2.4.h.11 Distinction Between Evading Payment And Evading Assessment?

• Jurisdiction: United States

11. Tax protesters

As a general rule, debtors who are or were members of organized tax protester organizations will have rough sledding in bankruptcy court. Such debtors typically refuse to file tax returns, or file returns improperly, sometimes mailing in tax protest literature along with the return. Liens filed against the IRS are a common event among tax protesters. Typically, taxpayers attend a seminar hosted by a tax protest organization and are told they can do this as well as a host of other activies.

Neither Congress nor the courts are likely to indulge legal arguments pressed by tax protester groups that a tax is dischargeable in bankruptcy because the government does not have the legal right to assess taxes in the first place. See, for example, In re Angstadt, 1994 Bankr. LEXIS 1218 (Bankr. E.D. Pa.1994), which reviewed the litany of tax protester arguments and dismissed them all as invalid.

It may be possible to convince a court that one's tax protest beliefs are sincere to the point that one may be said to have not known one had a lawful duty to pay a tax, thus avoiding a fraud finding.

The U.S. Supreme Court rendered a ruling in 1991 that is of some comfort to sincere tax protesters. The Court in Cheek v. United States, 111 S.Ct 604 (1991) overturned a tax evasion conviction for failing to file returns and for tax evasion on the basis that the jury should have been informed that a true belief that one had no lawful duty to pay taxes could negate the element of willfulness. Said the Court:

In this case, if Cheek asserted that he truly believed that the Internal Revenue Code did not purport to treat wages as income, and the jury believed him, the Government would not have carried its burden to prove willfulness, however...