JUSTICE DEPARTMENT ACTS TO SHUT DOWN TAX SCAM PROMOTION

Tacoma, Washington Man Alleged To Promote Fraudulent Tax Scheme

WASHINGTON, D.C. - The Justice Department today filed suit in the U.S. District Court in Tacoma, Washington, asking the court to bar Jack Cohen of Tacoma from selling allegedly illegal tax schemes. The civil injunction suit alleges that Cohen, through his website, www.taxax.org promotes a fraudulent tax scheme which falsely states that American citizens who receive income from sources within the United States are not required to file federal income tax returns or pay federal income taxes.

The government’s court filing notes that Cohen’s position, also known as the “U.S. Sources argument” or the “Section 861 argument” (after the tax-law provision it misinterprets), has repeatedly been rejected by federal courts.

“Time and again, federal courts have rejected the so-called Section 861 argument as frivolous,” said Eileen J. O’Connor, Assistant Attorney General in charge of the Justice Department’s Tax Division. “People who sell or participate in these illegal schemes risk serious consequences, including substantial civil penalties, and, where appropriate, criminal prosecution.”

According to the suit filed today, Cohen sells his customers a “package” that falsely states that only income from foreign sources must be reported on federal income tax returns. Other packages Cohen allegedly sells include a “W-4 Killer,” for “employees who wish to stop the withholding process,” and a “Custom Letter Pack,” which purports to “reverse the government’s presumption that we are ‘taxpayers’ pursuant to the Code....”

The suit alleges that Cohen’s newest package consists of forms employees can use to threaten lawsuits against employers who refuse their requests to stop federal income tax withholding.

A Texas man, Dick Simkanin, was convicted of tax crimes last month in connection with his failure to withhold federal income taxes from employees’ pay. Simkanin faces a statutory maximum sentence of 129 years imprisonment and millions of dollars in fines. He is scheduled to be sentenced on April 30, 2004. Information on that case is available at <http://www.usdoj.gov/usao/txn/PressRel04/simkanin_convict_pr.html>.

The Justice Department has also obtained many injunctions against promoters of the “U.S. Sources” or “Section 861” argument. Information on those cases can be found at:

<http://www.usdoj.gov/tax/04_tax_061.htm>

<http://www.usdoj.gov/tax/03_tax_128.htm>

<http://www.usdoj.gov/tax/03_tax_267.htm>

<http://www.usdoj.gov/tax/02_tax_352.htm>

<http://www.usdoj.gov/opa/pr/2002/February/02_tax_055.htm>

<http://www.usdoj.gov/opa/pr/2002/March/02_tax_184.htm>

Information on the Justice Department’s Tax Division can be found at <http://www.usdoj.gov/tax/>.

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