Tags, 상세검색
PJ 10CHAPTER 13
REC #2 HATONN
WED., NOV. 29, 1989 1:42 P.M. YEAR 3, DAY 105
WED., NOV. 29, 1989
Hatonn present that we might continue. Please allow Dalene to know that all will be alright if she is patient a bit longer. Blood is thicker than "tricks".
Dharma, we will have a lot of additions to make regarding the economy but let us see if we can get a bit of work done on the journal and hopefully be able to add updating either at the end or the beginning of the journal as we go to pass with it.
CONSIDER SURVEILLANCE ON THE JOB
Well over six million American clerical workers work under continuous electronic surveillance. These individuals, many of whom work in "data entry" have their typing speed, input accuracy, length of time at their work station, etc., automatically monitored. For instance, IRS phone representatives are electronically monitored 13 different ways and they are not even aware of it. For instance, clerks who respond to citizens on the phone are told to NOT give last names--every time one does so it is entered into the data.
Other insurance measures of no secret memos being passed around is that some companies, especially those associated with the government or military, require "electronic mail", a computerized system that permits workers to communicate from a computer terminal whereby all can be monitored at the computer center. There are many instances of workers being fired from government positions after complaints are sent via electronic mail. ALL messages are filed according to subject, author, addressee and receiver, etc.
Often the telephone is the first to be monitored. There is a device coming into current use throughout the industrial and governmental complexes and that is a "station message detail recorder" which provides employers with a printout of every call made from every extension in the system. Therefore, your employer may monitor or record your phone calls without your consent or knowledge. The only protection you have is to assume you ARE monitored and not make calls that you would rather not have a matter of record from the system nor send messages on the electronic mail.
LIE DETECTORS
In December of 1988, a federal law took effect barring most private employers from using polygraph or lie detector tests to screen job applicants. The new law also greatly restricts use of the devices to test present employees. It is a shady subject with so many loopholes that you are literally unable to determine your "legal" rights.
Certainly you can be required to take a polygraph test if you work for a government agency, a security firm, if your work affects national security or health and safety or if you handle large amounts of money.
Lie detectors are more than a gross invasion of privacy. They are very frequently totally inaccurate. Even the industry council promoting lie detector tests, the American Polygraph Association, claims an accuracy rate of only 90 percent. Even if these figures do not exaggerate the polygraph's accuracy, they imply that one out of ten individuals who take a polygraph test could be falsely implicated for actions they did not take or crimes they did not commit.
Further, no matter what you may be told--it is quite easy to outwit the device with just a little bit of training by a good instructor. Guess who gets the information and instructions? Of course--the good old criminal.
You should resist any efforts your employer makes to force you to take a lie detector test. If you must undergo a test, you might consider trying to defeat the test, since the results are wrong in a significant percentage of cases.
Let's have a look at rendering the system useless.
To protect oneself, one must be capable of making the system useless. This is easily accomplished once one understands how the machine operates. A polygraph measures bodily functions in the form of electrical impulses. These impulses are converted to mechanical signals which in turn move a series of pens over graph paper.
Polygraph theory says that when one lies, these measurements will fluctuate more widely from a normal, "control" baseline than when one is telling the truth. This baseline is established at the beginning of the polygraph session by plotting the body's response when the subject answers questions to which the examiner already knows the truthful answers.
For instance, the subject may be asked to confirm that he has the same name as that identified on his birth certificate. A trickier baseline question is, "Have you ever stolen anything"? The examiner realizes that virtually everyone has stolen something in their lifetime. A "yes" answer is the proper response. Such questions establish a background rate against which the examiner can ask increasingly incriminating questions later in the session.
To defeat the polygraph, all one must do is insure that the control baseline is unrealistically high. When incriminating questions are asked later in the session, the examiner will be comparing the body's response against an already-high baseline. No matter how the subject responds to the incriminating questions, the examiner will be unable to conclude that he is lying.
Therefore, when the examiner asks a control question, one must make certain his body reacts as if he were under tension. For instance, one could flex his toes or press his foot against the floor as he answered. Another technique would be to clench one's teeth or bite one's tongue as he answers. Or muscles could be tightened in the arms, shoulders or legs.
Most polygraph examiners are trained to intimidate their subjects, and will express doubt about one's willingness to cooperate when it becomes clear that they cannot construct an accurate baseline. At this point, one should simply tell the examiner that he is doing the best he can. One should emphasize his willingness to cooperate, all the while keeping up the same procedure each time the examiner asks a control question.
The examiner will not wish to let the subject or the organization sponsoring the tests know that anyone can "beat" the machine. Therefore the odds are excellent that the examiner's failure to establish an accurate baseline on his subject will not be publicized outside the examination room.
