Get Together With Fellow 'Cracking the Code-...' Warriors From Your Home State Or Region

A number of my correspondents have expressed a desire to get together-- or at least communicate directly-- with other upstanding students and defenders of the law who happen to live in their area, or are dealing with the same state government.  Thus, I am offering, to anyone interested, the opportunity to be included in a forum of CtC warriors in each state (and in non-American countries as well).  Once added to the group, participants will be free to communicate with each other, compare notes, share strategies and research, plan barbecues, etc..  There are now several thousand members among 48 state groups.

If you are interested, you must send an email to StateGroups 'at' losthorizons.com precisely as specified:

1. The "subject line" must say "Sign Up", and nothing else.

2. The body of the message must contain the following (and in order as shown):

Your Name

Your Email Address (which will be used for group messages)

Your Phone Number

Your Home State

Example:

John Freeman

john@freeman.com

555-555-5555

Michigan

Please try to make your email look EXACTLY like the example above (left justified, no formatting of text, no spaces between lines).

3. You must send your sign-up email from the same email address you list in the body of the message (whatever email address you send from WILL be the one used for group messages, whether it's the same one you list or not).

Only names and email addresses will be provided to others-- the phone number is purely for my own use to attempt to verify that someone seeking to be listed is who they say they are, and not a marketer (or anyone else) just trying to get email addresses for their own nefarious purposes.  (By the way, once you have signed up, there may be a delay before you are added to the roster and get your "Welcome" message-- group memberships are updated and distributed only once every two-four weeks.)

SIGN UP AND ENJOY SOME GOOD COMPANY AS YOU ACT TO UPHOLD THE LAW!! 

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State Warrior Group News

Kudos! to the Ohio Warriors-- these serious patriots are printing business cards alerting the reader to the fact that the "income" tax isn't what they have been led to believe, and directing them to losthorizons.com to learn more.  Each Ohio warrior has committed himself or herself to distribute 1,000 of these cards.  Outstanding!

Warriors in Georgia, Colorado and Ohio are now operating high-traffic billboards awakening their neighbors to the liberating truth! See here and here and here.

Groups are now active in Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin and Wyoming.

Warriors in France, Ireland, and the District of Columbia are STILL waiting for some company.

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More Than Two Thirds Of The Several States That Collect "Income" Taxes Have Now Acknowledged The Truth About The Law As Revealed In CtC, And Have Issued Complete Refunds Accordingly!  See The Following Chart...

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A Brief Examination Of Some Representative Union State Tax Statutes

I RECENTLY HAD OCCASION to look at certain "income" tax-related statutes found on the books in a couple of the several states. In each case, these statutes concerned themselves with the state tax agency's authority to make determinations. Each used language by which the unwary might be misled. For instance, read the following language from Indiana's state code:

IC 6-8.1-5-1
Proposed assessment; notice; protest; hearing; letter of findings; rehearing; appeal; demand for payment
Sec. 1.

(a) As used in this section, "letter of findings" includes a supplemental letter of findings.

(b) If the department reasonably believes that a person has not reported the proper amount of tax due, the department shall make a proposed assessment of the amount of the unpaid tax on the basis of the best information available to the department. The amount of the assessment is considered a tax payment not made by the due date and is subject to IC 6-8.1-10 concerning the imposition of penalties and interest. The department shall send the person a notice of the proposed assessment through the United States mail.

(c) If the person has a surety bond guaranteeing payment of the tax for which the proposed assessment is made, the department shall furnish a copy of the proposed assessment to the surety. The notice of proposed assessment is prima facie evidence that the department's claim for the unpaid tax is valid. The burden of proving that the proposed assessment is wrong rests with the person against whom the proposed assessment is made.

Looking at this language, one might make the mistake of imagining that the Indiana Department of Revenue is authorized to issue a "proposed assessment" based upon its "reasonable belief" that a person has not declared the right amount of "income" to be taxed on a tax return, and what's more, if it does so, the "proposed assessment" is to be taken as presumptively true, and the burden of proving the contrary somehow rests on the filer!

Nothing could be further from the truth.

Knowing, as everyone who has had a junior high-school civics course does, that the burden of proof is always on the claimant, read this language more carefully and note that Sec. (1)(b) DOESN'T say, "not reported the proper amount of income". Instead, what it actually says is, "proper amount of TAX DUE". Now we see what is really being said, and how the burden of proof can be on the filer. The authority laid out here is to allow or disallow filer-claimed deductions and similar adjustments CLAIMED BY THE FILER as applicable to whatever he or she has declared as the starting "income" figure on the state return (and/or to correct the math involved in the application of the state's rate of tax to whatever is the final "net income" figure arrived at on the return).

Now it all makes sense...

(BTW, it is also relevant to this point that most, if not all, state income tax structures expressly provide that the "income" figure to be used as the starting point for calculating the state's portion of the tax is the figure declared by the filer on his or her federal return--usually as either total income or adjusted gross income. Thus, the state tax agencies have no latitude for looking any further than a filer's federal return for information on which to make what determinations are within their authority.)

