Why Does The IRS Want To Prevent You From Reading ‘Cracking the Code-...’?
On August 26th, 2003, I announced the publication of ‘Cracking the Code- The Fascinating Truth About Taxation In America’. I have recently learned that not even two weeks later, the Internal Revenue Service began preparing a desperate effort to suppress the book-- an effort by which the ‘service’ seeks to fine me for, or stop me from, distributing the book; to secure a list of my customers (presumably so that they can be selectively targeted for special efforts at pre-emptively dissuading them from acting on what they learn from the book); perhaps even to fabricate a pretext on which my inventory of books can be seized and made to disappear.
So far, this effort is taking the form of characterizing ‘Cracking the Code-...’ as the ‘promotion of an abusive tax shelter’. ‘Promotion of an abusive tax shelter’ is a statutory construct-- specifically addressing the creation of an entity in which investment is solicited and a related (and fraudulent) tax benefit is documented and exploited. Such an offense would consist of, for instance, creating a fake company (entity, plan or arrangement), selling shares in the company for a nominal price (soliciting investment), and then producing documentation of losses (financial statements) which the “investor” then claims on his or her tax return to either lower gross income or credit against tax owed (the tax benefit). (The statutory language can be seen at http://www4.law.cornell.edu/uscode/26/6700.html.)
Thus, the IRS is apparently trying to assert that buying my book is an ‘investment’ in an ‘entity’ which I have created; that the term ‘statements’ as used in the statute can be taken to mean ‘declaratory expressions’; and that as a consequence of being ‘furnished’ the ‘statements’ in my book, my ‘investors’ will realize a ‘[fraudulent] tax benefit’. As is its common practice, the IRS is trying to call something what it is not, in order to give color to its pretenses. I suppose that if any of my readers try to deduct the cost of the book as a tax-preparation guide (which it is not) and claim to have paid more than $24.95 (which they did not), they might indeed be guilty of fraud-- but no suggestion to do either of these things will be found among the ‘statements’ in my book. In fact, most of the readers of my book will conclude that, according to the law, they have little or no “income” from which to take any deduction, or resulting tax against which to apply any credit, at all. Being presented with information that leads to such a conclusion doesn’t amount to receiving a ‘tax benefit’, of course-- fraudulent or otherwise-- and wouldn’t even if I were wrong in what I say in the book.
But I’m not. At the very same time the book-burning department of the IRS was preparing its assault, the ‘do-what-the-law-commands’ department, after briefly attempting to dissuade US from acting on what is revealed in the book, grumblingly issued my wife and me a complete refund of every penny withheld in 2002 from my private-sector salary-- FICA and all. Eight months or so later, while continuing with its efforts to suppress my book, the ‘service’ issued another refund of every penny withheld from me in 2003-- a pleasant experience also enjoyed by nearly every reader of 'Cracking the Code-...' who has been so kind as to share with me the consequences of acting on the resulting knowledge.
In light of the refunds being issued, even those who haven’t read ‘Cracking the Code-...’ would have to recognize that the ‘service’ isn’t trying to suppress my book because it’s worried that some poor naďf might end up with an improper understanding of the law, file accordingly, and suffer some dire consequence… On the contrary, it is obvious that the reason the ‘service’ is trying to suppress my book is because it’s worried that MORE Americans will end up with a PROPER understanding of the law, file accordingly, and inflict some dire consequence on the federal gravy-train.
Frankly, I find the ‘service’s’ anxiety highly flattering. Whichever of the two views outlined above one might prefer-- both that which clearly is not the case, and that which just as clearly is-- the subtext of either is that my presentation of the fine print in the law which the government has striven mightily over the decades to relegate to obscurity is so persuasive and irrefutable that even the IRS’s well-developed program of intimidation; the exhortations of veritable armies of CPA’s, attorneys, and ‘tax professionals’; and the decades of disinformation to which every American has been subject will not prevail over it if it is allowed into a reader’s hands. And indeed, this is true. All of those opposing forces notwithstanding, this is what those given a chance to read the book have to say:
Why It Matters