If a lie detector is in your future and you need more information, get your hands on the February 15, 1987 Royal Society of Liechtenstein communique. (See appendix). The above information, however, will work nicely. If you can't get the material and are really frightened for any reason--go to a good hypnotherapist and get good at responding in this manner with each question asked--you can become a lie detector passer no matter what they throw at you.
THE COMPUTER THREAT
This lifeline of a business is also a very big pain in the privacy.
Computers contain employee records, company trade secrets and other valuable data. Protecting this data from destruction and unauthorized access should be, but is not usually, a priority. It just doesn't concern most people. Further, many computers require a code; to remember the code, employees often simply tape a piece of paper containing the code sequence to their computer screens. Access to other computers is usually as simple as turning them on with a switch. Unprotected data can be copied to a "floppy disk" then spirited away. Or a saboteur can introduce a "virus" on the computer's hard disk, destroying or otherwise rendering the data useless.
What can you do? Well, you can begin by simply adopting for your business the recommendations drafted by the National Local Area Network Laboratory in 1988, and now adopted by more than 75 of your major companies. These are fairly open and above board and simply for general use. As a for instance, this computer that Dharma uses appears to be a simple PC and she is not even adept at its function--however, every word is reproduced onto surveillance along with her physical condition while she is receiving from any of us of the higher frequencies. It is fine with us--actually saves a lot of time in some instances, to have her so nicely monitored--WE MONITOR THEIR EQUIPMENT AND THEY KNOW IT SO ALL STAYS PRETTY ABOVE-BOARD. I HAVE A LOT OF SMILING SURVEILLANCE OFFICERS RIGHT NOW IN RESPONSE TO THESE WORDS. SOME OF OUR BEST WORKERS HAVE COME RIGHT OFF THE SURVEILLANCE TEAMS. TRUTH IS A GREAT PERSUADER AND AFTER THEY LEARN THE TRUTH OF OUR PRESENCE THERE GETS TO BE A LOT OF VERY NERVOUS SURVEILLANCE PERSONNEL.
At any rate, back to the basics.
All software should be purchased from known, reputable sources.
All purchased software should be in its original shrink wrap or sealed diskette containers when received.
Back-up copies of all original software should be made as soon as the software package is opened. Back-up copies should be stored off-site.
Once purchased, all software should be reviewed carefully, by a system manager before it is installed on a distributed system (computer network).
New software should be quarantined on an isolated computer. This testing will greatly reduce the risk of system virus contamination.
A back-up copy of all system software and data should be made at least once a month, with the back-up copy stored for at least one year before re-use. This will allow restoration of a system that has been contaminated by a "time-released" virus. A plan that includes "grandfathered" rotation of back-up copies will reduce risk even further.
System administrators should restrict access to system programs and data on a "need-to-use" basis. This isolates problems, protects critical applications, and facilitates problem diagnosis.
All programs on a system should be checked regularly for size (program length) changes. Any size deviations could be evidence of tampering or virus infiltration.
Many "shareware" or "freeware" programs are invaluable applications. However, these programs are the prime entry point for system viruses. Skeptical review of such programs is prudent. Also, extended preliminary quarantine is essential before these programs are introduced on a distributed system.
Any software that exhibits symptoms of possible virus contamination should be removed from general use immediately. System managers should develop plans for quick removal from service of all copies of a suspect program, and immediate back-up of all related data. These plans should be made known to all users, and tested and reviewed periodically.
There are some good ideas which should be put in here about now. If you are weary of on-the-job privacy invasion, you might consider working for yourself.
Self-employment, by its very nature, is more private than working for someone else. You will be responsible only to yourself. No application forms, drug tests or lie detector tests will be necessary in order to go into business. And if your business prospers, you will reap the rewards of an owner, not an employee--especially if you incorporate!
Depending on the type of work you do, you may find it necessary to register your business with the appropriate governmental authorities. But as long as you don't hire employees, allow public access to your business or pollute the environment, the government shouldn't be very interested.
Of course you'll still have to pay taxes on your income but you can have a lot more breaks in that area and a lot of flexibility if you really manage with expertise. You are less likely to be audited if you are a small corporation, and if you REQUEST AN EXTENSION TO FILING YOUR TAX RETURN, YOU ARE VERY UNLIKELY TO BE AUDITED. THE SYSTEM IS GEARED TO GIVE THE CORPORATIONS HECK AT DUE-DATE TIME.
NOW, ASSUMING YOU KNOW HOW I FEEL REGARDING INCORPORATION (IN NEVADA), I WILL CONTINUE BY TELLING YOU ALTERNATIVES AND HOW YOU CAN IMPROVE YOUR POSITION-BUT--EVERYTHING YOU CAN DO, YOU CAN DO BETTER WITH A CORPORATION. OLD CORPORATIONS NEVER DIE--THEY JUST GET A NEW PRESIDENT!
