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CHAIRMAN’S REPORT – April 14th, 2017

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CHAIRMAN’S REPORT – April 14th, 2017
A LOOK AT THE FUTURE WITH A GREATLY EMPOWERED IRS

All of us need to understand the real consequences of President Trump and Congress retaining the current federal income/payroll tax system.  

Here is what we know:
  • It is now settled that illegal income tax evasion is increasing.  Dr. Cebula’s study clearly shows that over the ten years from 2017 to 2026, evasion will likely exceed $9 trillion if it continues to grow at the historical rate—based on IRS and U.S. government numbers.
  • If the annual evasion rate were greatly reduced then there would be a small, if any, annual federal budget deficit at current levels of spending.
  • Illegal evasion is not a victimless crime because the rest of us have to pay more taxes to make up for it or the U.S. government will have to borrow to make up for it, leaving the burden to pay this debt on the rest of us.
  • People evading the federal income tax are also evading the payroll tax and any state and local income taxes.
  • Income tax evaders normally only evade tax on a portion of their income and have made the decision that it is okay for them to do it.
  • Income tax evaders paying zero taxes on their evaded income are unlikely to report the evaded income because Congress lowers the income tax rate.  If they report all of their income they will find themselves paying at least 35% on income that they previously paid no taxes.    Zero percent or 35%, which will it be?     I think the answer is clear.
  • Congress has boasted that it has continued to reduce the size of the IRS.  The IRS audit rate is below .7% and only about .2% were actual in person audits.
  • Congress insists that Americans follow immigration laws, drug laws and countless other laws, so to not be hypocritical, they have to take the same attitude toward illegal evasion of the federal income tax.
  • The only way to even start reducing illegal federal income tax evasion is to dramatically increase the number of IRS audits and to make most of them in person, and not correspondence audits which are done by mail.
The Imperfect IRS

We all remember learning that Lois Lerner was able to set up rules that allowed only one conservative advocacy organization to be granted tax exempt status in three years.  Even though the same standard of review and countless delays were not experienced by organizations whose political beliefs aligned with those of Lois Lerner.

The problem, however, is more than Lois Lerner.  The Treasury Inspector General for Tax Administration (“TIGTA”) is continually pointing out problems with IRS administration and operations.  TIGTA reported that between Oct. 1, 2010, and Dec. 31, 2012, the IRS paid $2.8 million in bonuses to employees cited for such things as drug use, making violent threats, fraudulently claiming unemployment benefits, misusing government credit cards and failing to pay their taxes. 

This same report had some other disturbing items:
  • More than 1,100 employees who failed to pay their taxes received discretionary awards of more than $1 million in cash bonuses and more than 10,000 hours in extra paid vacation.
  • At least five employees received performance awards after being disciplined for fraudulent under-reporting of their tax liabilities for multiple years and paying taxes late. 
TIGTA has recently pointed out another very disturbing application of the Code to taxpayers.  The Bank Secrecy Act of 1970 (otherwise known as the Currency and Foreign Transactions Reporting Act) requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering.  The  law  requires reporting of banking transactions that exceed $10,000.  The IRS Criminal Investigation division investigates people who make cash deposits just under  $10,000 to determine if these people are violating the law by trying to hide money from the government.

Not surprisingly, the IRS chose to assume that anyone depositing sums of less than $10,000 was likely a criminal and seized the funds in their bank accounts.  Then the taxpayers had to fight to get their money back. In a random sample of 278 IRS forfeiture actions, 91% of these businesses were found to have obtained their money legally.

The IRS often attempts to negotiate with businesses for the return of their illegally IRS-seized funds.  The IRS knows that it can take a long time and cost the businesses thousands of dollars, so the IRS was offering to return 50% of the money even though it was clear that it was illegally seized and the IRS was not entitled to any of the money. 

