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October 9, 2014

Where Did the Tax Protesters Go?

IRS Audits

Houston Tax Attorney

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It has almost been twenty years since Congress enacted the Revenue Restructuring Act of 1998 (“RRA98”). RRA98 prohibits the IRS from designating taxpayers as “tax protesters.”

What is a Tax Protester?

A tax protester is someone who uses illegal methods to protest the tax laws. This often includes Constitutional and other arguments about the taxpayer not being subject to tax for various reasons or that the income tax itself is illegal. This term is often best defined by the tax protester arguments have been repeatedly rejected by the courts, such as:

  • The Sixteenth Amendment to the Constitution was improperly ratified and therefore never came into being,
  • The Sixteenth Amendment is unconstitutional generally,
  • The income tax violates the Takings Clause of the Fifth Amendment,
  • The tax laws are unconstitutional,
  • Wages are not income and therefore are not subject to federal income tax laws,
  • Filing a tax return violates the privilege against self-incrimination, and
  • Federal Reserve Notes do not constitute cash or income.

The IRS’s Illegal Tax Protester Program

Prior to RRA98, the IRS operated the Illegal Tax Protester Program. IRS employees who noticed indicators that a taxpayer was a tax protester would refer the cases to the program. IRS employees who worked for the program would then determine if the taxpayer should be included in the program and it would essentially accelerate the IRS collection process for those taxpayers. The IRS would even make specific notes in the taxpayer’s file to indicate that they were a tax protester.

The RRA98 Takes Away “Tax Protester” Designation

Congress was concerned that this label could bias IRS employees and result in unfair treatment of the taxpayer. As such, it changed the law to prohibit the IRS from using the tax protester designation. It also prohibited from using similar terms that have the same meaning. Even the term “tax defier” has been removed from the IRS’s policy manual.

The IRS’s Illegal Tax Protester Program was also disbanded. Now, tax protester cases are handled as part of broader programs that deal with specific taxpayer behavior, including:

  • The Frivolous Return Program that handles taxpayers who file tax returns based on some type of frivolous argument that justifies payment of little or no income tax.
  • The Nonfiler Program that handles taxpayers who fail to file their required tax returns.
  • The Potentially Dangerous Taxpayer/Caution Upon Contact Program that handles taxpayers who have assaulted and/or threatened IRS employees.

These restrictions only apply to the IRS. They do not apply to the U.S. Department of Justice.

The U.S. Department of Justice Tax Defier Initiative

The U.S. Department of Justice (“USDOJ”) created the National Tax Defier Initiative or TAXDEF in 2008. This initiative is intended to shut down tax-fraud promoters and fraudulent tax-return preparers. This initiative continues to the present time.

The IRS and USDOJ Enforcement Activities

This absence of the “tax protester” label has not deterred the IRS or the USDOJ from going after tax protesters–they just operate without using the term “tax protester.”
The IRS and the USDOJ have been active in publicizing their enforcement activities with respect to taxpayers who would previously have been designated as tax protesters. This has included using the courts to enforce our tax laws.

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