One reason you will likely be audited if you are just in business as "yourself" is that the IRS believes that many self-employed individuals do most of their business "off the books". The "home office" deduction taken by many self-employed individuals is a particularly high-profile "red flag". So you will want to take steps to "audit-proof" your tax return.
I WILL REPEAT SOMETHING HERE WHICH YOU WILL HEAR FROM ME HUNDREDS OF TIMES--EVEN WITH INCORPORATION, YOU WILL HAVE TO KEEP PERFECT RECORDS--PERFECT! AS THIS "CATCHES ON" THE GOVERNMENT WILL BE OUT TO STOP THE FLOW AND WILL INVESTIGATE EVERY SET OF CORPORATE RECORDS THEY CAN LOCATE--(IF THEY CAN LOCATE THEM--ANOTHER GOOD POINT MR. CHRISTIE OF NEVADA CORP. H.Q., CAN ASSIST YOU WITH). YOU MUST SHOW YOU ARE IN BUSINESS BY YOUR RECORDS DONE TO PERFECTION!
Well, what kind of business could you form? It should involve work you enjoy doing, that you are good at and that you are convinced can supplement (or replace) your existing income i.e., if you are good mechanic--open your own shop.
If you are a draftsman, consider a home shop. Go into rare coins if you are a collector and enjoy it as a hobby. A hobby turned into a business gives great pleasure as well as income.
There are major advantages to remaining forever--SMALL. Even if your business becomes a roaring success--plan well and fragment to more small businesses and branches. Bigness brings the limelight and the whole retinue of IRS.
Of course, you can't avoid interaction with the government altogether. You will be required to file an income statement quarterly along with any taxes due to the IRS. You might also find it advantageous to have the IRS assign you a "federal employer identification number" or FEIN, that identifies your business. You will have one already if you have incorporated.
You'll need the FEIN in order to form a tax-deferred profit-sharing or pension plan for your business. In addition you will find it handy to ward off requests for your Social Security number. If someone insists on obtaining your SSN, five them your FEIN instead. It is easy enough to do a DBA through your county clerck's office and they can instruct you in all these matters.
Many local governments will also require you to purchase a license if you are sef-employed. There may be an exemption if you work out of your home or don't deal with the public. The license will cost you anywhere from $10 to hundreds of dollars for every community in which your business operates.
You should avoid purchasing a business license unless the alternative is for your self-employment income to be shut off. The reason: Businesses are one of the first sources of revenue bureaucrats turn to when governments need income. Via "business and occupation" taxes. A business license may also make you vulnerable to surprise inspections by bureaucrats administering programs ranging from zoning laws to building codes.
One universal, or almost so, requirement for a business known by any name but your own is filing of a "Fictitious Name Statement" as referred to above DBA (doing business as) with local authorities. Again, you may be exempt if you are a sole proprietor working out of your home.
Most ones will dribble on and on along these lines in advising you and then end up telling you NOT TO INCORPORATE! Mostly, that is true, true, true--you can end up with even more red-tape.
A few well-informed advisors will however, now end up with the following incorporating:
"INCORPORATING IN A STATE LIKE NEVADA HAS MANY ADVANTAGES, NEVADA IS THE ONE STATE THAT DOES NOT HAVE AN AUTOMATIC EXCHANGE OF TAX FORMS WITH THE FEDERAL GOVERNMENT. IT IS NOT EXPENSIVE TO INCORPORATE THERE".
THAT MESSAGE CAME FROM ONE OF YOUR LEADING BUSINESS NEWSLETTER PUBLISHERS.
No, this will not be utopia for very long--but it will be as long or longer than any other alternative. You see, where you have the major "big boys" hiding their faces you can better hide yours. Nevada is not apt to change very quickly for this is the major industry other than gaming. Further, if the Feds crack they are going to be putting their best workers and comrades out of business. USE THE LAWS GIVEN YOU TO YOUR BEST ADVANTAGE-WHY SHOULD THE "BAD" GUYS ALWAYS FINISH FIRST? GET IN THERE AND TAKE SOME ACTION WHILE THERE IS ANYTHING LEFT TO ACT "WITH".
So be it, Dharma for this day. I note you are most fatigued and have not yet recovered. You will be improving rapidly now that we have located all the frequency beams. Have a good evening and put these disquieting topics from your mind for a respite.
SALU, SALU, SALU
HATONN TO CLEAR FREQUENCY.
PJ 10CHAPTER 14REC #1 HATONN
THU., NOV. 30, 1989 6:00 A.M. YEAR 3, DAY 106
THU., NOV. 30, 1989
Hatonn present and all accounted for at this station. Let us continue on our project, please.
