Albert B. Crenshaw
IRS audits tax returns of 800 of its employees
Sat Jan 3 16:55:01 2004
Posted on Sat, Jan. 03, 2004
IRS audits tax returns of 800 of its employees
By Albert B. Crenshaw
WASHINGTON - The Internal Revenue Service is auditing the tax returns of about
800 of its employees after preliminary checks raised questions about business
deductions they reported.
The audits were triggered by suspicions raised by other agency employees about
25 of their co-workers last year. The office of the Treasury inspector general
for tax administration found that about half of the 25 had improperly reported
items on Schedule C, which is used to report income and expenses from operating
Several of those employees were fired, the agency said.
``I am disappointed that a small but unacceptable number of our employees have
generated false business deductions to reduce their taxes. We have a
zero-tolerance standard for abuse of the tax laws by employees,'' Internal
Revenue Commissioner Mark W. Everson said in a prepared statement. ``As
administrators of the tax system, our employees must maintain the absolute
highest standards when it comes to their own taxes.''
IRS officials said the suspicions arose when IRS employees in several offices,
assisting co-workers in preparing their returns, noticed a recurring pattern of
deductions in Schedule C on a number of returns. Following agency procedure,
they notified the inspector general. Officials declined to describe the nature
of the questionable deductions.
After the initial investigation, the IRS identified about 800 employees whose
returns appeared questionable based on their Schedule C filings. Audits of most
of those employees' returns are being conducted and will begin soon on the rest,
the agency said. They are part of a joint investigation with the inspector
general's office. Under the law, only the IRS can do audits, but the inspector
general is responsible for reviewing IRS employee conduct.
``Our investigations are designed to determine whether these apparent individual
issues are mistakes or intentional, and to provide those details to appropriate
authorities,'' Pamela J. Gardiner, the acting inspector general, said in a
Everson said the IRS expects many of the employees facing audits to substantiate
their claims. Those who can't will face sanctions ranging from reprimand to
demotion to firing, depending on the nature and severity of their
transgressions, he said.
An agency spokesman said it was unlikely that any of the questionable deductions
were related to the workers' employment. IRS employees are barred from doing
tax-return preparation or other such work on the side, though they can obtain
permission to work in unrelated outside businesses. Some of the questions may
involve businesses run by spouses, the spokesman said.
Schedule C income and expenses have long been a source of enforcement problems
for the IRS. Most of the items on that schedule are not independently reported
to the agency as are items such as wages (reported by employers on Form W-2) and
mortgage interest (reported by lenders on Form 1098). Thus, to verify a
taxpayer's Schedule C income and expenses, the agency relies primarily on
face-to-face audits, which these days are done on only a small portion of the
roughly 130 million returns the agency receives annually.
The 800 IRS workers under audit represent a tiny fraction of the agency's
roughly 115,000 employees, and the spokesman called them ``precautionary on our
part,'' noting that ``IRS employees are traditionally right at the highest level
of tax compliance of any government agency.''
Nonetheless, the agency also said it is launching a ``multi-step initiative''
that will include a new review of tax behavior of IRS employees.
The IRS has been checking specifically on federal workers since 1992. The IRS
does periodic surveys of the payment status of government workers.
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Vernie Kuglin 58 yr old FedX Pilot
The Associated Press
Tax Refuser Wins Federal Evasion Case
Tue Aug 12 18:29:38 2003
.c The Associated Press
MEMPHIS, Tenn. (AP) - A woman who said she refused to pay federal income taxes
because the IRS didn't respond to her inquiries about tax law has been acquitted
of tax evasion.
Vernice Kuglin, a 58-year-old FedEx pilot, had been charged with six counts of
tax evasion. Had she been convicted by the federal court jury, she would have
faced up to 30 years in prison and $1.5 million in fines.
``I feel justified,'' she said after Friday's verdict.
Kuglin said she began to question the federal tax system about 10 years ago and
wrote the Internal Revenue Service twice in 1995 with questions about what law
required her to pay taxes. She said she didn't get a response. On Dec. 30, 1995,
she filed a withholding statement directing that no taxes be withheld from her
The government accused Kuglin of filing false W4 forms from 1996 to 2001, during
which time she earned $920,000 in income. Normal withholding would have been
Federal prosecutor Joe Murphy said during closing arguments that Kuglin did have
an opportunity to sit down and discuss her situation with the IRS, ``and she
The five-day trial did not resolve whether she must make the tax payment.
``I think it is safe to assume the IRS will attempt civil collection, but she is
not guilty of tax evasion,'' said defense attorney Robert Bernhoft.
Larry Becraft, another defense attorney, said after the verdict that the federal
tax code is confusing and ``at best is a walking due process violation.''
Becraft, who helped win acquittals for 17 defendants in another Memphis tax
trial 12 years ago, said the letters from his client to the IRS showed a lack of
criminal intent to evade tax laws and that she sincerely believed her conduct
``The whole thing could have been resolved if the government had simply answered
her questions,'' Becraft said. ``It didn't happen. I made an argument to the
jury that an American has a right to ask the government for answers.''
IRS spokeswoman Nancy Mathis was unable to state agency policy on responding to
letters asking it to specify the law that makes people liable for income taxes.
She said the IRS had posted various items on its Web site and issued news
releases stating that taxes are mandatory. The first words of the Internal
Revenue Code are ``a tax is hereby imposed.''
When asked if she planned to start paying federal income taxes again, Kuglin
said: ``I will pay all the taxes for which I am liable.''
She said she believes the 16th amendment to the Constitution - giving Congress
the power to collect income taxes - and the Internal Revenue Code are
constitutional, ``but I also feel there is a gross misapplication of the
individual income tax laws by the IRS.''
Kuglin said she hopes to resume flying for the Memphis-based cargo airline as
soon as the government returns her passport, which was seized after her
indictment this year.
Why Most Americans NOT Required to Pay IRS Taxes Ranger, Sat Jan 3 21:39
OVERTHROWING THE UNITED STATES FEDERAL GOVERNMENT: Hal Turner, Sat Jan 3 21:48
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