IRS colluding with states?

Opponents of the federal income tax are criticizing a new partnership between the Internal Revenue Service and state governments, formed in a bid to crack down on "abusive tax avoidance schemes."

The IRS, along with the Treasury Department and tax officials from nine states, will announce the new partnership at a news conference today. Officials say the alliance is being formed to recoup billions in revenue the government says individuals were erroneously convinced they did not owe state and federal coffers.

At issue, says the IRS, is whether critics of the income tax are defrauding the government of revenue through classes, programs and other venues they have established to "teach" individuals how legally not to pay taxes.

These "abusive transactions to avoid taxes, according to private estimates, deprive state and federal governments of billions of dollars annually," said an IRS media alert on Friday.

But one group, the We the People Foundation, headed by longtime tax-reform activist Bob Schulz, says if there is abuse occurring in relation to taxes, it is coming from Washington.

"It is the government that is the abuser. The government is abusing its constitutionally limited power to tax," WTP said.

Bob Schulz

Schulz and his supporters have tried for nearly two years to force the government to answer several questions about the income tax and the Sixteenth Amendment, which authorized a tax on income in 1913. But thus far, neither the IRS nor other appropriate government agencies have agreed; in fact, the IRS has usually dismissed such arguments as frivolous.

"The 'Tax Honest Movement' is now encouraging people to retain their tax money until the government answers those questions," WTP says.

But rather than seek answers at today's new conference, Schulz said he and former IRS agents Joe Banister, John Turner and Sherry Jackson will instead set up outside the Treasury Department, where the IRS announcement is scheduled to take place, and distribute their own information packet "documenting aspects of the income-tax fraud."

"Obviously, the government's intent is to have the media shower the nation with a blanket of propaganda by flooding Tuesday evening TV and Wednesday morning newspapers with its biased, one-sided story," WTP said in a statement.

Scheduled to appear at the 10 a.m. Eastern conference are IRS Commissioner Mark W. Everson, Treasury Assistant Secretary for Tax Policy Pamela F. Olson and IRS Small Business/Self-Employed Division Commissioner Dale F. Hart, a representative of the Federation of Tax Administrators. Also appearing will be tax officials from California, Louisiana, Maryland, Massachusetts, New Jersey, New York, Ohio, Virginia and the District of Columbia.

The event will be available as a webcast via the U.S. Treasury website, officials said.

Last week, Schulz and WTP accused the federal government of forming a "strike force" comprised of IRS and Department of Justice agents, as well as federal judges, to "target" reform advocates who are questioning the legality of the income tax.

The formation of the teams was first broached during Senate Finance Committee hearings April 5. Those hearings, chaired by Sen. Charles Grassley, R-Iowa, examined groups and individuals who some lawmakers alleged were defrauding taxpayers with "schemes, scams and cons."

One longtime tax reformist, Irwin Schiff, was raided by federal agents in February, for allegedly "engaging in … fraudulent or deceptive conduct" relating to Schiff's business, which was advising people they did not owe income taxes.

A June 16 federal court order claimed Schiff and his associates were "promoting through consulting services, websites and tax-scam packages the filing of 'zero-income' federal tax returns … directing customers to inundate the IRS, federal courts and the Department of Justice with frivolous lawsuits and IRS hearings."

In its 35-page order, the government accused Schiff of "promoting abusive tax shelters, aiding and abetting understatement of tax liability, preparing any part of a return or claim for refund that includes an unrealistic position," and other violations of federal tax law.