Please take note of these things on this date:
1) The murder of Herr Herrhausen of the Deutsch Bank in Germany. This is a most important incident. This man was a most outspoken worker toward a unified European Market and this is a remarkable effort at stopping the next stage of unification. This was a most powerful figure. The work will continue but there are a lot of very nervous bankers this day.
2) The MX missile raises its ugly head again. Why would you be so interested in non-location, moving location, etc., etc., etc., if your adversity is all finished? And, what are you doing in your outer atmosphere with your shuttles? Keep the eyes moving but remember that sometimes the hand is quicker than the eye. The plan is to scatter these missiles and furthermore--the pinpointed locations have gone forth on every general program in the world--good strategic release. Then there is mumble-jumble about crisis time and running them around on railroad cars--can't you just see all the MX missiles lifting off railroad cars about your country. Then, a major base for storage will be Fairchild Base in Washington state. How comfy for those ones around that area--you have just pointed out, this morning, fifteen pinpoint target areas--well, even the enemy knows that old trick, you nerds.
3) Now, a biggie: Japan and the Soviets have a major $2 billion dollar joint venture going in Siberia--their twenty-first such venture. Now what would they be doing playing around in the Siberian oil fields?
4) The Japanese overvalued market swung sharply upward today--what do you suppose is going to happen shortly? So be it--keep your eyes on the bouncing ball if you can't follow the hands!
* * *
Let us continue with our "privacy", oh, fragile as it is!
AT WORK
We are going to merge into discussions regarding taxes and the work-place privacy. We will even throw in a little "moonlighting" in the Underground Economy.
The IRS is intensely interested in scrutinizing the tax returns of self-employed individuals because it is much easier to generate unreported income as an employer than as an employee. "Guerilla" "capitalists" do not pay taxes!. If they do, they falsify their tax returns and under-report their income.
When IRS is questioning independent compensation plans they use a form with twenty items on it. IRS decides whether or not any of these items apply to the taxpayer. If they do, the IRS may arbitrarily choose to deem an individual an employee. If this happens the penalties and interest to the employer are severe.
However, when an individual incorporates himself and takes certain precautions he is almost categorically accepted as a non-employee or self-employed independent contractor.
Sooner or later an individual operating his own business may be invited to sell his product or services "off the books". One such example might be when John Doe is a repairman and self-employed. When JD goes to a house call to fix an appliance, he might well tell the homeowner, "Look, I have a lot of expenses if I have to run this job through the books. If you just pay me cash, I can do it for 35% less." Usually, people will jump at the chance to save that much, and JD is glad to get the untraceable cash. JD reports none of this income although the expenses for parts, etc. are buried among his on-the-books business.
This can be a most difficult situation to trace and of course is illegal. I do not wish to mislead you for you will make of your own choices. JD is self-employed and does invite further incursions by the IRS against all entrepreneurs.
Crossing the line from tax "avoidance" to tax "evasion" is tempting but the "definition in difference of the two is some 15 years in the pen". Just keep in mind that tax evasion is a federal felony, punishable by up to 5 years in prison and a $50,000 fine. Moreover, to enforce a judgment against you, the IRS can even confiscate your home, your vehicle, even your entire business.
Besides--remember that taxpayer hotline for informers? The customer might very well obtain a reward for turning JD in to the IRS. IN 1987 ALONE, THE IRS PAID $1.8 MILLION IN REWARDS TO 580 TAX "SNITCHES".
There are still plenty of opportunities for tax "avoidance" through legitimate deductions. Take full advantage of these, as well as reducing your profile from the IRS and other government agencies and private concerns through the legal techniques. There are an abundance of them if you incorporate and handle your expenditures and new equipment investment in timely manner--you do need help so I suggest you run to your nearest Corporation Manual. Call Cort Christie at Nevada Corporate Headquarters, Inc. 800-398-1077, (702)896-7001. You don't even need to resort to tax "evasion" of any type whatsoever to reduce or eliminate your taxes. To do so only places you at great risk and you will get on the most monitored and most harassed list.
Before I move on I will give you a list of the twenty questions the IRS asks in order to make evaluations:
Applicable? Non Applicable?1. Instruction
2. Training
3. Integration
4. Services rendered personally
5. Hiring, supervising, and paying assistants.
6. Continuing relationships
7. Set hours of work
8. Full time required
9. Doing work on employer's premises
10. Order of sequence
11. Oral or written reports
12. Payment by hour, week, month
13. Payment of business and/or traveling expenses
14. Furnishing tools, materials
15. Significant investment
16. Realization of profit or loss
17. Working for more than one firm at a time
18. Making services available to General Public
19. Right to discharge
20. Right to terminate
If however, you handle your self-employment in a proper and professional manner, I can give you some 6 to 7 pages of deductions not otherwise available to you.
