IRS Agent Confesses...

No Authority to Assess!

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| From the "Reasonable Action" Newsletter |

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IMPORTANT NOTE:  This text makes reference to documents

that were printed along with the original R.A. article.  

These are NOT reproduced here.  

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           IRS AGENT CONFESSES: NO AUTHORITY TO ASSESS

Yes -- the truth can leak out even in the

biased courtrooms of America -- but when IRS employees are

involved, such honesty comes as quite a shock! Sometimes

these revelations occur suddenly or unexpectedly during

cross examination.  The official may be caught off guard

just long enough to spill the beans or perhaps the official

may not realize the implications of his own testimony. Whatever 

the reason, the truth is revealed. In this

particular case the facts were accidentally exposed by an

IRS employee who had been called upon to answer a few simple

questions.

It is doubtful that this IRS employee fully understood the

ultimate impact of his statements. IRS personnel sometimes

suffer from a comprehension-gap concerning the application

of the law. If they do not understand the structure of the

Code, they can not possibly understand the limitations of

the law which they are attempting to enforce. That being the

case, any given IRS employee may fall prey to the

presumption that other legal provisions exist to account for

actions which they do not understand. Ignorance and apathy

play an important part in perpetuating the problem. For the

most part, IRS employees simply do what they are told and

never question the direction of superiors.

To these employees, the requirement of the law is

irrelevant. Therefore, the authority for their activity

rarely figures into the equation. They just assume that

their actions are legal. Ask any IRS agent to outline the

limitations of his legal authority to sign a summons and you

won't get a correct answer. Ask him what provision within

subtitle F (Administration and Procedure) permits the

issuance of a summons and the agent will not know. Ask for

the delegation order to sign a summons and the answer you

will hear is... "I'm just doing what I was told."

It is true that individual IRS employees may not fully

understand the limitations of the law, but their superiors

do understand, and the courts and legal professionals have

an obligation to ensure that the limitations of the law are

properly enforced. Excuses like "I didn't know" or

"I'm just following orders" are not acceptable.

That defense didn't work at Nuremburg, and it is doubtful

that it will work when IRS employees are eventually

prosecuted for violating the rights of the victims they have

plundered. Given the increasing number of what the IRS calls

"nonfilers," it is only a matter of time before this illegal

enforcement activity is exposed for everyone to see.

YOU CAN'T HIDE THE TRUTH

People are discovering this scheme because the truth is

leaking out. You can't hide the truth. You may succeed in

covering it up for a short period of time, but sooner or

latter the truth will prevail. The disclosure of IRS fraud

is inevitable. At this very moment it is happening

throughout the country. The IRS is fully aware of the

impending demise of their scam. Five years ago Fred

Goldberg, the Commissioner of the IRS, admitted that there

were 6 million non-filers. Last month, Shirley Peterson (the

present commissioner) admitted that the number of non-filers

had increased to 10 million. That's a substantial increase -

- almost double what it was 5 years ago. High ranking IRS

officials cannot help but be worried. With each leak, more

and more people learn and react to the knowledge that their

government is intentionally misapplying the law.

In the case of  United States of America v. William R.

Lloyd those facts again leaked out. The defendant was on

trial for tax evasion and the circumstances

(authority/procedure) to assess became the topic of

examination. Before he knew it, Special Agent Gary Makovski

let the cat out of the bag and actually admitted that "If

no information or a return is filed, the Internal Revenue

Service cannot assess you..."  To understand why the

testimony is so significant, it is well worth reviewing the

constitutional restriction on the power to tax, the actual

application of the income tax laws,  and the authority to

assess those who are the subject of the law.

NOT SO COMMON KNOWLEDGE

The general public is unaware that the Internal Revenue Code

is limited in application. It cannot (per constitutional

restriction)... does not... and never has been... applied

against the United States citizen who is living and working

within the 50 states of the union. That individual is

neither the subject nor the object of the tax -- and neither

is his income.

The application of the tax is limited to and imposed upon

certain occupations and/or activities. Taxable activities

presently include the manufacture of certain commodities

like alcohol, tobacco, or firearms.  An example of a

privileged occupation might be the practice of law. But, it

is the privilege associated with the governments permission

to engage in the activity that is the subject of the tax -

not the individual -- nor the income -- and even then the

income is only the "measure" of the tax.