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Arkansas uses much the same language, and with precisely the same meaning and limitations;

26-18-403. Proposed Assessments
(a)(1)  If any taxpayer fails to file any return as required by any state tax law, the director, from any information in his possession or obtainable by him, may determine the correct amount of tax for the taxable period. If a return has been filed, the director shall examine the return and make any audit or investigation that he considers necessary. 
    (2)  When no return has been filed and the director determines that there is a tax due for the taxable period or when a return has been filed and the director determines that the tax disclosed by the return is less than the tax disclosed by his examination, the director shall propose the assessment of additional tax plus penalties, as the case may be, and shall give notice of the proposed assessment to the taxpayer. 

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Let's look at another example, this one from Minnesota:

289A.35 ASSESSMENTS ON RETURNS.
The commissioner may audit and adjust the taxpayer's computation of federal taxable income, items of federal tax preferences, or federal credit amounts to make them conform with the provisions of chapter 290 or section 298.01.

Again, a quick, uninformed reading of this language might well lead to the conclusion that the Minnesota DOR may "audit and adjust" a filer's testimony to make it "conform with the provisions of chapter 290 or section 298.01".

Not as I read this language...

Looking more carefully, we see that the authority cited is to "audit and adjust" only the "taxpayer's" COMPUTATION OF FEDERAL TAXABLE INCOME (which is "gross income" minus adjustments-- resulting in "adjusted gross income"-- and then minus deductions and exemptions to arrive at "taxable income") not the initial amount declared as gross "income" received, or even the amount calculated to "adjusted gross income" on the filer's federal form, which is the starting point for the state return calculations. That is, the state is merely claiming the authority to apply its own structure of deductions, exemptions and credits to the amount of "adjusted gross income" calculated on a filer's federal form, in place of the federal structure.

Thus, the authority in this statute, like that of the Indiana and Arkansas statutes above, doesn't extend to "approving" or "allowing" or "adjusting" the amount of gross "income" declared by the filer, and to which allowable deductions/exemptions are subsequently applied. Nonetheless, state tax agencies have been known to try to use language of the sort we've just looked at to mislead the unwary or careless into believing the contrary. Don't be a victim of this kind of cheap ploy! Always read carefully and thoroughly, and never lose sight of the forest when closely examining one of the trees!

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Here's another example, from the statute-books of Illinois: 

(35 ILCS 5/904) (from Ch. 120, par. 9-904)     Sec. 904. Deficiencies and Overpayments.     (a) Examination of return. As soon as practicable after a return is filed, the Department shall examine it to determine the correct amount of tax. If the Department finds that the amount of tax shown on the return is less than the correct amount, it shall issue a notice of deficiency to the taxpayer which shall set forth the amount of tax and penalties proposed to be assessed. If the Department finds that the tax paid is more than the correct amount, it shall credit or refund the overpayment as provided by Section 909. The findings of the Department under this subsection shall be prima facie correct and shall be prima facie evidence of the correctness of the amount of tax and penalties due.  

P. S. The studious reader will have noted that the limited authority in the state statutes discussed above mirrors that of the federal Tax Court/"deficiency" authority, discussed in 'About 1040s And Claiming Refunds' in CtC (and much more thoroughly here)...

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Here are the Missouri laws establishing what constitutes "income" for purposes of the state income tax authority:

143.111. Missouri taxable income. — The Missouri taxable income of a resident shall be such resident's Missouri adjusted gross income less:

(1) Either the Missouri standard deduction or the Missouri itemized deduction;

(2) The Missouri deduction for personal exemptions;

(3) The Missouri deduction for dependency exemptions;

(4) The deduction for federal income taxes provided in section 143.171; and

(5) The deduction for a self-employed individual's health insurance costs provided in section 143.113.

143.121. Missouri adjusted gross income. — 1. The Missouri adjusted gross income of a resident individual shall be the taxpayer’s federal adjusted gross income subject to the modifications in this section.

[This is followed by a series of specific additions, including federal tax refunds resulting in a Missouri tax benefit; certain kinds of interest; the amounts of two kinds of deductions a filer might have claimed on his federal form; and certain property tax amounts. A selection of available deductions that can be taken from the federal AGI is also provided in this section. See it all here.]

So, as shown, under Missouri law a filer's "income" is determined by that filer when completing his federal 1040 and arriving at his federal AGI, subsequently subject to a few modifications, none of which include the addition of any pay-related amounts of any kind, whether qualified as "wages" or not.

The section of state law establishing what the MDOR or any administrative tribunal is authorized to "determine" harmonizes with these specifications exactly:

143.611. 1. As soon as practical after the return is filed, the director of revenue shall examine it to determine the correct amount of tax. If the director of revenue finds that the amount of tax shown on the return is less than the correct amount, he shall notify the taxpayer of the amount of the deficiency proposed to be assessed. If the director of revenue finds that the tax paid is more than the correct amount, he shall credit the overpayment against any taxes due under sections 143.011 to 143.996 from the taxpayer and refund the difference. No deficiency shall be proposed and no refund shall be made pursuant to this or any section of sections 143.011 to 143.996 unless the amount exceeds one dollar.

As plainly stated here, the director of revenue is empowered examine the return to determine the correct amount of tax, not the "correct" amount of "income" to which the tax should be applied. The preceding sections of law dictate what constitutes the correct amount of "income" to be used in calculating the correct amount of tax-- whatever appears as the filer's federal AGI.

The same "determinations" statute commands the director to refund any overpayments.

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A collection of Colorado statutes related to this subject can be see here.

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MORE ON THE SUBJECT of "adjustment" and "determination" pretenses generally can be seen here.

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Georgia Warriors Compile State Tax Laws