Herald & Lanterjr 8 August '84 business «

IRS Warns About Using Tax Dodges I

NEWARK — New Jerseyans, especially those in the $25,000 to $50,000 income group, are cautioned by the Internal Revenue Service not to be taken in by groups and/or in-

dividuals advocating various tax avoidance schemes, often giving the impression that there are no consequences and that the IRS can't do a thing about it.

Contrary to this misleading information, the IRS is in the process of specifically identifying persons it calls "illegal tax protesters", and is actively moving to assess the taxes due plus penalties In some cases, it is also seeking criminal prosecution. IN AN ATTEMPT to discourage the filing of returns on which persons claim no tax liability based on arguments repeatedly rejected by the courts, the IRS is now authorized to impose a $500 "frivolous" return penalty in addition to other penalties that may be assessed This new penalty, a part of tax legislation passed in 1982, is also being imposed against persons who file forms that cannot be processed or provide insufficient information on which to calculate a true tax liability. It also applies to those who list Consistent information, such as the naming of just a few dependents by a person who claims 99 exemptions or tax exempt status on a W-4 employer withholding form. It does not apply to taxpayers who write protest messages on tax forms, as long as they pay the taxes due. THE INTERNAL Revenue Service will examine those individuals who claim tax benefits or exemption from income tax on the basis that they are ministers of churches which was acquired through a mail order ministry tax avoidance schem§. Regardless of whether or not a person is a minister of a church which has requested and received 'an auu iwvivw an

exemption ruling from_the service, that person fs still required topay-iqcorjje tax on incon)^ Tljefe are two types, of schemes nor m. ad 1 y associated with mail order minraujes_ The first is where an individual claims a deduct ion/or money contributed to the church Contribution must/be unrestricted and avoid yany conditions or powers \ THE FACT that /a transfer of funds is termfed a gift of contribution by /the individual making th.^ transfer or by the organiza tion receiving the funds is not determinative A transfer of funds with the expectation of receiving goods or services of commensurate value will not result in a charitable deduction In other words, if there is the expectation of a return benefit in any form, no deductiorvis allowable For instancy the purchase of minister's credentials and a church charter* from a mail order ministry is not an allowable deduction. The second type of

scheme is where a person | vvho alleges to be a minister claims a "vow of poverty", transfers all income and assets to the church, has the church pay all personal expenses in return and claims that the benefits received from the church are tax free. With respect to this version of the mail order ministry scheme, the IRS's position is that such a transfer does not relieve the taxpayer of paying tax on the income. PERSONS WHO withhold*c:^>«rrt of their taxes, often Jcalled a "war tax", because they disapprove gcjyernment defense spending policies, are also being assessed the taxes due. along vtith substantial penalties ana, interest. In cases where tax protesters disagree with the additional assessments they have the option of appealing them first within the IRS or through the federal courts Those who lo& their appeal and still refuse to pay their taxes could be subject to enforced collection action, including the seizure of personal property « Therefore, the iftS strongly urges taxpayers who disagree with the tax system to voice their protest with their Congressional representatives, the persons who enact the tax * laws administered by the j. IRS. 4 It also suggests that such individuals carefully review their financial situations and avail themselves of the numerous legal tax reduc tion options available to them

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