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Irwin A. Schiff (born 1928) is a prominent figure in the tax protester movement. Schiff is known for writing and promoting literature that claims the United States income tax is applied incorrectly. He has lost several civil cases against the federal government and has a record of multiple convictions for various federal tax crimes. Schiff is serving a 13-plus year sentence for tax crimes (with his location listed as the Terre Haute Federal Correctional Institution). His projected release date is 7 October 2016.[1] Irwin Schiff is also the father of stockbroker and US senate candidate Peter Schiff.

Contents

Background

In 1950, Schiff graduated from the University of Connecticut with a Bachelor of Science degree in accounting and economics.[2]

After college, Schiff was in the insurance business. In 1968 he testified[3] before the Senate Committee on Banking and Currency in opposition to the removal of gold backing from Federal Reserve Notes. In 1976, he published a book entitled The Biggest Con: How the Government is Fleecing You.[3]

Schiff has a web site named "PayNoIncomeTax.com", which has previously offered his various books for sale. He is featured in Hollywood producer Aaron Russo's 2006 film America: Freedom To Fascism.

Arguments raised by Schiff

Among the arguments raised over the years by Schiff are:

  1. that no statutory deficiency in Federal income tax can exist until an assessment has been made;
  2. that no tax assessment can be made unless a tax return has been voluntarily filed;
  3. that the Internal Revenue Service, in enforcing the income tax, seeks to impose a tax not authorized by the taxing clauses of the United States Constitution;
  4. that the United States Tax Court has no jurisdiction over Schiff; and
  5. that the United States Tax Court is not a court.

These arguments were ruled invalid in Schiff v. Commissioner.[4] Another argument made by Schiff on his web site is: "On the [Form] 1040 itself [...] you report 'zero' income regardless of how much you received in: wages, commissions, interest, alimony, capital gains or from operating a business. For tax purposes, 'income' only means corporate 'profit.' Therefore, no individual receives anything that is reportable as 'income.'"[5] This argument has been rejected by the lower courts, as well as the United States courts of appeal.[6]

Other taxpayers have been convicted of federal tax crimes after following Schiff's schemes. See, e.g., United States v. Middleton[7]; United States v. Mosel[8]; United States v. Burdett[9]; and United States v. Heath[10].

Convictions for 1974 and 1975 tax years

Schiff had filed Federal income tax returns through the tax year 1973. For years 1974 and 1975, however, he refused to disclose his income. Instead, he sent unsigned[2] 1040 forms to the Internal Revenue Service with the title ("U.S. Individual Income Tax Return") changed to read "U.S. Individual Income Confession." Instead of disclosing income, he included assertions of various constitutional rights on the forms, claiming essentially that under the Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth, and Thirteenth Amendments he would not be an "involuntary serf" of the U.S. government. Schiff contended that because Federal Reserve notes were not backed by gold, they were not “income” for purposes of the Federal income tax.[3]

Schiff began conducting seminars on Federal income taxes in 1977. On April 12, 1978, Schiff appeared on the NBC television program The Tomorrow Show with host Tom Snyder, arguing his views on Federal income taxes. Six days after his appearance on The Tomorrow Show, Schiff was charged with willful failure to file tax returns for the years 1974 and 1975.[11] The modified, unsigned 1974 and 1975 forms—with no income information on them—were deemed by the Internal Revenue Service not to be valid Federal income tax returns under 26 U.S.C. § 6012. During the resulting trial, a videotape of the television program was shown to the jury. Schiff was convicted on both counts, and appealed his conviction to the United States Court of Appeals for the Second Circuit.[3]

At the Court of Appeals, the admission of the videotape was ruled unduly prejudicial, the conviction was overturned, and the case was remanded for a new trial. He was convicted a second time for failure to file, and that conviction was affirmed.[12]

Convictions for 1980 through 1982 tax years

In October 1985 Schiff was convicted of tax evasion[13] with respect to his personal income taxes for years 1980, 1981 and 1982, and willful failure to file[11] a corporate tax return for Irwin A. Schiff, Inc. (a company for which he served as president), and that conviction was affirmed the following year.[14] Schiff was released from the Federal prison system in June 1993. Despite having spent four years in the system, he continued his tax protest related activities.