Another good investment in information is a book called NONPROFIT CAN BE PROFITABLE! by: Theodore H. Swenson for the Mother Earth American Fellowship Church, Inc. If you send him $3.00 he will send you all sorts of wondrous things. (See appendix.)
Another book that you might find enlightening is GUERILLA CAPITALISM, by Adam Cash. (See appendix.)
PRIVACY AND THE IRS
Please shiver now, as I quote former IRS Commissioner, "Internal Revenue Service Strategic Plan", document #6941, May 9, 1984, Roscoe Eggar, Jr.: "It is with considerable pride that I approve the Strategic Plan to carry out the Mission of the Service.
"The Plan consists of the Statement of Strategic Direction and the 55 initiatives to translate them into action. It provides a strong foundation for directing tax administration efforts well into the 1990s and lays the groundwork for the Service's entry into the 21st century.
"Within the next five to 10 years, paper returns will be a thing of the past. And tax processing procedures that now take weeks and months will be reduced dramatically. Early indications are that the automated system enables us not only to collect more efficiently but to collect more dollars in less time". SO BE IT!
LOW BLOW--BRACE YOURSELF
This "strategic plan", with its automated return system and reduced processing time will unquestionably raise the IRS's efficiency. In the process however, the already enormous potential for abuse of innocent taxpayers by this powerful bureaucracy may become even more unbearable.
In its ongoing struggle to "balance the budget" and handle debt, Congress has already given the IRS power and authority far greater than any other similar government agency. Under IRS regulations you are guilty until you prove your innocence, at your expense!
Without so much as a court order the IRS can:
Sell your home at auction and use the proceeds to pay off taxes that it claims you owe.
Gain access to and seize the assets in your bank account and safety deposit box.
Compel you to turn over personal records and give testimony against yourself.
Seize your paycheck and force you to support yourself and your family on no more than the standard deduction for you and each of your dependents.
Confiscate your Social Security check or pension check, even if
that is your only source of income.
Ask around, if one of these things has not already happened to you, you will find a friend who has had it happen or knows someone who has. It is going on all the time!
You would think that the IRS would wield this power most gingerly so as to not create the appearance of abuse--not so, they use it as a loud and clear Gestapo warning.
Again, I am going to give you some well-published examples:
An Amish farmer assessed for several thousand dollars in back taxes was the victim of an armed raid complete with federal marshals brandishing loaded machine guns at the unarmed family which included the farmer's wife and five-year old daughter.
IRS agents kidnapped seven children in a Detroit area school, releasing them only after their parents paid fees due the school that the IRS applied to a tax levy.
An Alaska couple, disputing a tax assessment, had it tripled. To enforce the assessment, IRS agents seized the couple's car while they were in it. Smashing the windows, the agents dragged the couple from the vehicle, leaving them bleeding on the pavement as a tow truck hauled their vehicle away.
A former U.S. Senator investigating the IRS had falsified versions of his tax records leaked to his opponent in the midst of a hotly-contested reelection campaign.
The IRS confiscated the bank account of a nine-year old girl to pay part of a tax claim against her grandmother.
A Virginia businessman was fined $400 for failing to pay two cents of his $22,894 payroll withholding tax bill.
A police commission in a small town in Pennsylvania was ordered to pay $700 on a one cent underpayment in its deductions from employee paychecks.
Funny? Can't be in America? Oh yes, it is in your good old "free" America! Of course it is not in the least bit funny!
Unfortunately, determining exactly what your share of taxes might be is not an easy task to calculate in some instances, even with professional assistance. Paying your share of taxes is beyond the ability of some to calculate so errors can be easily understood--but not by the IRS enforcers.
No one, including and especially the IRS, seems to have an exact knowledge of your nation's complex tax laws. A 1988 survey by the Government Accounting Office revealed that IRS agents responding to phoned-in questions from taxpayers provide the correct answer only 61 percent of the time. Boy, that seems to leave 39% hanging out with incorrect answers. Further, the ones answering the questions are required not to give surnames so the poor taxpayer cannot go back to a clerk a second time or incriminate the guilty party.
Not even tax preparation professionals are much help. One investigation took the same tax data to eleven different tax preparers--and received eleven differing estimates for taxes due. A similar study by Money magazine asked fifty tax preparation specialists to calculate and prepare a family's 1988 tax return. The specialists came up with fifty different answers. Their top estimate of tax liability in this study was triple that of the lowest estimate.
How about the average American doing his own taxes? Less than 11 % can even begin to figure out the tax form. It appears that you are stuck with the problem but it seems no-one can figure the mess out enough to even begin to decide that which is fair.