The income tax laws were never applied against citizens

themselves, or their occupations in general, because

Congress was never granted the power to levy a "direct" tax

against the citizen. The power to levy a direct tax is

limited to the taxing of state governments only, and

according to the supreme Court, the 16th amendment merely

clarified a power that Congress had "from the beginning" to

levy an "indirect" tax (in the form of an excise) on income

without apportionment; but this is not the same as, nor did

it allow for, a "direct" tax on the property or person of

the U. S. citizen unless apportioned among the states

according to the formula directed to be taken in Article 1

Sec. 2  Cl. 3.

All such "direct" taxes must still be apportioned by the

census of enumeration and billed to the state governments

respectively. Yes, the federal government may tax "income,"

but it cannot tax the person or property of a citizen

without violating the rule of apportionment concerning

direct taxes. If it did, it would by virtue of its

application, create a direct tax in violation of Article 1

Section 9 Clause 4, and Article 1 Section 2  Clause 3 of the

Constitution. This is why there is no statutory liability

for a citizen living and working within the 50 states to pay

a federal tax on income. And that is why the tax is 100%

constitutional.

THE 16th AMENDMENT

The 16th amendment does tend to confuse the average person.

Most people do not understand the difference between

"direct" taxation and "indirect" taxation. They assume that

a "tax on income" is neither. In fact, some law schools

actually teach that the income tax is (in their own words) a

"bastard" tax that falls somewhere between direct and

indirect. That is incorrect. No doubt the contention arises

and results from a naive belief that the government would

not allow the intentional misapplication of the tax laws,

(when in fact it propagates it) and that there must be some

other explanation -- but, it has probably never occurred to

those who are of this opinion, that the taxes and the

resulting social programs effectively buy the public vote,

and strengthen the political establishment that benefits

from the misapplication.

Such opinions exist because people are unaware of supreme

Court decisions confirming that the tax on income is an

"indirect" tax in the form of an excise, rather than a

"bastard" tax that is neither direct nor indirect. It is NOT

some  "unique" tax, that is "direct," and yet not subject to

the rule of apportionment. It is indirect, and by virtue of

this status, it cannot be subject to the rule of

apportionment just as the language of the 16th amendment

reads.

It is therefore not applicable against a citizen living and

working in the United States of America (50 States).

Congress has by statute identified the taxable party and/or

entity. The IRS has provided by regulations the procedure by

which the U.S. (50 States) citizen claims his/her exemption

from withholding -- the presentation of a statement of

citizenship to the employer who retains the original copy

and forwards the duplicate to the IRS Philadelphia PA with

an accompanying letter of transmittal.  Congress has

directed that those who are liable for a tax on income are

subject to withholding; has created a withholding agent;

and, imposed liability for any tax on same. The withholding

agent must withhold tax from anyone coming under the

provisions of IRC Code sections 1441, 1442, 1443, and has

imposed liability on the withholding agent per section 1461.

Congress has in IRC 1461 also indemnified the withholding

agent from claims asserted by those identified in IRC

section 1441, 1442, and 1443 for obeying the appropriate

statutes. Nevertheless, the citizen is under the protection

of the Constitution and Congress has been obedient to the

Constitution by not enacting a liability statute against a

citizen living and working in the United States of America

(50 States). 

The IRS inputs phony entries to its computers

in a blatant attempt to defraud U.S. citizens. Congress

acquiesces in this criminal activity by ignoring the pleas

of the citizens that improper actions of the IRS be

controlled. Congressman forward to their constituents copies

of IRS responses to Congressional inquiries and members of

Congress drop the issue by telling their constituents that

"the IRS has responded (see enclosed)," but the "see

enclosed" they mention is a copy of the IRS response to the

inquiring member of Congress. The constituent is then

advised that if their elected official "may be of service to

them in the future" that the elected official should be

contacted without hesitation. 

This "drop issue" letter is

designed to convey to their constituents the idea that the

IRS response is to be assumed to be correct. This is the

heart of the scam. If Congress wanted to exercise control of

the IRS and keep them obedient to the Constitution a

different posture would be adopted.