Civil tax problems for tax years 1979 through 1985

In June 2004, a Federal court ruled that Schiff was liable for over $2 million in taxes, penalties and interest for the years 1979 through 1985. In that case, Schiff's attorney had filed a brief claiming a diminished capacity defense, contending that Schiff had been diagnosed with a chronic, severe delusional disorder relating to his beliefs about the federal income tax system. This was characterized by some opponents of Schiff's beliefs as a claim that those beliefs were the product of a delusion, or even insanity, and that Schiff had willingly allowed his defense counsel to raise such an argument.

Schiff himself responded to these claims, stating that the diminished capacity defense was an attempt to prevent the Judge from rendering a summary judgment and instead allow a jury trial. Schiff also asserted that this was different from an insanity defense.[15] Schiff, in his statement on the matter, asserts that the judge erred in not putting this question to the jury, and insists that "(1) no one is required to pay income taxes; (2) the entire federal judiciary is involved in a monumental, criminal conspiracy to collect income taxes in violation of law." As of November 2006, Schiff continues to state on his internet web site that the U.S. Federal income tax was repealed in the 1950s, and that U.S. officials are engaged in a conspiracy: "Since the income tax was repealed in 1954 when Congress adopted the 1954 Code, it is clear that for 50 years federal judges in conspiracy with U. S. Department of Injustice prosecutors have been illegally and criminally prosecuting people for crimes that do not exist in connection with a tax that nobody owes."[16]

Case regarding The Federal Mafia

The Federal Mafia is a book written in prison[17] by Schiff. In the book, Schiff contended that the income tax system and Internal Revenue Service were illegal. On August 9, 2004, the Ninth Circuit Court of Appeals upheld an injunction issued by a U.S. District Court in Nevada under 26 U.S.C. § 7408 against Irwin Schiff and associates Cynthia Neun and Lawrence Cohen, against the sale of this book by those persons.[18] This prohibition does not extend to other sellers of the book. The court rejected Schiff's contention on appeal that the First Amendment protects sales of the book, as the court found that the information it contains is fraudulent.[19]

Schiff, Neun and Cohen are currently barred under the preliminary injunction from selling or advertising material advocating nonpayment of tax, preparing a tax return for others, and from otherwise providing assistance or encouragement to others in violating tax law. Schiff and his associates are additionally required to provide a copy of the injunction to each of their customers, to post it on their website, and to provide the government with a customer list.[20]

Schiff and his associates have responded by giving the book for free on their website.[21]

Convictions for 1997 through 2002 tax years

On October 24, 2005, Schiff was convicted in the U.S. District Court in Las Vegas, Nevada,[22] on multiple counts of filing false tax returns for the years 1997 through 2002,[23] aiding and assisting in the preparation of false tax returns filed by other taxpayers,[24] conspiring to defraud the United States,[25] and income tax evasion,[26][27] and he is again serving jail time.[28] Schiff responded with numerous complaints about the trial process, including a claim that Judge Kent Dawson did not allow Schiff to present evidence at his trial.[29]

Despite Schiff's age (approximately 78 years old), on February 24, 2006, Schiff was sentenced to 151 months (12 years and 7 months) in prison and was ordered to pay over $4.2 million in restitution to the Internal Revenue Service; Schiff was also sentenced to 12 additional months for contempt of court. On December 26, 2007, the United States Court of Appeals for the Ninth Circuit affirmed Schiff's convictions except for the criminal contempt convictions. The Court vacated the contempt convictions due to the failure of the trial court judge to file contempt orders under rule 42(b) of the Federal Rules of Criminal Procedure. The Court of Appeals indicated that the trial judge could file the appropriate paperwork and re-sentence Schiff on the contempt convictions.[30] On September 5, 2008, the trial judge re-sentenced Schiff to eleven months in prison in connection with the contempt of court, effectively lowering Schiff's overall original sentence by one month.[31]

One of Schiff's co-defendants, Lawrence Cohen, was sentenced on February 3, 2006 to 33 months in prison and was ordered to pay $480,000 in restitution. On December 26, 2007, the United States Court of Appeals for the Ninth Circuit reversed Cohen's conviction due to the failure of the trial court to allow testimony from a psychiatrist regarding Cohen's mental state. The Court of Appeals remanded the Cohen case for a possible re-trial.[32]