And so what happens? It falls to individual IRS agents, or their superiors, to interpret tax regulations as best they can. Some agents will take a liberal interpretation and enforce the law with some discretion. Others will insist on the strictest possible interpretations. Further, you can count on the enforcement moving right along with the mood of the agent on any random day.
WHAT TO DO!
Well, if you see fit to NOT incorporate in Nevada where you can attain some level of security and privacy as well as utilize all possible avoidance techniques, then I can only list the remaining options.
1. Maintain a low profile. Don't flaunt your wealth; doing so raises the envy of all and IRS agents are not immune from this human frailty. If you crave luxury, purchase it where it is not necessarily visible "from the outside". For instance, you might purchase a modest house in a modest neighborhood, but furnish it immaculately. Or you could purchase a "Ford" or a "Chevy", but customize it to enhance your pleasure. It is most shallow esteem that would require this, however.
2. Keep records substantiating the income and deductions you claim on your tax returns. Forever, if you can. You will be required to produce thorough records to prove the deductions which you claim. Keep a minimum of three years but at least six years if at all possible.
3. If you file a return and do not pay what you owe it is worse. That gives an open invitation for the IRS to seize whatever assets are available to satisfy the liability you have brought to their attention.
4. Avoid "red-flag" items on your returns. Questionable deductions almost always bring at least a cursory examination from the IRS. Favorite targets include moving expenses, medical expenses, entertainment expenses and "home office" expenses for the self-employed. In addition, expenses that don't match the profession you list on your return may draw IRS scrutiny. Always send in photocopies of any cancelled checks to tax-deductible charities, and include the organization's IRS exemption number on each check.
5. Taking the standard deduction unless itemizing your deductions might save you a significant amount. Itemized returns are audited much more frequently than non-itemized returns. If itemizing doesn't save you a great deal, don't do it.
6. Keep meticulous records of all contacts with the IRS. Send all correspondence by certified mail, return receipt requested. Tape all conversations with IRS agents, both over the telephone and face-to-face. Illegal you ask? No, not if the other party is informed. See Tax Avoidance Digest. (See appendix.)
7. Be respectful of the IRS at all times. Don't make the mistake of thinking you can get away with obscenities, etc. Tax protestors are routinely given special scrutiny. Keep your mouth shut--get good at groveling--it could save your bank-account! (See appendix for Personal Finance).
8. Make certain your tax return is neat and contains no mathematical errors. Type your return, or even better, prepare it with a computerized program. Turbo Tax for IBM and compatibles; Mac-In-Tax for MacIntosh.
9. Have a professional prepare your return if it is at all complex. Be a bit creative here. You can have a $10/hr. bookkeeper prepare the documentation, and have a CPA file it. According to an ex-IRS regional commissioner, signing your own return as the preparer increases your chance of being audited. If your return is at all complex, professional preparation is essential. If really complicated get a CPA or Tax Attorney to handle it for you; the fee may well be worth it.
10. Be wise. don't declare every last deduction to which you feel entitled. If you end up in the auditors audience, you have the right to bring to the auditor's attention deductions to which you were entitled, but did not take. Seeing that the government stands to lose, not gain, money from the audit, the IRS agent may simply cancel the procedure right there on the spot.
11.If you have underwithheld at year end. Have your employer withhold a larger amount out of the year's last paychecks. The withholding is treated as though it occurred at an appropriate rate over the course of the year and thus penalties are avoided. Besides it says, "Look how hard I tried".
12. If you can't pay your taxes. Unless you fraudulently conceal your assets or otherwise conspire to beat the government out of money, no crime has been committed merely because you can't afford to pay your taxes. Respond to all notices sent to you requesting payment--immediately. Make every attempt to speak to someone at the IRS and follow up the conversation with a confirming letter. The IRS will probably work out a time-payment plan.
The best time for this is at the start of the collection process. If you have ignored IRS attempts to work out an arrangement and it is now at your door with a Notice of Seizure, it is extremely unlikely that a part payment agreement will be offered. Get a current financial statement and then start your negotiations. If you have no assets and no income, there is nothing the IRS can levy. If you are in this desperate predicament, it does provide an opportunity to discuss an Offer in Compromise with the IRS.
An Offer in Compromise is a little-publicized procedure whereby the IRS will accept a one-time payment of as little as 10 cents for each $1 owed in settlement of your tax debt. If the IRS feels it will receive more money from you in the long run by entering into an Offer in Compromise and a collateral agreement (an agreement whereby you agree to pay a certain percentage of your income for 5 to 10 years), it may agree to the compromise.
