IRS Agent Confesses...
No Authority to Assess!
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IMPORTANT NOTE: This text makes reference to documents
that were printed along with the original R.A. article.
These are NOT reproduced here.
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IRS AGENT CONFESSES: NO AUTHORITY TO ASSESS
Yes -- the truth can leak out even in the
biased courtrooms of America -- but when IRS employees are
involved, such honesty comes as quite a shock! Sometimes
these revelations occur suddenly or unexpectedly during
cross examination. The official may be caught off guard
just long enough to spill the beans or perhaps the official
may not realize the implications of his own testimony.
Whatever the reason, the truth is revealed. In this
particular case the facts were accidentally exposed by an
IRS employee who had been called upon to answer a few simple
It is doubtful that this IRS employee fully understood the
ultimate impact of his statements. IRS personnel sometimes
suffer from a comprehension-gap concerning the application
of the law. If they do not understand the structure of the
Code, they can not possibly understand the limitations of
the law which they are attempting to enforce. That being the
case, any given IRS employee may fall prey to the
presumption that other legal provisions exist to account for
actions which they do not understand. Ignorance and apathy
play an important part in perpetuating the problem. For the
most part, IRS employees simply do what they are told and
never question the direction of superiors.
To these employees, the requirement of the law is
irrelevant. Therefore, the authority for their activity
rarely figures into the equation. They just assume that
their actions are legal. Ask any IRS agent to outline the
limitations of his legal authority to sign a summons and you
won't get a correct answer. Ask him what provision within
subtitle F (Administration and Procedure) permits the
issuance of a summons and the agent will not know. Ask for
the delegation order to sign a summons and the answer you
will hear is... "I'm just doing what I was told."
It is true that individual IRS employees may not fully
understand the limitations of the law, but their superiors
do understand, and the courts and legal professionals have
an obligation to ensure that the limitations of the law are
properly enforced. Excuses like "I didn't know" or
"I'm just following orders" are not acceptable.
That defense didn't work at Nuremburg, and it is doubtful
that it will work when IRS employees are eventually
prosecuted for violating the rights of the victims they have
plundered. Given the increasing number of what the IRS calls
"nonfilers," it is only a matter of time before this illegal
enforcement activity is exposed for everyone to see.
YOU CAN'T HIDE THE TRUTH
People are discovering this scheme because the truth is
leaking out. You can't hide the truth. You may succeed in
covering it up for a short period of time, but sooner or
latter the truth will prevail. The disclosure of IRS fraud
is inevitable. At this very moment it is happening
throughout the country. The IRS is fully aware of the
impending demise of their scam. Five years ago Fred
Goldberg, the Commissioner of the IRS, admitted that there
were 6 million non-filers. Last month, Shirley Peterson (the
present commissioner) admitted that the number of non-filers
had increased to 10 million. That's a substantial increase -
- almost double what it was 5 years ago. High ranking IRS
officials cannot help but be worried. With each leak, more
and more people learn and react to the knowledge that their
government is intentionally misapplying the law.
In the case of United States of America v. William R.
Lloyd those facts again leaked out. The defendant was on
trial for tax evasion and the circumstances
(authority/procedure) to assess became the topic of
examination. Before he knew it, Special Agent Gary Makovski
let the cat out of the bag and actually admitted that "If
no information or a return is filed, the Internal Revenue
Service cannot assess you..." To understand why the
testimony is so significant, it is well worth reviewing the
constitutional restriction on the power to tax, the actual
application of the income tax laws, and the authority to
assess those who are the subject of the law.
NOT SO COMMON KNOWLEDGE
The general public is unaware that the Internal Revenue Code
is limited in application. It cannot (per constitutional
restriction)... does not... and never has been... applied
against the United States citizen who is living and working
within the 50 states of the union. That individual is
neither the subject nor the object of the tax -- and neither
is his income.
The application of the tax is limited to and imposed upon
certain occupations and/or activities. Taxable activities
presently include the manufacture of certain commodities
like alcohol, tobacco, or firearms. An example of a
privileged occupation might be the practice of law. But, it
is the privilege associated with the governments permission
to engage in the activity that is the subject of the tax -
not the individual -- nor the income -- and even then the
income is only the "measure" of the tax.
