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New York Court Bars 'Tax Termination Scheme'

by Leroy Baker, Tax-News.com, New York

15 August 2007


A federal court in Binghamton, New York, has permanently barred Robert L. Schulz and his organizations, the 'We the People Congress' and 'We the People Foundation', from promoting a tax scheme that helped employers and employees improperly stop tax withholding from wages, the Justice Department has announced.

In his decision entering the civil injunction order, US District Judge Thomas J. McAvoy, found that Schulz "knew or had reason to know" that his statements in promoting the scheme were false. The court said that in promoting the scheme, dubbed the 'Tax Termination Package', Schulz and the We the People organizations "relied on fringe opinions of known tax protestors whose theories have repeatedly been rejected by courts across the country". The court further noted that several of those tax protestors have been convicted of tax crimes.

The court said that promotion of the Tax Termination Package caused an estimated harm to the US Treasury of more than $4 million, and ordered Schulz to give a copy of the court order to all people who bought or otherwise obtained the tax scheme materials. Schulz must also give the Justice Department a list of the names, addresses, telephone numbers, and Social Security numbers of all people and businesses to whom Schulz and his organizations distributed the tax scheme materials.

The government’s complaint, filed in Syracuse with the US District Court for the Northern District of New York in April 2007, alleged that Schulz has used the two We the People entities to market the nationwide tax fraud scheme to employers and employees. According to the complaint, the Tax Termination Package included We the People forms, which the defendants falsely told customers can be used to replace forms the IRS requires employers and employees must use in connection with federal tax withholding from wages.

The suit stated that Schulz and the We the People entities falsely suggested that use of the replacement forms would allow customers to legally stop tax withholding. These schemes are on the IRS’s 2007 list of the 'Dirty Dozen' tax scams.

“People who sell tax scams are asking for trouble for themselves and their customers who participate in them,” warned Eileen J. O’Connor, Assistant Attorney General for the Justice Department’s Tax Division. She added: “They and their customers temporarily enrich themselves at the expense of law-abiding taxpayers. The Justice Department and the Internal Revenue Service are determined to stamp out these scams.”

Since 2001, the Justice Department has obtained more than 230 injunctions to stop the promotion of tax fraud schemes and the preparation of fraudulent returns.


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