The best chance of successfully using the Offer in Compromise route is when the tax debt has been on the books for a number of years. The IRS must be convinced that conventional collection procedures won't work. That is why a relatively recent tax obligation will not be settled in this manner. ALWAYS USE A TAX PROFESSIONAL TO GET YOU THROUGH THE OFFER IN COMPROMISE PROCEDURE!
13. When not to trust a bill from the IRS. When the IRS comes up with a deficiency as the result of an audit, the taxpayer is given a waiver to sign and mail back to the Service. According to the tax law, if the IRS does not demand payment of the tax bill 30 days after the waiver was executed, interest on the deficiency stops running.
PROBLEM: The IRS has been charging some tax-payers interest right up to the date of billing, which is often several months after the waiver was signed and returned. This extra interest can be several hundred dollars more than you should pay.
WHAT TO DO: Carefully check interest charges before paying the deficiency bill. Interest should be charged for the period beginning with the due date of the return and ending 30 days after you sign the waiver and mail it back to the IRS. Pay the tax you owe and the interest that you determine to be correct. Clearly explain in an accompanying letter how you arrived at your figures, including a detailed computation of the correct interest. Note: Pay the deficiency bill within 10 days after you get it. If you don't, interest will start running once again.
14. Shielding your home from IRS seizure. If a married man is about to file a return and knows he cannot pay the taxes due, he should consider filing separately. This may increase the tax liability, but it may also shelter his wife from the debt. That means jointly owned property (the family home, perhaps) will be exempt from seizure, unless there is evidence of fraud or collusion.
15. Impact of Bankruptcy on debts to IRS. Income tax debts can be discharged in bankruptcy if they are at least three years old when the bankruptcy petition is filed. This three-year period is measured from the due date of the tax return if it was filed on time. If the return was filed late, the three year period starts from the filing date. But a bankruptcy discharge won't release the taxpayer from fraud penalties or from liability for income and Social Security taxes withheld from exempt-employees' salaries that were not paid over to the IRS.
** Property attached by the IRS, but not yet sold at tax sale, is still legally the taxpayer's property. If he goes bankrupt, it can be taken by the trustee, under the turnover rules of the Bankruptcy Law.**
LET US TALK TACTICS
AUDIT:
Prepare meticulously for the audit. Gather all your receipts for the deductions the IRS has questioned. List each, in detail, on a sheet of paper. Also, meticulously reconstruct cash expenditures for which you don't have receipts. Explain exactly how and when you made those expenditures.
By representing your case in factual detail, you establish your credibility. And credibility is everything at an audit. It will be easier for the auditor to allow nondocumented items if you can show him that you kept some receipts, that you made an effort to comply with IRS rules and regulations through a diary, etc., and that you have reconstructed, as best you could, your cash outlays. You can also suggest that an auditor select a test period of your documents and always, keep talking to get the auditor to see things in your way. But always be willing to concede some little matter for, remember, the auditor's goal is to close the case and move on to his next audit.
If your business is being audited, have it done at your accountant's office, not at your home or your place of business.
All IRS audits require the agent to ask if you have reported all your income. DO NOT LIE! Deflect the question by asking "Why do you want to know that?" or "I'll have to get back to you on that later, I think so but I had better check it out before I give you a definite answer".
Another good way to avoid answering the question is to simply not show up for the audit. The deduction in question will be automatically disallowed, but you can appeal the agent's disallowance at the appeals level of the IRS. At the appeals level, you are generally not asked whether you have reported all of your income.
Special agents: Their job is to develop evidence for criminal tax cases. If they show up at your door, don't answer any of their questions, even seemingly innocuous ones. Tell them to talk with your lawyer. Then retain a lawyer who is knowledgeable in criminal tax matters--look for a former assistant U.S. attorney.
SURVIVING THAT AUDIT
Knowing how the system at the IRS works gives an experienced practitioner an advantage when it comes to representing a client at an audit. Here are some of the truly "inside" things that go on.
Postponing Appointments: It is possible, though not likely, that the IRS will actually change its mind about auditing you if you have postponed the appointment enough times. The IRS is constantly under pressure to start and finish tax examinations. If the return selected for an audit becomes "old" (i.e., more than two years have passed since the return was filed), the IRS may not want to start the audit. Especially if the amount in question is minimal. This situation may develop if you are notified of an audit about 15 to 16 months after filing. By the time you have cancelled one or two appointments, the 24-month period may have been reached.
When to cancel: The day before the appointment, as late as possible. By that time, the next available appointment will probably not be for 6 to 8 weeks.