The income tax laws were never applied against citizens
themselves, or their occupations in general, because
Congress was never granted the power to levy a "direct" tax
against the citizen. The power to levy a direct tax is
limited to the taxing of state governments only, and
according to the supreme Court, the 16th amendment merely
clarified a power that Congress had "from the beginning" to
levy an "indirect" tax (in the form of an excise) on income
without apportionment; but this is not the same as, nor did
it allow for, a "direct" tax on the property or person of
the U. S. citizen unless apportioned among the states
according to the formula directed to be taken in Article 1
Sec. 2 Cl. 3.
All such "direct" taxes must still be apportioned by the
census of enumeration and billed to the state governments
respectively. Yes, the federal government may tax "income,"
but it cannot tax the person or property of a citizen
without violating the rule of apportionment concerning
direct taxes. If it did, it would by virtue of its
application, create a direct tax in violation of Article 1
Section 9 Clause 4, and Article 1 Section 2 Clause 3 of the
Constitution. This is why there is no statutory liability
for a citizen living and working within the 50 states to pay
a federal tax on income. And that is why the tax is 100%
THE 16th AMENDMENT
The 16th amendment does tend to confuse the average person.
Most people do not understand the difference between
"direct" taxation and "indirect" taxation. They assume that
a "tax on income" is neither. In fact, some law schools
actually teach that the income tax is (in their own words) a
"bastard" tax that falls somewhere between direct and
indirect. That is incorrect. No doubt the contention arises
and results from a naive belief that the government would
not allow the intentional misapplication of the tax laws,
(when in fact it propagates it) and that there must be some
other explanation -- but, it has probably never occurred to
those who are of this opinion, that the taxes and the
resulting social programs effectively buy the public vote,
and strengthen the political establishment that benefits
from the misapplication.
Such opinions exist because people are unaware of supreme
Court decisions confirming that the tax on income is an
"indirect" tax in the form of an excise, rather than a
"bastard" tax that is neither direct nor indirect. It is NOT
some "unique" tax, that is "direct," and yet not subject to
the rule of apportionment. It is indirect, and by virtue of
this status, it cannot be subject to the rule of
apportionment just as the language of the 16th amendment
It is therefore not applicable against a citizen living and
working in the United States of America (50 States).
Congress has by statute identified the taxable party and/or
entity. The IRS has provided by regulations the procedure by
which the U.S. (50 States) citizen claims his/her exemption
from withholding -- the presentation of a statement of
citizenship to the employer who retains the original copy
and forwards the duplicate to the IRS Philadelphia PA with
an accompanying letter of transmittal. Congress has
directed that those who are liable for a tax on income are
subject to withholding; has created a withholding agent;
and, imposed liability for any tax on same. The withholding
agent must withhold tax from anyone coming under the
provisions of IRC Code sections 1441, 1442, 1443, and has
imposed liability on the withholding agent per section 1461.
Congress has in IRC 1461 also indemnified the withholding
agent from claims asserted by those identified in IRC
section 1441, 1442, and 1443 for obeying the appropriate
statutes. Nevertheless, the citizen is under the protection
of the Constitution and Congress has been obedient to the
Constitution by not enacting a liability statute against a
citizen living and working in the United States of America
The IRS inputs phony entries to its computers
in a blatant attempt to defraud U.S. citizens. Congress
acquiesces in this criminal activity by ignoring the pleas
of the citizens that improper actions of the IRS be
controlled. Congressman forward to their constituents copies
of IRS responses to Congressional inquiries and members of
Congress drop the issue by telling their constituents that
"the IRS has responded (see enclosed)," but the "see
enclosed" they mention is a copy of the IRS response to the
inquiring member of Congress. The constituent is then
advised that if their elected official "may be of service to
them in the future" that the elected official should be
contacted without hesitation.
This "drop issue" letter is
designed to convey to their constituents the idea that the
IRS response is to be assumed to be correct. This is the
heart of the scam. If Congress wanted to exercise control of
the IRS and keep them obedient to the Constitution a
different posture would be adopted.