Most politicians are unaware of the limited application of

the tax laws anyway, and most legal professionals woefully

uneducated in such matters; but even assuming that they were

educated, the income tax serves the political purpose of

funding programs that buy the public vote, and there is no

reason (other than morality) for them to rock the ship of

state.

The political machine thus ignores, if not encourages, (by

default) the routine misapplication and illegal enforcement

of the tax laws. That is a fact of life -- and that is why

our struggle has been long and  difficult; but considering

the increase in the number of so-called "nonfilers,"  that

struggle may soon be over, and we may yet see the tables

turned on the illegal activities of an increasingly

globalist minded government.

SEE NO EVIL -- SPEAK NO EVIL --

HEAR NO EVIL

So who is to blame? Are just a few select officials

responsible, or is the average IRS employee also to blame

and if so, to what degree? Do the agents themselves know

what they are doing, or is their training and function

within the service sufficiently limited to allow for an

acceptable misunderstanding as to their actual authority?

Perhaps the truth lies somewhere in between. The instant

case may shed some light and help us answer this question.

The fact is, some agents are aware of the limited

application of the law and some are not -- possibly some

suspect but go along with policy for the sake of expediency,

not caring about their moral or legal obligations as long as

they do what they are told and get a pay check at the end of

the week. If some agents know and some don't, it is just as

certain that this education was not included in their

training. Those who know, probably figured it out on their

own, or were made privy to such information by a friend or

associate who was higher up within the IRS.

If the employee were so inclined, he could put it all

together and figure out what is happening. Unfortunately,

most have neither the character or the where-with-all to do

this, and the hierarchy within the IRS is certainly not

going to train its personnel in the knowledge that would

defeat the political objectives of those who appoint them to

office.

Indeed, to ensure their very existence and preserve their

employment these IRS officials must "encourage voluntary

compliance." Were there an honest concerted effort to inform

the various agents of the limited application of the law,

the IRS could not expect them to ignorantly misapply its

provisions and they might be out of a job. Instead, the IRS

fosters an atmosphere where their agents operate in the

dark. The agents have a "duty" to know, but end up making

incorrect assumptions, or they leap to conclusions because

of their incomplete education. With this in mind we will

examine agent Makovski's testimony to determine the extent

of his actual knowledge and the significance of his

testimony.

EVASION OF WHAT?

Mr. Lloyd was on trial for alleged violations of section

7201 (evasion of taxes). To evade a tax, one must first have

a "known duty" to file a return and pay a tax. Second, and

more important as far as evasion is concerned, there must be

an outstanding "bill" or "assessment" that is due and owing.

In the case of someone who has not filed, there must be a

"presumed valid assessment" executed with proper authority

by IRS personnel, followed by a tax "bill" which must be

sent to the taxpayer, (notifying the taxpayer of the

liability) otherwise, there is nothing to evade.

Now for the facts... Mr. Lloyd did NOT file a return.

Moreover, he  had NOT received a "bill" or

"assessment," presumed valid or otherwise. As a United

States citizen who was not involved in one of the activities

previously mentioned we can make several presumptions about

his alleged liability or lack thereof, and the authority for

the IRS to assess a tax against him; all of which are

relevant for demonstrating the wrongful prosecution

instituted by the IRS, and determining agent Makovski's

knowledge and intent.

TO ASSESS OR NOT TO ASSESS

Given the above facts, and knowing that Lloyd was not

required to file, (and did not) there would be no authority

or procedure which would allow the IRS to assess a tax.

Reprinted below is section 6201. This section is the

assessment authority found within subtitle F, and it reveals

something which may not have occurred to those IRS agents

who simply "do what they are told." Notice that when no

return is filed, the authority to assess is limited to

assessments involving stamp taxes. What on earth is this

statute referring to? Could it be the stamps we see on a

bottle of alcohol or a pack of cigarettes? When a

manufacturer of alcohol or tobacco products wishes to sell

his goods, he must purchase stamps to pay the tax associated

with his taxable activity, and then place the stamps on the

products he sells.

Did you ever take the time to examine the stamps on a pack

of cigarettes or a bottle of alcohol? These are the stamps

that this statute is referring to. They are required for

those products whose manufacture is the subject of the

excise. If they fail to pay the stamp tax associated with

the activity, then 6201(a)(2) provides the authority for the

IRS to assess a tax.  If the bill remains unpaid, then it

could be construed as evasion for which the penalty in

section 7201 might apply. Lloyd was not involved in such

activity.

