbe more clearly ax Protestor Arguments

Stack:

We carefully studied the law (with the help of some of the “best”, high-paid, experienced tax lawyers in the business), and then began to do exactly what the “big boys” were doing (except that we weren’t steeling (sic) from our congregation or lying to the government about our massive profits in the name of God).

Me:

Again, Stack is upset that he couldn’t get away with the tax fraud he alleges the Catholic Church got away with.

Stack:

We took a great deal of care to make it all visible, following all of the rules, exactly the way the law said it was to be done.

Me:

How did Stack manage to “follow the rules, exactly the way the law said it was to be done” if the law was too complex too understand? 

In Stack’s twisted cortex the tax laws are only too complicated to understand the way the IRS interprets them, but his interpretations are in plain English and always impeachably correct.

7.  Independent Contractor v. Employee Status 

Stack:

Return to the early ’80s, and here I was off to a terrifying start as a ‘wet-behind-the-ears’ contract software engineer… and two years later, thanks to the fine backroom, midnight effort by the sleazy executives of Arthur Andersen (the very same folks who later brought us Enron and other such calamities) and an equally sleazy New York Senator (Patrick Moynihan), we saw the passage of 1986 tax reform act with its section 1706.

Me:

This, of course, is sheer paranoia. The purpose of excluding engineers and software programmers from the safe harbor provisions of §530 was to stop the rampant abuse by employers of those categories of workers, not to see Stack starve.

Section 1706 was designed to protect, not punish people like Stack.

Stack:

[The] mere existence of Section 1706 began to have its impact on my bottom line; this, of course, was the intended effect.

Me:

One scoop of conspiracy flavored ice cream, please, with a paranoid cherry on top. Stack is seriously suggesting that Arthur Anderson and Senator Patrick Moynihan conspired to pass a tax law whose sole purpose was to destroy him.

Somewhere along the line, Stack fell in love with his own reflection.

 8.  They Won’t Listen to Me

Stack:

During 1987, I spent close to $5000 of my ‘pocket change’, and at least 1000 hours of my time writing, printing, and mailing to any senator, congressman, governor, or slug that might listen; none did, and they universally treated me as if I was wasting their time.

Me:

Senators, Congressmen, Governors and slugs thought Stack was off his rocker. What could possibly have given them that idea?

9.  They Get to Be Independent Contractors, Why Can’t I?

Stack:

I spent countless hours on the L.A. freeways driving to meetings and any and all of the disorganized professional groups who were attempting to mount a campaign against this atrocity. This, only to discover that our efforts were being easily derailed by a few moles from the brokers who were just beginning to enjoy the windfall from the new declaration of their “freedom”.

Me:

Notice that Stack doesn’t talk about how §1706 is bad for engineers, but how other workers will get a “windfall” because the law did not exclude their professions from the §530 safe harbor.

This complaint is similar to Stack’s attacks on the Catholic church for having a tax exemption that he was unable to get. He’s simply ticked off that someone else is getting something he isn’t getting.

And I don’t know what “windfall” Stack is referring to. There is no significant economic advantage (it’s probably a disadvantage) to being treated as an independent contractor instead of an employee, unless, of course, you intend not to pay your income taxes.

I have little doubt that Stack wanted to be an independent contractor to avoid paying taxes.  

10.  I Lost Money Because I Was Busy Tax Protesting

Stack:

Oh, and don’t forget, for all of the time I was spending on this, I was loosing (sic) income that I couldn’t bill clients.

Me: 

If Stack had invested as much time and money in his career as he invested in tax protesting, he probably would have been successful.

Then again, maybe not. He says he wanted to be an independent businessman yet was too dense to recognize that by spending thousands of hours on a whining campaign against the federal government he was hurting his prospects.

Myriad other engineers and software programmers  managed to succeed wildly in the late ’80′s and early ’90′s in spite of the evil and onerous provisions of §1706. Even average software engineers made a ton of money during these boon years. But not Stack.

He obviously had difficulty competing and, like all narcissists, could not fathom the possibility that it was his fault.

11.  The Sleazy Government Screwed Me Again

Stack:

I filed no return that year thinking that because I didn’t have any income there was no need. The sleazy government decided that they disagreed. But they didn’t notify me in time for me to launch a legal objection so when I attempted to get a protest filed with the court I was told I was no longer entitled to due process because the time to file ran out. Bend over for another $10,000 helping of justice.

Me:

Like so many of Stack’s other complaints, this one rings false. 

First, it is generally true that you don’t have to file an income tax return if you had no taxable income during the year. This is why I am certain that the IRS was not pursuing Mr. Stack merely for failing to file a tax return, but rather, because it had reason to believe he had received taxable income during the tax year.