The Real Problem For The Future

Congress recognizes that the IRS has difficulty collecting taxes from anyone who is not a W2 employee.  To help the IRS, Congress said:
  • If the IRS says you owe taxes, it is up to you to prove your innocence;
  • It is okay for the IRS to demand that you keep very specific records at your expense and, if you don’t, then assess you not only taxes but interest and, often, penalties;
  • While the IRS agents are being paid by the government, taxpayers have to pay the costs to get professional help to attempt to show that the taxpayer has not underpaid their taxes;
  • One of the problems with enforcement of the Internal Revenue Code (“Code”) is that the Code is so vague that no one knows what it means.  Money Magazine used to take the same set of facts to 50 different  tax preparers  to have them prepare a tax return, and they would get 50 different answers for  the amount of income tax owed;
  • Just because no one can understand the Code, it is still the fault of the taxpayer who, in the opinion of the IRS, doesn’t agree with the IRS interpretation;
  • If the IRS decides that a taxpayer owes taxes, they just issue an assessment and the taxpayer has to take the time and probably pay professionals if they don’t agree with the assessment.
Real World Example of What Will Come If The IRS Conducts More Audits

A client of mine called me and explained that he had just gone through an audit.  He had to pay his certified public accountant to help him gather the information that the IRS agent demanded.  He had to pay the accountant to attend the actual audit with the IRS agent.  The agent went over all of my friend’s documents and ultimately determined that he owed $1,200.  The accountant saw the assessment, was outraged and said it was totally wrong.  In his next sentence, the accountant told my friend to immediately pay the $1,200 because it would cost much more to dispute the assessment and maybe get it overturned. 

My friend felt that he had been extorted and was angry, but that is the system Congress has created.

The Solution

The FAIRtax.
  • No more IRS audits or harassment;
  • Fairer for all;
  • Faster economic growth;
  • More U.S. jobs;
  • Much less illegal evasion;
  • Increased personal freedom.
PASS THE FAIRTAX!
 
WHAT CAN EACH OF US DO
 
Call up the local or D.C. office of the House Member and two Senators and you can use the following script:
  • I am sure that Representative ____ or Senator ____ is in favor of everyone obeying the income tax laws.
  • After they assure you that their boss is not in favor of anyone breaking the law, ask if they are aware of the Cebula study showing $9 trillion of evaded income/payroll taxes over the next ten years.
  • Since most will say they don’t believe their boss has seen the study, either drop off a copy or get an email address and send a copy to them for their boss.
  • Say you are going to call back in a week and ask what the Representative or Senator is going to do to stop this evasion.
  • In a week, call back and ask specifically what the Representative or Senator is going to do to enforce the law.
  • They probably will say their boss believes that simplifying the income tax will handle the problem.
  • Explain that when people evade income taxes, they are also evading the 15.3% payroll/Medicare tax and state income tax.  So it is unlikely that they are going to pay 30% or 40% when they were paying 0% because they have already decided it is okay to cheat.
  • Say that the only way to reduce evasion is to increase by tens or hundreds of thousands the number of comprehensive IRS audits done each year.
  • Point out that Evaders do not self-identify by putting an “E” on their income tax return.
  • 80% of the people likely to be audited are trying to comply, but they will be forced to endure these IRS audits as well.
  • Ask if the Member is in favor of this?
  • If they say no, then ask again how the Member proposes to stop people breaking the income tax laws.
  • Then explain that the way to handle evasion without unleashing the IRS audits is the FAIRtax.  
If you can see your Member or attend a town hall and ask these questions, you can be even more effective.

HELP BRING ABOUT REAL TAX REFORM AND STOP FUTURE IRS ABUSES

Because of the varied attacks on the Ryan/Brady income tax plan, the White House has announced that they need to start over to determine the best tax plan to propose.

Abraham Lincoln also said, “Things may come to those who wait, but only the things left by those who hustle.” 

We may only have a limited time to stop the fake tax reform being promoted by some in Congress.  If it passes, then the Elites will say that we need to wait before we consider any more changes.  To stop this fake reform, we must be able to ensure that our message is clearly heard not only by Congress but also by President Trump.  To do this we need your help.

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HELP YOUNG PEOPLE LEARN ABOUT THE FAIRTAX
 

Have you tried to explain the FAIRtax to youngsters in your household? If you would like some help with this, we have the solution for you, AMERICA’S BIG SOLUTION which is an inexpensive e-book written as an introduction to the FAIRtax.
 
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AMERICA’S BIG SOLUTION by Florida Volunteer Terry Tibbetts has been written to give people of all ages a basic introduction to the FAIRtax and encourage them to learn more about the most thoroughly researched tax plan ever presented to Congress.  It is a light hearted approach to a very serious subject. 
 
Everyone needs to know that we have an alternative to federal income tax and the criminal enterprise known as the IRS.  Everyone needs hope and AMERICA’S BIG SOLUTION provides that hope. AMERICA’S BIG SOLUTION is an alternative to the social media platforms competing for our attention. 
 
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Links for Further Information

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