FEDERAL COURT IN WASHINGTON STATE HALTS TAX-SCAM PROMOTION

Tacoma Man Who Promoted False Tax Claims Required To Disclose Names Of Customers

WASHINGTON, D.C. - The Justice Department announced today that a federal court in Seattle has barred Jack Cohen of Tacoma, Washington, from selling his tax fraud schemes. The schemes are based on a discredited argument, repeatedly found frivolous by many courts, called the “U.S. Sources” or “Section 861 argument.” The “argument,” named after the provision of the federal tax code it misinterprets, posits that U.S. citizens are not required to pay taxes on income they receive from sources within the United States.

“Tax-scam promoters cheat not only their customers and the Federal treasury but also all law-abiding taxpayers. Some scams even teach people how to harass their employers and obstruct the administration of the tax system,” said Eileen J. O’Connor, Assistant Attorney General for the Justice Department’s Tax Division. “The Department of Justice is working methodically to shut down tax fraud scams of all varieties.”

The court issued an order, called a preliminary injunction, which will remain in effect while the case remains pending. Pursuant to the court’s order, Cohen is barred from selling the Section 861 argument and any other abusive tax schemes. He must post a copy of the injunction on his website and must remove all false statements about the tax laws on the site. The order also requires Cohen send a copy of the court’s order to his customers and requires him to give the Justice Department a list of his customers.

Papers filed in the case show that Cohen, through his “Tax Ax” website, told employers to stop withholding federal income and social security taxes from the wages of their employees, and sold products such as the “W-4 Killer Pack,” which he advertised as “a kit for employees who wish to stop the withholding process.” He also sold the “Tax-Collecting Employer Challenge” for $250, a kit which told employees to send letters to their employers threatening to sue them unless they stopped withholding taxes from their paychecks. More information on this case is available at http://www.usdoj.gov/tax/txdv04092.htm.

This is the latest in a series of injunctions the Justice Department has obtained in its continuing effort to shut down tax-scam promotions. Information on other recent injunctions entered and suits filed can be found at the Justice Department Tax Division website, http://www.usdoj.gov/tax/taxpress2004.htm.