On February 23, 2006, Cynthia Neun, another co-defendant, was sentenced to 68 months in prison and was ordered to pay over $1.1 million in restitution. Neun's conviction was affirmed by the United States Court of Appeals for the Ninth Circuit.[33] According to the prosecutor's office, Neun sold materials encouraging people not to pay taxes, prepared false tax returns, and represented hundreds of taxpayers in dealings with the IRS where she promoted Schiff's arguments. She will be required to submit to three years of supervision following her release from prison, expected in September of 2010.[34]

In this last case Schiff's attorneys again asked that the court consider the claim that Schiff has a mental disorder relating to his beliefs about taxes.[35] According to the prosecutor's office the evidence at trial showed that Schiff had attempted to evade the payment of over $2 million in taxes from 1979 through 1985, and that he had used offshore bank accounts using multiple tax identification numbers and had attempted to hide assets in connection with his tax protester related activity.

One of the results of Schiff's conviction is the state of his former bookstore, "Freedom Books," which stood at 444 E. Sahara Avenue in Las Vegas, Nevada. The store had a large sign which formerly read "WHY PAY INCOME TAXES WHEN NO LAW SAYS YOU HAVE TO?". The building (as of December 2006) had been sold and is now the offices of Vegas Flooring and Interiors [4]. The sign's former message had been covered by brown paint while it was for sale, and now advertises the present occupant.

