The Federal Government Is Not Amused by Tax Protests
Question: I have a friend who is caught up in this ridiculous tax-protester business. I want to help him before he gets into real trouble. His main contention is that only income from foreign sources is taxable. Would you be so kind as to send me some of the court cases that have rejected these arguments? He says there aren’t any such cases.
Answer: An Internet-savvy 10-year-old could find many of the cases your friend pretends don’t exist. A nice list of them, which are all variations on the “my income isn’t taxable” argument, can be found at the Internal Revenue Service’s Web site, www.irs .gov, in the IRS Criminal Investigation section. The IRS also has a pamphlet--”Why Do I Have To Pay Taxes?”--available on its Web site or by calling (800) 829-1040.
The Tax Court, which has reviewed many of these cases, now routinely fines tax protesters $5,000 to $25,000 for making what it rightly terms “frivolous arguments” that have long been discredited.
Your friend isn’t about to be dissuaded by mere facts, however. He’s got too much invested in rationalizing his position. He’d rather risk audits, fines and a possible prison term than admit he’s wrong.
Of course, he’s still willing to use the highways, enjoy the police and fire protection and be defended by the armed services, as long as it’s all paid for with someone else’s money.
And if he were ever to give up his bogus arguments, he’d face a real dilemma. Because he obviously doesn’t like the tax system the way it is, he might face an ethical imperative to try to change it.
But that would require real time and effort, which your buddy apparently isn’t willing to expend.
Avoiding Scams Easier Than Recouping Losses
Q: My husband will retire next year. In the last 30 years, he has fallen for many “get rich quick” schemes against my wishes. (I find out about these scams only after he’s signed up for them.) We have lost a lot of money, but he still thinks the next thing will work, and of course nothing ever does. How can I put an end to this? Can we check these companies out if they’re not registered with the Better Business Bureau? Can we get the money back after he has signed up?
A: You can find just about everything you need to know about spotting and avoiding scams at the Federal Trade Commission’s Web site, www.ftc.gov. You also can call the FTC at (877) FTC-HELP, or 382-4357.
The answers to your last two questions are pretty obvious. Don’t deal with a company that’s not registered with the Better Business Bureau.
And don’t count on getting your money back after you’ve signed up for these scams.
There simply are too many of them for the government to track down and punish the perpetrators, let alone try to get your money back.
That doesn’t mean you have to continue to suffer, however. A spouse who refuses to behave responsibly with money can be frightening, as he’s putting both of your financial futures at risk, but you can take some action.
First, you might talk to your husband about what compels him to keep trying these schemes, even though he knows deep down they won’t work.
One reason people play losers’ games, such as the lottery, is that they feel that they have no other way to succeed, said Meir Statman, an expert in behavioral finance at Santa Clara University. Others believe that they haven’t achieved as much as they should financially during their lifetime.
You may be able to make changes in your financial life to help your husband feel less desperate about the future. Or you may need to guide him to a therapist or a 12-step group that deals with gambling addictions.
Olivia Mellon’s book “Overcoming Overspending: A Winning Plan for Spenders and Their Partners” (Walker & Co., 1997), also may provide some insights.
If your husband refuses to stop, you have some pretty drastic measures available to you, including divorce, a legal separation of your financial assets or a conservatorship, in which a court would appoint you to handle his affairs.
You would need to discuss your situation with a lawyer to determine the best course.
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Liz Pulliam Weston is a personal finance writer for The Times and a graduate of the personal financial planning certificate program at UC Irvine. Questions can be sent to her at moneytalk@latimes.com or mailed to her in care of Money Talk, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012. She regrets that she cannot respond personally to queries. For past Money Talk questions and answers, visit The Times’ Web site at www.la times.com/moneytalk.
