No Liability: Choosing Your Strategy

Thursday, February 23, 2006

Choosing Your Strategy

Post 9 of 11

If you are convinced that my arguments are substantially sound then you have to ask, “What now?” The question is best answered by comparing where you are with where you want to be. Heavy investment and substantial assets require a more cautious approach than wishes for riches.

The most important issue in deciding what actions to take in choosing your relationship with the government is to know yourself. The food for thought I shared earlier is just the beginning. As I said before, if you believe you are going to burn in hell for not filing a return, then all the legal arguments in the world are not going to help your peace of mind.

Let's think about the possibilities for the future. Is one path any safer than another?

Are they capable of arbitrarily or randomly finding fault with obedience (filing)? Yes, they have several ways of doing this. You can be randomly chosen to defend every single line of your tax return so they can gather statistical data. They could decide to take a closer look at people in your field of work and audit you in order to inspire stricter compliance in your field. They may find a simple typo and decide to audit your returns for the past three years. Even if they don't audit you they may simply apply penalties and/or fees which you would then have to take time to handle with no assurance of success. If you are really lucky you may have the option to go to their courts where they presume your guilt and you must prove your innocence (the recent IRS investigation by Congress has brought about promises to change this but I’ll believe it when I see it.) All of which is at your expense and you would have a snowflakes chance in hell of getting them to pay any of your expenses.

The mission of the IRS is first and foremost to inspire compliance. Their strategies, therefore, serve that goal before they serve the goal of collecting money. That means that no matter what your “income” level you have no better or worse chance of having your veracity doubted by the IRS.

The vast majority of filers have no problems with the IRS.

On the positive side of filing you are fitting into the normal ways of the vast majority of people in business. This is an important consideration since anyone who has substantial assets or financial affairs has to be able to do business in order to maintain and/ or improve their financial position.

On the flip side, if you choose not to file, can they arbitrarily or randomly interfere with your life? Yes, and in predictable ways. As a non-filer, they will notify you when they finally notice you have not filed. The computer will spit out form CP-516 and you will have your first opportunity to confront them with your clear and thoroughly considered position regarding the obligation to file an income tax return.

As soon as you receive any notice, start writing to them asking questions and clearly stating your position. That’s the essence of the strategy I advocate. Politely ask questions about their position and clearly state your position. The sooner you clarify the exact issue of dispute, the sooner the disagreement will be resolved. Maintain an open attitude about the correctness of your position, in other words, state your openness to being proven wrong (and, ideally, state exactly how they can do that). However, do not accept anything less than direct and specific answers to the questions you ask. When asking questions be specific enough that a direct answer is simple and proves one way or another the correctness of your position or disproves the correctness of their position. The long term goal is that when your correspondence is introduced as evidence your position is clear and simple and their ability to disprove it is equally simple and clear. Thus, when they fail to answer your questions they are going to look foolish. It is unlikely that any jury (insist on a jury) would decide in favor of foolish and uncooperative agents of the government against a well-meaning and clearly intelligent citizen.

You do not want to invite escalation of their efforts to inconvenience you. They are most likely to do that if you use the language and tactics of “protesters” and the anti-government factions that the IRS fears. Understand that they are operating in the context of legal, not moral nor political obligations. That means they are most likely to listen to legal arguments (that may happen to have moral/political positions attached) than they are to purely moral/political arguments or moral/political arguments (that happen to have legal positions attached).

I reiterate that you must choose your strategy first and foremost by your personal beliefs, regardless of how the IRS is likely to perceive your actions. You will need to be crystal clear of what your arguments are and stand by them unwaveringly, whether they are moral, legal, practical, or political. Even if you chose a purely moral stance (which the IRS is always quick to dismiss) if you stick by your principles then you will be better off than if you are wishy-washy about what you mean to say and throw in legalistic arguments that you do not believe.

The fact is that no matter what course you choose the IRS might choose to disagree and throw their powerful resources at disrupting your course. A substantial challenge to your course may require you to call on all the resources you can muster, financial, spiritual, emotional, political, and social. The clearer you are from the beginning, the better able you will be to take control of the situation and focus the process on the issues you believe in. Even if you lose, the conflict will be resolved quickly if the issues are clearly set out from the beginning.

If they do decide you are worth pursuing then you must also rely on the financial privacy structures you have put in place to protect your assets and earnings. The issues and solutions for achieving financial privacy are beyond the scope of this book and are more important for those with assets worth protecting.

No matter what course you choose the possibility of the IRS doubting your choice exists. The one thing I believe nearly everyone agrees upon is that the best strategy is to respond to the IRS promptly. It is a foundation of all societies that good faith is required to resolve conflicts. If you make good faith efforts to resolve your conflicts, then you are generally going to be treated better. Ignoring people gives them ample opportunity to make up their own version of why you are not responding. In the case of the IRS you run the risk that they will decide you are “evading” or “protesting” and they might use that label as justification for invoking their most viscous weapons.

IRS agents are smart enough to know that an intelligent, well-meaning citizen who asks simple, clear questions in a courteous and respectful way is likely to find favor with judges and juries. Even if you are right, if you do not practice courtesy and respect they have the power to break their own rules. A case to consider in this regard is Irwin Schiff. He has written several books on the topic of income taxes. He also went to jail and had other penalties applied for his contempt of the system. His mistake was, in my opinion, that he simply could not loosen up enough on his righteousness long enough to show respect for the people who work in the system. If you brought me into your home and then I started ranting and raving about how badly you kept it, you would kick me out, and rightly so. In this case the system does not kick you out, it sucks you in, right into jail. After reading his books which included excerpted transcripts of the proceedings that landed him in jail, I decided that if I were the judge listening to Mr. Schiff criticize everything I do, I would probably have thrown him in jail, too.

For non-filers it is important to show good faith. The key is to be clear about exactly what you believe in, and stick to it respectfully and with determination. My personal beliefs involve moral, legal, and practical issues and I will roll them out judiciously according to what will be best to avoid or resolve a conflict. If you have a purely moral stance, then you would be wise to stick to what you know and weigh the moral issues and tactics so that you can maintain your integrity throughout the process. Whatever issues you feel are vital you can find a community of like-minded individuals and they can help you understand how the system typically responds to the actions you have in mind.

Besides clarifying your personal beliefs and defining the issues you are willing to confront, the next step is finding a community of people who have experience with confronting that issue or one very similar. The most valuable resource you can invest in is the support of a community of like-minded people.