My guess is that a Form 1099-MISC or some other information return was filed with the IRS showing that Stack received non-employment compensation during the tax year. Then, after sending several notices requesting that Stack to file a return, the IRS proceeded to prepare a substitute-for-return (SFR) that included the reported 1099 income on the return.

As for Stack’s claim that he wasn’t notified about the assessment until it was too late to do anything about it, I can only say that I have represented several clients who eventually got their days in Court because they were able to prove they had never received the proper notice. In fact, these cases are sometimes easy to prove because the IRS retains proof of the certified mailings of such notices. If the IRS doesn’t have proof of mailing in its own file, a new notice will be issued and the taxpayer will be given his due process, appeals rights anew.

In summary, if everything Stack says is true (i.e. he had no taxable income and he was not properly notified that the IRS had made an assessment against him) he would have easily prevailed even without the assistance of a tax attorney or CPA.

12.  A Conspiracy of Accountants

Stack:

After my experience with the CPA world, following the business crash I that I’d never enter another accountant’s office again.

Me:

Stack’s narcissism and paranoia know no bounds. Even the “CPA world” (what an exciting world that must be) conspired against him.

Too bad the lobotomists didn’t conspire first.

13.  Tax Returns, Pianos and IRS Audits

Stack:

But here I am with a new marriage and a boatload of undocumented income, not to mention an expensive new business asset, a piano, which I had no idea how to handle. After considerable thought I decided that it would be irresponsible NOT to get professional help; a very big mistake.

Me:

Stack doesn’t trust CPAs yet he he thinks it’s irresponsible not to hire one.

By the way, just how is a piano a “business asset” and whose fault is it that Stack couldn’t “handle” it?

Stack:

I had taken all of the years information to Bill Ross, and he came back with results very similar to what I was expecting. Except that he had neglected to include the contents of Sheryl’s unreported income; $12,700 worth of it.

Me:

If Bill Ross failed to report Mrs. Stack’s income, it is likely that Stack did not disclose the income to him? 

In any case, why did Stack and his wife sign the return if the income was not included? Remember, even if a taxpayer has his return prepared by a professional tax preparer, he is responsible for it’s content.

I would love to hear from Mr. Ross on this, but my guess is that he is (quite understandably) laying low. And even if he were willing to go public with the truth, he is probably constrained by a duty of confidentiality.⁴ 

When the dust settles, I would like to have Mr. Ross write a guest post here giving his side of the story.

Stack:

To make matters worse, Ross knew all along this was missing and I didn’t have a clue until he pointed it out in the middle of the audit. By that time it had become brutally evident that he was representing himself and not me.

Me:

More the-world-is-conspiring-against-me poppycock.

How could Stack have possibly known that Ross “knew all along that [his wife's income] was missing”? I would be willing to wager that Ross didn’t know about the unreported income until it was pointed out to him by the IRS auditor. Like all paranoiacs, Stack’s kneejerk reaction to every adversity was that people were out to destroy him.⁵

Finally, it’s hard to see how or to what end Ross was representing himself in the audit. My guess is that Stack was upset with Ross for not taking the blame for the omission of his wife’s income from their joint tax return.  

I wouldn’t taken the blame, either.

Footnotes:

1.  I typically allow them to vent for a few minutes before telling them in the clearest possible terms that I can’t help them unless and until they are willing to concede the legality of the tax laws and commit to coming clean with the IRS. They usually look at me as if I had just told them that the moon landing was real, Oswald acted alone, and 9/11 was not an inside job.

When they discover that I will not assist them with their tax protestor nonsense (you know, because I happen to labor under the delusion that the federal income tax is constitutional) they accuse me of being a co-conspirator with the federal government in a nefarious plot to ruin their lives.

2.  A direct democracy is unworkable because it requires a public referendum on every proposed government action. And you think things aren’t getting done now?

3.  That’s right, the law that Stack virulently loathed actually did more than any tax overhaul law in the last 100 years to help middle-class Americans. It lowered their tax rates, simplified the tax code and closed loopholes.

4.   There is an exception from the duty of confidentiality when a CPA or lawyer discloses client information that is necessary for his defense against a claim of malpractice. And the fact that Stack is dead won’t relieve Ross of his duty of confidentiality because he filed jointly with his wife and she is still alive.

5.  I’ve encountered many people like Stack in my life. The adversity they encounter (and we all encounter adversity) is always someone else’s fault. Like Stack, they take responsibility for nothing. For more on this, read my blog post titled Austin IRS Bomber Blamed Everyone But Himself.