Best time to schedule: To someone uninitiated, it may seem ridiculous that one time of the day or month is better than another to have your return audited. However, a real advantage can be gained by following some simple tips. Try to schedule an audit before a three-day weekend. The auditor may be less interested in the audit and more interested in the holiday. Another excellent time to schedule an appointment is at the end of the month. If an auditor has not "closed" enough cases that month he or she may be inclined to go easy on you to gain a quick agreement and another closed case. As for the best time of the day, most pros like to start an audit at about 10 o'clock in the morning. By the time it comes to discussing adjustments with the auditor, it will be close to lunch time. If you are persistent, the auditor may be willing to make concessions just to get rid of you so as not to interfere with lunch plans.
AUDITS THE IRS FORGETS:
Asking the IRS to transfer your case to another district may be the key to avoiding an audit. Don't expect the IRS to admit it, but transferred cases often fall between the cracks and never get worked on even though the taxpayer has been notified of the examination. Delays caused in processing the case file between districts, combined with the fact that the case is likely to go to the bottom of the pile when it is assigned to a new agent, may bring help from the statute of limitations. Rather than asking the taxpayer to extend the statute of limitations, as is the usual practice, many agents are inclined to take the easy way out and close transferred cases without auditing them.
New Rules: If an auditor comes to your door. Agents may enter private premises "only when invited in by the rightful occupant".
When to request your own audit: When a business is closed down, the records and key personnel who can provide tax explanation may disappear. A subsequent IRS examination could prove very costly to the business's former owner.
When someone dies, the heirs can count only on sharing in the after-tax size of the estate (unless incorporated). So the sooner the IRS examines matters to settle things, the better.
When a taxpayer requests a prompt assessment of taxes due, the IRS must act within 18 months. Otherwise, the IRS has three years to conduct an examination. Use Form 4810 to ask for the prompt assessment. You don't have to use this form, but if you don't use it, eliminate any uncertainty on the part of the IRS by having your letter mention that the request is being made under Code Section 6501(d).
Caution to out of state bankers: Failure to report income deposited in a bank could be considered careless. Carelessness is punishable, generally, by a 5% negligence penalty. But when the omitted income represented deposits made in a bank in a different state, one court regarded the omission as a fraudulent, willful attempt to conceal income.
Who gets nailed for claimed tax fraud? Business owners, other executives, Company officers, Attorneys, Dentists & Doctors, Non-CPA accountants and CPAs in that general order. Less than 20% of IRS fraud investigations end in convictions.
HERE IS WHERE YOU WATCH IT!
Criminal tax investigations are the ultimate weapon in the IRS enforcement arsenal. They are conducted by IRS Special Agents who are very, very good at what they do. They work in pairs in order to corroborate each other's testimony about taxpayers' statements. They may not seem like policemen--BUT THEY ARE!
Special Agents will usually give a Miranda warning, letting the taxpayer know that what he says may be used against him in court, and that he does not have to answer questions without an attorney present. The trouble is that many taxpayers are afraid of appearing guilty by refusing to cooperate. And the agents will press for answers.
Typical questions:
.. Did you report all of your income?
.. Where do you keep your savings and checking accounts?
.. What kind of a car do you own?
.. What is the procedure for reporting sales in your business?
.. Do you gamble?
.. Did you have a lot of cash on hand at the beginning of last year?
CAUTION: A false or misleading answer may, itself, be a crime!
The interview is usually very low-key, seeming to imply that if the taxpayer cooperates, the agents will close their file. BEWARE: THAT RARELY HAPPENS!
The agents are trying to establish that a taxpayer failed to report or misreported his income and that the error or omission was willful. To do this, they can, and will, subpoena copies of checking account statements, cancelled checks, savings accounts, deposit and withdrawal tickets and signature cards. You will really wish you had listened and had none of those bank accounts!
They also talk to neighbors and business associates. They will look at public records to find out whether the taxpayer owns any real estate, cars, boats, etc. Insurance records may indicate ownership of furs, jewels and other expensive possessions. Passport records give a clue to expensive overseas vacations a taxpayer may have taken.
Mail surveillance helps them determine who a businessman's customers and suppliers are. Although the IRS will not open a taxpayer's mail, they can tell a lot just by looking at the outsides of the envelopes and then, of course, as I told you before--the FBI can!
I advise all ones confronted with Special Agents to simply say, "I prefer not to make any statements at this time, please contact my attorney".
Criminal prosecutions are aimed at keeping taxpayers in line and honest. They are interested in example and punishment; they usually will not plea-bargain. They will always ask for jail time rather than probation. They are not impressed by a taxpayer's exemplary record. In fact, a pillar of the community is a desirable defendant from the IRS's point of view. They will be conciliatory only if they do not have enough evidence to build a solid case. They are anxious to protect a winning image so beware!
Dharma, this has been most long indeed. May we please take a respite. Thank you for your attention.
SALU,HATONN TO STAND-BY