The remaining provision for assessment authority (section

6201(a)(1)) pertains only to those individuals who have

filed returns. The information on that return is subject to

assessment by virtue of the fact that the return was signed

under penalty of perjury by the taxpayer who filed it,

testifying to the fact that a liability, and a requirement

to file exists; and that the information on the return is

true and correct. If it is not correct, the authority under

this section allows for a correction to be made based on the

information that is given on the return. Under no

circumstances (except stamps) may the IRS assess a tax

without a return being filed by the taxpayer himself.

Therefore, there was no authority to assess Lloyd. Courts

have held that an unsigned substitute return such as those

typically filed by the IRS when a 1040 return has not been

filed "...is no return at all." (Vaira v. C.I.R., 444 F.2d,

citing Dixon v. Commissioner, 28 T.C. 388); and that, "Since

the 'returns' prepared by the IRS contained no information

from which a tax could be determined, they were not returns"

(U.S. v. Verkuilen, 82-2 U.S.T.C., Schiff v. Commissioner,

U.S.T.C. 1984 223). 

If a return is not filed, the IRS's only

recourse is to move for an indictment against the individual

who is presumably required to file. To do so they must cite

the section of the law allegedly requiring that person to

file. Reference may of course be made to the penalty

associated with having a "known duty to file" and willfully

not filing the return,  but even then such  penalty is

applicable only if a person actually believes he has a

requirement to file and chooses to shirk that duty. Lloyd

had not filed a return and there was no other provision for

assessing a tax against him.

THE CAT SLIPS OUT OF THE BAG

Since there was no assessment, Lloyd had never received a

"bill" to evade, so naturally the question arose as to the

assessment circumstances. To the right is the text of the

transcript of the agents testimony.  When Makovski was asked

under what circumstances an assessment was made he explained

"two ways." He did not say that it was limited to just 2

ways, but it wasn't necessary for him to elucidate. The law

itself provides only 2 ways, and agent Makovski's reference

to two circumstances would seem to indicate that he had

personal knowledge of the 2 provisions in law. He said...

"First of all, whenever you file a return yourself"

(emphasis on 'yourself') "and it is sent to the service

center..." an assessment is made. He then added "If no

information or return is filed, the Internal Revenue Service

cannot assess you anything." To which section under 6201 was

he referring? Was it subsection (a)(1) or subsection (a)(2),

and did it suddenly occur to Makovski that there was no

authority or did he know or suspect all along?

He obviously knew enough to answer the question!  He knew

that Lloyd had not filed a return. He investigated Lloyd so

he knew that Lloyd was not involved in an activity that

required the purchase of stamps. He knew that there was no

assessment. 

What's more, he knew that Lloyd was on trial for

allegedly "evading" an "assessment" that did not, and

could not, by law exist. Therefore he had to know his

investigation was a fraud. If there was no authority to

assess Lloyd then how could Makovski investigate an

"evasion" of an "assessment" that could not possibly exist.

If a return had been filed, then the story would be

different. The authority to assess under section (a)(1)

would have allowed for an "assessment" that could

conceivably be "evaded," but Makovski knew that Lloyd had

not filed a return for the years in question. He certainly

knew from his own criminal investigation that Lloyd was not

involved in an occupation involving a stamp tax. So what was

he investigating? If no return was filed, and the authority

is limited to stamp taxes, then in Makovski's own words

"the IRS cannot assess you." Agent Makovski not only knew

the law, but he (accidentally?) told the truth.

THE HUNDRED YARD DASH

We were informed by attendees of the trial that after

Makovski's admission the U.S. attorney put her head in her

hands. The jury must have understood the implication of the

testimony because it took even less time for the jury to

acquit Lloyd than it did to pick the jury from the jury

pool; and, Lloyd received a standing ovation from those in

the courtroom as the U.S. Attorney slithered out with the

Judge to avoid talking with the media.

This case is just one example of the coming deluge of

opposition to IRS fraud. The public will no longer accept

this flagrant disregard for the law. What will the

government do? Find out in the next issue of the Reasonable

Action where we will look at why the income tax is obsolete

and review the dangers of proposed alternative forms of

taxation.

[END]

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