Most politicians are unaware of the limited application of
the tax laws anyway, and most legal professionals woefully
uneducated in such matters; but even assuming that they were
educated, the income tax serves the political purpose of
funding programs that buy the public vote, and there is no
reason (other than morality) for them to rock the ship of
The political machine thus ignores, if not encourages, (by
default) the routine misapplication and illegal enforcement
of the tax laws. That is a fact of life -- and that is why
our struggle has been long and difficult; but considering
the increase in the number of so-called "nonfilers," that
struggle may soon be over, and we may yet see the tables
turned on the illegal activities of an increasingly
globalist minded government.
SEE NO EVIL -- SPEAK NO EVIL --
HEAR NO EVIL
So who is to blame? Are just a few select officials
responsible, or is the average IRS employee also to blame
and if so, to what degree? Do the agents themselves know
what they are doing, or is their training and function
within the service sufficiently limited to allow for an
acceptable misunderstanding as to their actual authority?
Perhaps the truth lies somewhere in between. The instant
case may shed some light and help us answer this question.
The fact is, some agents are aware of the limited
application of the law and some are not -- possibly some
suspect but go along with policy for the sake of expediency,
not caring about their moral or legal obligations as long as
they do what they are told and get a pay check at the end of
the week. If some agents know and some don't, it is just as
certain that this education was not included in their
training. Those who know, probably figured it out on their
own, or were made privy to such information by a friend or
associate who was higher up within the IRS.
If the employee were so inclined, he could put it all
together and figure out what is happening. Unfortunately,
most have neither the character or the where-with-all to do
this, and the hierarchy within the IRS is certainly not
going to train its personnel in the knowledge that would
defeat the political objectives of those who appoint them to
Indeed, to ensure their very existence and preserve their
employment these IRS officials must "encourage voluntary
compliance." Were there an honest concerted effort to inform
the various agents of the limited application of the law,
the IRS could not expect them to ignorantly misapply its
provisions and they might be out of a job. Instead, the IRS
fosters an atmosphere where their agents operate in the
dark. The agents have a "duty" to know, but end up making
incorrect assumptions, or they leap to conclusions because
of their incomplete education. With this in mind we will
examine agent Makovski's testimony to determine the extent
of his actual knowledge and the significance of his
EVASION OF WHAT?
Mr. Lloyd was on trial for alleged violations of section
7201 (evasion of taxes). To evade a tax, one must first have
a "known duty" to file a return and pay a tax. Second, and
more important as far as evasion is concerned, there must be
an outstanding "bill" or "assessment" that is due and owing.
In the case of someone who has not filed, there must be a
"presumed valid assessment" executed with proper authority
by IRS personnel, followed by a tax "bill" which must be
sent to the taxpayer, (notifying the taxpayer of the
liability) otherwise, there is nothing to evade.
Now for the facts... Mr. Lloyd did NOT file a return.
Moreover, he had NOT received a "bill" or
"assessment," presumed valid or otherwise. As a United
States citizen who was not involved in one of the activities
previously mentioned we can make several presumptions about
his alleged liability or lack thereof, and the authority for
the IRS to assess a tax against him; all of which are
relevant for demonstrating the wrongful prosecution
instituted by the IRS, and determining agent Makovski's
knowledge and intent.
TO ASSESS OR NOT TO ASSESS
Given the above facts, and knowing that Lloyd was not
required to file, (and did not) there would be no authority
or procedure which would allow the IRS to assess a tax.
Reprinted below is section 6201. This section is the
assessment authority found within subtitle F, and it reveals
something which may not have occurred to those IRS agents
who simply "do what they are told." Notice that when no
return is filed, the authority to assess is limited to
assessments involving stamp taxes. What on earth is this
statute referring to? Could it be the stamps we see on a
bottle of alcohol or a pack of cigarettes? When a
manufacturer of alcohol or tobacco products wishes to sell
his goods, he must purchase stamps to pay the tax associated
with his taxable activity, and then place the stamps on the
products he sells.
