IRS Warns 1,000 Who ‘Untaxed’ Selves to Pay Up

Internal Revenue Service officials are asking an estimated 1,000 Orange County residents who participated in a scheme to “untax” themselves to contact the IRS and pay up before agents start coming after them.

Eight people, including a Colorado couple who federal prosecutors say masterminded the operation called “The Pilot Connection/Liberty Foundation,” have been arrested and indicted on charges of tax evasion, mail fraud and conspiring to defraud the U.S. government and more than 10,000 people nationwide, prosecutors said Tuesday.

“With the arrests Monday, we have broken up the largest tax protest organization currently operating in the United States,” said Michael J. Yamaguchi, U.S. attorney for the Northern District of California.

According to a 45-count indictment, Phillip Marsh, 69, and Marlene Marsh, 57, sold packages for between $1,200 and $5,000 instructing people how to permanently “untax” themselves. The main component in the package, IRS officials said, was a form letter to the IRS asking to be removed from the tax rolls, classifying petitioners as “non-resident aliens.”

Those sending in the forms would then stop filing tax returns, believing they had been removed from the tax rolls.

Prosecutors said the scheme duped 10,000 people, in all 50 states, grossing the Marshes more than $10 million since January, 1990. So far, the IRS has initiated 7,000 civil cases against people who “untaxed” themselves, and actions against 1,131 of them have resulted in assessments totaling nearly $29 million in taxes, penalties and interest, prosecutors said.

About 1,000 people who bought the package came from Orange County, according to Judith L. Golden, an IRS spokeswoman in Laguna Niguel. She advised those who removed themselves from the tax rolls to come in and pay up.