|
The Internal Revenue Service plans to announce next week that it is
actively pursuing small-business owners who are bragging on the Internet
and in seminars that they do not withhold taxes from their employees'
paychecks, arguing that the tax laws do not apply to them.
Dale Hart, the I.R.S. deputy commissioner for small businesses and the
self-employed, said the agency was now looking for business owners who
have stopped withholding and turning over income, Social Security and
Medicare taxes, and was "stepping up" the pressure on them.
Workers at these companies, who Mrs. Hart said "are being scammed
by their bosses," will also be pursued and will be assessed penalties
unless they send in the taxes that should have been withheld from their
paychecks.
Some of the business owners, as well as the promoters who advise them,
will be prosecuted for tax evasion and other crimes, said Mark E.
Matthews, chief of the I.R.S. criminal investigation division. Indictments
may take months.
In addition, the agency has tightened its procedures for issuing
refunds to business owners who say they are exempt from the tax laws, said
John Buchanan, the I.R.S. executive responsible for ferreting out sham
trusts and similar commercial tax evasion schemes.
The changes, and an effort to encourage workers to turn in bosses who
stop withholding taxes, come as proponents of theories that the tax laws
are a hoax prepare to meet in Washington.
The New York Times reported in an article on Nov. 19 that at least 23
small-business owners had publicly declared on the Internet that they did
not withhold taxes from their workers' paychecks. These owners told The
Times that the I.R.S. was making no effort to make them pay.
One company named in the report, the Kristi Tool Company of
Magnolia, Mass., advertises that it has not withheld taxes since 1979. Its
owner, Dick Celata, said in an interview that the I.R.S. had never tried
to make him pay and he said he took that as proof that he was correct in
his belief that he was not required to pay taxes.
In recent weeks Dick Simkanin, owner of Arrow Plastics in
Bedford, Tex., who maintains a Web site with the names of businesses that
say they do not withhold taxes, has added three more businesses to his
list.
Another business, Jon Peters Plumbing in Omaha, said it stopped
withholding nine years ago. The Candleberry Creek Company in Cheona,
Ill., stopped withholding in 1998.
Frank Keith, the senior I.R.S. spokesman, said in November that
"with limited resources the I.R.S. must often choose which cases to
pursue" and that it focused on those that would generate the most
revenue.
Several former I.R.S. commissioners, as well as tax policy officials
who had served in both Republican and Democratic administrations, said at
the time that they were shocked at the failure of the I.R.S. to move
against these business owners and warned that unless enforcement action
was taken swiftly the movement would grow, threatening the integrity of
the income tax system.
Days before the article was published about 60 business owners gathered
in Huntington Beach, Calif., at the invitation of Nick Jesson, owner of N.T.D.
Electronics in Huntington Beach, to plan strategies to expand their
movement.
Next Saturday hundreds of people, including business owners, are
expected to meet at the Hilton Hotel in Arlington, Va., to discuss ways to
"expose and end the illegal operation of the income tax system,"
according to the event's sponsor, Robert L. Schulz of the We the People
Foundation in Queensbury, N.Y. Among the tactics urged by some of those
who have announced they will attend is persuading more business owners to
stop income tax withholding, which is the source of more than 80 percent
of federal income tax, Social Security and Medicare revenues.
Mrs. Hart, the I.R.S. deputy commissioner, said that arguments like the
one that asserts that the income tax applies only to foreign-owned
companies operating in the United States are "frivolous claims that
have no legal authority" and have been thoroughly rejected by the
courts.
But she said the agency had concluded it must conduct a public
education program, especially for "poorly educated workers" who
may tend to accept statements by their employers that income taxes are
voluntary.
She said that while penalties would be assessed against workers who
fail to turn over taxes that should have been withheld from their
paychecks, an exception might be made for workers who pay but do not file
promptly or pay less than they owe.
"We would have to consider that on a case-by-case basis,"
Mrs. Hart said.
The agency has also tightened scrutiny of requests for withholding tax
refunds, said Mr. Buchanan, the I.R.S. executive assigned to police
commercial evasion schemes.
Two companies that do not withhold taxes, Bosset Partners Marketing
in Clearwater, Fla., and N.T.D. Electronics, said the I.R.S. promptly
refunded more than $200,000 in withholding tax refunds when they asked for
their money back.
Mr. Buchanan said the I.R.S. had tightened procedures for processing
withholding tax refund claims.
"We have pretty good filters to intercept these refund requests
and only a handful are getting through," he said. "And those
that do get through we are finding posthaste afterward because we now have
a mechanism in place" to identify such errors.
|