Did you ever take the time to examine the stamps on a pack
of cigarettes or a bottle of alcohol? These are the stamps
that this statute is referring to. They are required for
those products whose manufacture is the subject of the
excise. If they fail to pay the stamp tax associated with
the activity, then 6201(a)(2) provides the authority for the
IRS to assess a tax. If the bill remains unpaid, then it
could be construed as evasion for which the penalty in
section 7201 might apply. Lloyd was not involved in such
The remaining provision for assessment authority (section
6201(a)(1)) pertains only to those individuals who have
filed returns. The information on that return is subject to
assessment by virtue of the fact that the return was signed
under penalty of perjury by the taxpayer who filed it,
testifying to the fact that a liability, and a requirement
to file exists; and that the information on the return is
true and correct. If it is not correct, the authority under
this section allows for a correction to be made based on the
information that is given on the return. Under no
circumstances (except stamps) may the IRS assess a tax
without a return being filed by the taxpayer himself.
Therefore, there was no authority to assess Lloyd. Courts
have held that an unsigned substitute return such as those
typically filed by the IRS when a 1040 return has not been
filed "...is no return at all." (Vaira v. C.I.R., 444 F.2d,
citing Dixon v. Commissioner, 28 T.C. 388); and that, "Since
the 'returns' prepared by the IRS contained no information
from which a tax could be determined, they were not returns"
(U.S. v. Verkuilen, 82-2 U.S.T.C., Schiff v. Commissioner,
U.S.T.C. 1984 223).
If a return is not filed, the IRS's only
recourse is to move for an indictment against the individual
who is presumably required to file. To do so they must cite
the section of the law allegedly requiring that person to
file. Reference may of course be made to the penalty
associated with having a "known duty to file" and willfully
not filing the return, but even then such penalty is
applicable only if a person actually believes he has a
requirement to file and chooses to shirk that duty. Lloyd
had not filed a return and there was no other provision for
assessing a tax against him.
THE CAT SLIPS OUT OF THE BAG
Since there was no assessment, Lloyd had never received a
"bill" to evade, so naturally the question arose as to the
assessment circumstances. To the right is the text of the
transcript of the agents testimony. When Makovski was asked
under what circumstances an assessment was made he explained
"two ways." He did not say that it was limited to just 2
ways, but it wasn't necessary for him to elucidate. The law
itself provides only 2 ways, and agent Makovski's reference
to two circumstances would seem to indicate that he had
personal knowledge of the 2 provisions in law. He said...
"First of all, whenever you file a return yourself"
(emphasis on 'yourself') "and it is sent to the service
center..." an assessment is made. He then added "If no
information or return is filed, the Internal Revenue Service
cannot assess you anything." To which section under 6201 was
he referring? Was it subsection (a)(1) or subsection (a)(2),
and did it suddenly occur to Makovski that there was no
authority or did he know or suspect all along?
He obviously knew enough to answer the question! He knew
that Lloyd had not filed a return. He investigated Lloyd so
he knew that Lloyd was not involved in an activity that
required the purchase of stamps. He knew that there was no
What's more, he knew that Lloyd was on trial for
allegedly "evading" an "assessment" that did not, and
could not, by law exist. Therefore he had to know his
investigation was a fraud. If there was no authority to
assess Lloyd then how could Makovski investigate an
"evasion" of an "assessment" that could not possibly exist.
If a return had been filed, then the story would be
different. The authority to assess under section (a)(1)
would have allowed for an "assessment" that could
conceivably be "evaded," but Makovski knew that Lloyd had
not filed a return for the years in question. He certainly
knew from his own criminal investigation that Lloyd was not
involved in an occupation involving a stamp tax. So what was
he investigating? If no return was filed, and the authority
is limited to stamp taxes, then in Makovski's own words
"the IRS cannot assess you." Agent Makovski not only knew
the law, but he (accidentally?) told the truth.
THE HUNDRED YARD DASH
We were informed by attendees of the trial that after
Makovski's admission the U.S. attorney put her head in her
hands. The jury must have understood the implication of the
testimony because it took even less time for the jury to
acquit Lloyd than it did to pick the jury from the jury
pool; and, Lloyd received a standing ovation from those in
the courtroom as the U.S. Attorney slithered out with the
Judge to avoid talking with the media.
This case is just one example of the coming deluge of
opposition to IRS fraud. The public will no longer accept
this flagrant disregard for the law. What will the
government do? Find out in the next issue of the Reasonable
Action where we will look at why the income tax is obsolete
and review the dangers of proposed alternative forms of
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