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Auditing the Annual IRS "Fear Campaign"

by Bob Bauman, former U.S. Congressman

About this time each year, the IRS antics bring to mind the late, unlamented Josef Goebbels. In case you're unfamiliar with the name, Dr. Goebbels was Adolf Hitler's infamous minister of propaganda.

It was Dr. Goebbels who observed: "Propaganda has only one object; to conquer the masses. Every means that furthers this aim is good; every means that hinders it is bad."

Fear was the Nazi stock in trade. They used fear as a potent psychological weapon in their efforts to direct and control the German masses.

And each year, as dependable as the arrival of spring, the fear mongers at the IRS launch into their annual campaign to scare the American public.

The annual campaign begins with a barrage of press releases. The PR specialists at the IRS start sending them three months before the annual income tax filing date, April 15th (a week from today). The press releases are more than just friendly "please file your taxes" reminders. They announce (or you could say "brag" about) the convictions of an assortment of alleged tax evaders. This scare tactic has become a ritual to frighten U.S. taxpayers into paying up.

Many of these press notices are announcements about successful prosecutions of tax evaders - all carefully timed to coincide with the first three months of the year when folks are working on their taxes or having them done by their accountants. Because tax prosecutions are relatively rare, an unquestioning news media dutifully picks up the press releases and runs them with large headlines.

The IRS Likes to Brag About Their Conquests

Criminal prosecutions for tax evasion are only worthwhile to the IRS because of publicity value. These cases take a long time and cost the IRS far more in time and effort than the added penalties they can possibly collect. In addition, in a criminal prosecution, the IRS has to be able to prove to a jury that the accused taxpayer knowingly and willfully failed to pay their taxes. That's what got actor Wesley Snipes off the IRS tax hook.

This has been a bad year for the IRS propaganda machine. In February, the IRS came out on the short end. A federal trial jury failed to find actor and tax protester Wesley Snipes guilty on tax evasion counts.

The action movie actor was convicted on three misdemeanor counts of willfully failing to file a tax return. He faces up to three years in prison when he is sentenced on April 24th. The IRS went after Snipes for his high profile. And they undoubtedly will prosecute others with "large numbers or loud voices because they're spreading the anti-tax cause," says J.J. MacNab, a writer who monitors tax resisters.

Another "New" Dirty Dozen List - Apparently They're Not Tired of the Old One Yet

For several years now, the IRS has trotted out its ancient "'Dirty Dozen" list - as some sort of keynote to its annual campaign. The list supposedly contains the top 12 worst tax frauds du jour. Quite frankly, the list is pretty entertaining - considering it's the same every single year.

Once again this year, the IRS put offshore financial activity on the list - although offshore has moved down to #5 on the list.

Without offering any proof, the IRS claimed that Americans are hiding trillions in taxable income offshore. That's a ridiculous claim at best - used for dramatic effect. Of course, legitimate international investing and banking is a normal part of doing business offshore.

Also, even in the midst of their glorious tax campaign, the IRS was forced to admit that it's legal for Americans to have offshore bank accounts, credit cards, investments and businesses. (If the IRS can spread their propaganda, then allow me to call attention to that, considering I'm sure few news organizations bothered to report that fact.)

The Tried and Tested Funny Numbers Game

These bogus claims about "trillions offshore" are part of the larger IRS "numbers game." Here's an example of how the IRS plays the game:

When he quit in 2002, then IRS Commissioner Charles O. Rossotti claimed the IRS had identified 82,100 taxpayers using offshore accounts to evade taxes. He also estimated the government lost US$447 million when tax evaders failed to pay their share. That's less than US$7,000 per taxpayer.

But only a year earlier, in 2000, under Rossotti, the IRS estimated that 505,000 taxpayers were using offshore bank accounts to evade taxes (that's about 400,000 MORE than Rossotti said two years later).

By early 2002, the IRS upped that number to two million. It was the same Commissioner Rossotti who, in May 2001, demanded federal court subpoenas for offshore credit card records. In 2001, he claimed offshore tax evasion was costing the government US$20 billion to US$40 billion in 2000 alone! (That's a long way up from US$447 million.)

Meanwhile Jack Blum, a Washington lobbyist and paid IRS propagandist on tax evasion, estimated that offshore evasion cost government US$70 billion annually.

If Only We Could Audit the IRS...

Apparently the IRS Commission can't figure out whether they lost US$447 million or US$70 BILLION (that's only a difference of US$69.5 BILLION). He also can't quite put his finger on whether supposed offshore evaders number 82,000 or 505,000 or two million. That's completely consistent with the way the IRS mishandles most matters. Talk about needing an audit!

The real IRS gap is not one of lost taxes, but the collective one between their ears.

So try and have fun with your Form 1040 and paperwork this week. Don't pay attention to the IRS's scare tactics. Simply fill out your forms as usual, and be done with it.

In fact, the most annoying thing you can do is fill your forms out correctly - then they won't have any PR material for next year's campaign.

If you want more info on the real deal about taxes, visit G&G Associates audio library and listen to Job vs. Bus and learn how you could easily get a tax free pay raise and turn around and guarantee yourself a 25-40% rate of return on your money by just saving those precious dollars on your taxes.


Thanks

Gary Gray
Tax & Financial Consultant, RFC
G&G Associates
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