David, please pardon this very long post. But the following has got to be said and heard before anybody else files a return claiming a deduction for lawful money or encourages others to do so. This is a WARNING.Originally Posted by David Merrill
I speak from experience. I have successfully avoided all income tax for 12 years. At first I did not file at all for 4 years in a row (this is when I had my own business and no W-2 reporting). Ultimately I filed zero returns for those years, and those filings were never challenged. For a few years after that I received W-2's and then filed a return Cracking the Code (CTC) style to claim a 100% refund, and actually got the refunds for a couple of years. Very exciting!!
But I saw the writing on the wall with CTC 3 years ago and started claiming exempt on W-4 so I would not NEED to claim a refund (except for FICA). After 3 years of being hammered with frivolous penalties and harassment due to the CTC returns I filed, I have come full circle and I am back to not filing a return at all (this is not to say I ignore the evidence being sent to IRS by third parties, as this is unwise.)
But if I must have a debate with IRS, I would rather it be about that information return and whether I am required to file (a discussion I can have from outside their jurisdiction) than to be in a position of begging them to give me my money back and filing a "taxpayer" return that argues that I am not actually a "taxpayer", regardless of how great the argument seems to be.
Or worse--having to argue with them about "frivolous return" penalties. You cannot win a debate with them if they decide your return is frivolous. It is a total nightmare. And no one will help you. Not the taxpayer advocate, not the due process appeals officer, not the Tax Court, probably not even a District Court or Appeals Court. They are all in on it. People I tell about this act like they don't believe me, like I am exaggerating. It is no joke. A "Frivolous return" penalty is a "scarlet letter". They will never tell you what it was that was "frivolous" about your return. If they could just kill you for filing such a return, they would. To them a frivolous return filer is a contagion that could infect the minds of the other cattle.
Don't be fooled that you have found a "magic bullet" with the lawful money redemption. You cannot possibly win any argument as a "taxpayer" unless they allow you to win. By filing a return you agree to play by their "rules" (there actually are none, if they find the rules are too inconvenient--its completely arbitrary). What hope does making an argument for your "remedy" ultimately have in such an environment? Filing a return with any argument on it is like asking for their approval. When they decide they no longer approve, watch out! This is what happened with Cracking the Code returns. It will happen with "lawful money" returns as well.
People have got to be careful about relying on remedy exclusively to extract themselves from the income tax system. I learned this lesson with CTC the hard way. IRS does not like to lose customers. Don't think IRS will not fight as hard as it can for survival. It has survived this long by bamboozling the public and terrorizing individuals. IRS will use bamboozling the public and terrorizing individuals to defeat remedy if it can, no matter how bulletproof you think remedy is.
Public perception is everything. The remedy has been there since 1913, yet people did not know it, so it has done them no good. IRS has had no reason to attack remedy, because so few people knew about it, its better (even at this point) to keep it quiet. If enough people do start to learn about this and use it, it will soon no longer be possible for IRS to sit quietly. If IRS survival is threatened, you can bet the IRS will attack remedy.
Do you really think they care that remedy is legitimate? So is your right to due process, and they trample on that every day. They know (and you should know) that even if people know about remedy, but they don't believe it or they are conditioned that it could land them in prison, or get them harassed by IRS, remedy will be useless.
I am gravely concerned about people getting too excited about filing "lawful money" returns. All it will take to slur remedy publicly is for one person to go to prison for filing "false documents" with the IRS (as Pete Hendrickson was convicted of), and for that person's filing to make anything close to an argument about "redeeming lawful money" along with a good media campaign by IRS to spread the word about the "remedy freaks".
I am not fear-mongering. But don't underestimate the adversary. Don't underestimate the lengths they will go to, no matter how long it takes them! It took them 8 years to bring Hendrickson down, but they had no choice once they were seeing tens of thousands of people (and growing every year) exiting their system for good with CTC!
As Hendrickson found out, a "false documents" charge does not require that any money be owed (they never claimed he owed any, in fact he got 100% refunds for the documents he went to prison for!! Almost 6 years afterward, they charged him with felonies) They also never contested any of his legal arguments on his returns, because they didn't have to! Pete failed to realize that the judge instructs the jury on the law, and that Pete would not be allowed to discuss the law to the jury. A defendant's only realistic defense in a tax case is to convince the jury he had a "sincere belief" he was not breaking the law, but a couple of frivolous return letters is all it will take to show that somebody was put on notice they were "breaking the law" so they "should have known".
Of course, if somebody can't successfully articulate remedy to the average folks on the jury, (or if the jury is rigged, or just impatient, or angry that he isn't paying his "fair share") the defendant is going to be up a creek! And even people who have been acquitted for tax crimes (based on whatever sincerely held belief they have) have been forced to abandon their "wrong" belief afterward (since the Court finds they have broken the law, and the acquittal was based only on the lack of "willfulness", the acquitted defendant can no longer claim he does not "know" he is violating the law if he persists in not filing the way the IRS prefers).
Let's say they don't want lawful money actually discussed in a trial. No problem! Faced with criminal charges, most people will abandon their position and agree to pay whatever IRS demands in back taxes, penalties and interest. When the public sees a "remedy" tax filer having to pay big bucks (by their own agreement, to avoid a trial) after making the remedy argument, IRS can and will discredit remedy without having to even risk a public trial.
But what has really caused the downfall of CTC (and will no doubt be used to destroy remedy) is the relentless $5,000 penalties issued out to thousands of CTC filers. IRS has gotten totally lawless with the 6702 penalties--I have friends who got $5,000 more added to their penalties every time they simply wrote a letter back in response to IRS bills. My friends know that is messed up, but they are no less terrified and they are not exactly referring CTC to anybody like they used to. And that's the whole point. IRS has to stop the spread of the idea. Terror works. Have you seen the lost horizons website lately? Every week Pete is bitching that nobody sends him scans of refund checks anymore.
This is my concern for remedy. Not that it is wrong, but that IRS will try to discredit it sooner or later. If remedy catches on, they will find the lamest person they can to pick on, someone using some convoluted version of remedy, so they are sure to get a conviction (or even an acquittal may serve IRS purposes, since they can still discredit remedy as an argument). But mostly, they will use the frivolous penalty to hammer people who file returns that way into submission (or at least shutting up about it, or advertising it as a recipe for trouble).
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