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DOJ Sues "We the People" Over Alleged Tax Scam By William Kates SYRACUSE, N.Y. -- U.S. prosecutors asked a federal court Tuesday to stop "We the People" and its founder Robert Schulz from falsely telling customers they can legally stop their income tax withholdings by purchasing the organization's Tax Termination Package. The tax fraud scam has already cost the U.S Treasury more than $21 million in unpaid taxes, government lawyers said in a 14-page complaint filed in U.S. District Court. "People who sell tax scams are asking for trouble for themselves and their customers who participate in them," said Eileen J. O'Connor, Assistant Attorney General for the Justice Department's Tax Division. "They and their customers temporarily enrich themselves at the expense of law-abiding taxpayers." Schulz, contacted at his Queensbury, N.Y., office, said he was not aware of the lawsuit and had no immediate comment. He has been an outspoken critic of New York state government, frequently suing the state _ and rarely winning _ over its spending and borrowing practices. In its complaint, the government alleged that since 2003, Schulz has used the We the People Foundation for Constitutional Education and We the People Congress to market a nationwide tax fraud scheme, called the Tax Termination Package, to employers and employees in 37 cities across the country. Schulz founded We the People in 1997 as a nonprofit educational organization. The package, offered for a "nominal donation" of $20, provides several We the People forms that are described as substitutes for IRS forms and gives customers step-by-step instructions on how to "legally" terminate their tax withholdings. In fact, wrote Assistant U.S. Attorney William Larkin, the package is "a how-to-method for evading payment of federal employment taxes by using false and misleading forms in place of authentic IRS forms," such as W-2s, W-4s and 1099s. The We the People campaign is "based on several false premises, including that the federal income tax system is voluntary, that the 16th Amendment was not properly ratified, and that the federal income tax does not apply to wages," Larkin alleged in the lawsuit. "These shopworn arguments have been rejected as frivolous by every federal court that has considered them," Larkin wrote. Furthermore, Larkin argued, We the People recognizes that its tax-evasion scheme is illegal because it directs customers to conceal their identity from the IRS by demanding that their employers stop using their Social Security number. Despite many "unequivocal" legal rulings, We the People has continued to sell the packages at seminars and on its web sites, he said. The IRS has so far identified 997 We the People customers who have not filed federal tax returns for three years or more, Larkin said. The IRS estimated the scheme has cost more than $21 million. Additionally, Larkin said the scheme undermines public confidence in the federal tax system, incites violations of internal revenue laws and causes the IRS to dedicate "scarce resources" to detecting, examining and correcting inaccurate returns and collecting unpaid taxes. Besides stopping the program, federal prosecutors asked the court to order We the People to notify all its customers that the program is illegal and to turn over to the government all the names and identification of those participating in it. |