See also

Notes

  1. ^ See prisoner number 08537-014, Bureau of Prisons, U.S. Dep't of Justice, at [1].
  2. ^ a b Schiff v. Commissioner, 47 T.C.M. (CCH) 1706, T.C. Memo 1984-223, CCH Dec. 41,174(M) (1984), aff'd per curiam, 751 F.2d 116, 85-1 U.S. Tax Cas. (CCH) paragr. 9108 (2d Cir. 1984).
  3. ^ a b c d United States v. Schiff, 612 F.2d 73, 80-1 U.S. Tax Cas. (CCH) paragr. 9112 (2d Cir. 1979).
  4. ^ 63 T.C.M. (CCH) 2572, T.C. Memo 1992-183, CCH Dec. 48,108(M) (1992).
  5. ^ Schiff, Irwin (2007). "What is Income?". paynoincometax.com (Schiff's webpage). http://www.paynoincometax.com/income.htm. Retrieved 2006-02-08.  
  6. ^ Cameron v. Internal Revenue Serv., 593 F. Supp. 1540, 84-2 U.S. Tax Cas. (CCH) paragr. 9845 (N.D. Ind. 1984), aff'd, 773 F.2d 126, 85-2 U.S. Tax Cas. (CCH) paragr. 9661 (7th Cir. 1985); Stoewer v. Commissioner, 84 T.C.M. (CCH) 13, T.C. Memo 2002-167, CCH Dec. 54,805(M) (2002); Reinhart v. United States, 2003-2 U.S. Tax Cas. (CCH) paragr. 50,658 (W.D. Tex. 2003); Fink v. Commissioner, 85 T.C.M. (CCH) 976, T.C. Memo 2003-61, CCH Dec. 55,068(M) (2003); Flathers v. Commissioner, 85 T.C.M. (CCH) 969, T.C. Memo 2003-60, CCH Dec. 55,067(M) (2003); Schroeder v. Commissioner, 84 T.C.M. (CCH) 220, T.C. Memo 2002-211, CCH Dec. 54,851(M) (2002), aff'd, 2003-1 U.S. Tax Cas. (CCH) paragr. 50,511 (9th Cir. 2003), cert. denied, 540 U.S. 1220 (2004); Sherwood v. Commissioner, T.C. Memo 2005-268, CCH Dec. 56,200(M) (2005); Ho v. Commissioner, T.C. Memo 2006-41, CCH Dec. 56,447(M) (2006).
  7. ^ 246 F.3d 825 (6th Cir. 2001).
  8. ^ 738 F.2d 157 (6th Cir. 1984)
  9. ^ 962 F.2d 228 (2d Cir. 1992).
  10. ^ 525 F.3d 451 (6th Cir. 2008).
  11. ^ a b See 26 U.S.C. § 7203.
  12. ^ United States v. Schiff, 647 F.2d 163 (2d Cir. 1981).
  13. ^ See 26 U.S.C. § 7201.
  14. ^ See United States v. Schiff, 801 F.2d 108 (2d Cir. 1986), cert. denied, 480 U.S. 945 (1987) and United States v. Schiff, 2003-2 U.S. Tax Cas. (CCH) paragr. 50,546 (D. Nev. 2003).
  15. ^ Schiff, Irwin (2007). "http://www.paynoincometax.com/pdf/delusional_defense.pdf". paynoincometax.com (Schiff's webpage).  
  16. ^ Schiff, Irwin (2007). "Pay no income tax- Home Page". paynoincometax.com (Schiff's webpage). http://www.paynoincometax.com/. Retrieved 2006-02-08.  
  17. ^ See generally United States v. Heath, opinion, May 19, 2008, case no. 05-81115, U.S. Court of Appeals for the Sixth Circuit.
  18. ^ United States v. Schiff, 2004-2 U.S. Tax Cas. (CCH) paragr. 50,328 (9th Cir. 2004). The injunction relates to "specified conduct" subject to penalties under 26 U.S.C. § 6700 and 26 U.S.C. § 6701.
  19. ^ See also footnote 1, United States v. Schiff, 2008-1 U.S. Tax Cas. (CCH) paragr. 50,111 (9th Cir. 2007), citing United States v. Schiff, 379 F.3d 621, 630 (9th Cir. 2004), regarding the Court's finding that the book The Federal Mafia: How the Government Illegally Imposes and Unlawfully Collects Income Taxes constituted "fraudulent commercial speech."
  20. ^ United States Department of Justice press release regarding The Federal Mafia case
  21. ^ [2]
  22. ^ See docket in United States v. Schiff, case no. 2:04-cr-00119-KJD-LRL, U.S. District Court for the District of Nevada.
  23. ^ 26 U.S.C. § 7206(1).
  24. ^ 26 U.S.C. § 7206(2).
  25. ^ 18 U.S.C. § 371, in this context, also known as a "Klein conspiracy."
  26. ^ 26 U.S.C. § 7201.
  27. ^ #548: 10-24-05 PROFESSIONAL TAX RESISTER IRWIN SCHIFF AND TWO ASSOCIATES CONVICTED IN LAS VEGAS TAX SCAM
  28. ^ Las Vegas Now - Breaking News, Local News, Weather, Traffic, Streaming Video, Classifieds, Blogs - Convicted: Las Vegas Anti-Tax Advocate Irwin Schiff
  29. ^ WTP Update
  30. ^ United States v. Schiff, 2008-1 U.S. Tax Cas. (CCH) paragr. 50,111 (9th Cir. 2007).
  31. ^ "Tax rebel Irwin Schiff sentenced to 11 more months in prison," Sept. 5, 2008, Las Vegas Review-Journal, at [3].
  32. ^ United States v. Cohen, 2008-1 U.S. Tax Cas. (CCH) paragr. 50,111 (9th Cir. 2007).
  33. ^ United States v. Neun, 2008-1 U.S. Tax Cas. (CCH) paragr. 50,111 (9th Cir. 2007).
  34. ^ Ms. Neun is incarcerated at the Federal Correctional Institution in Phoenix, Arizona.
  35. ^ Defendant Schiff's Objections to the Presentence Report, docket entry 373, Feb. 14, 2006, United States v. Schiff, case no. 2:04-cr-00119-KJD-LRL, U.S. District Court for the District of Nevada.

Publications

Books written by Schiff include the following:

  • Federal Mafia: How It Illegally Imposes and Unlawfully Collects Income Taxes (1992) ISBN 0-930374-09-6
  • The Great Income Tax Hoax: Why You Can Immediately Stop Paying This Illegally Enforced Tax (1985) ISBN 0-930374-05-3
  • How an Economy Grows and Why It Doesn't (1985) ISBN 0-930374-06-1
  • The Social Security Swindle: How Anyone Can Drop Out (1984) ISBN 0-930374-04-5
  • How Anyone Can Stop Paying Income Taxes (1982) ISBN 0-930374-03-7
  • The Kingdom of Moltz (1980) ISBN 0-930374-02-9
  • The Biggest Con: How the Government Is Fleecing You (1977) ISBN 0-930374-01-0

External links

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