It is safe to say that the vast majority of people have never been through a tax audit, neither from the IRS nor a state tax agency. Most people think in terms of how things affect them personally, and simply remain jaded and unaffected by horrible things that happen to other people. Until this particular thought process changes, taxing agencies will continue to prey on people who are least capable of defending themselves with limited resources.
Large businesses have the means to defend themselves and individual taxpayers represent a group of people with which everyone can identify, so the primary target is small businesses with assets that, somehow, people view as belonging to a faceless entity and not really belonging to an actual human being. So long as taxing agencies keep their brutal attacks low profile by focusing primarily on small business owners, the average person really doesn’t care much, and these agencies will be able to continue horrific financial attacks on this select group of people. In a way, it’s understandable. People tend to think in terms of other people like themselves. However, if libertarianism is to hold to what it claims is its core values of protecting the liberties of all people all the time, then small business owners can’t be ignored.
Oh Suk Kwon, a US veteran of the age of 73, worked all his life to achieve the dream of owning his own business and invested everything he had into a gas station. In 2011, the IRS raided his business under suspicions that he had been “structuring” his deposits. Structuring is a term used to describe an illegal activity whereby a person avoids transaction reporting laws by making all deposits remain below the legal reporting threshold of $10,000. Mr. Kwon had been advised by his bank manager that by making deposits of less than $10,000 there would be less paperwork. So, these types of deposits were made by Mr. Kwon for the purpose of convenience and not to launder or hide money, which is exactly what the IRS discovered during their investigation. But not before confiscating all of Mr. Kwon’s business money, which amounted to over $59,000. For most people, this amount of money lost in one large hit is financially devastating, and that was the case for Mr. Kwon. He had broken the law, and so confessed to breaking the law technically, but he had done nothing wrong. Because of his confession, even though the IRS fully admits there was no real wrong doing and no other illegal activity involved, to this day, they refuse to remit Mr. Kwon’s money back to him. He lost his business shortly after they confiscated his money, and the stress of the situation contributed to the death of his wife.
Sadly, the circumstances surrounding the case of Mr. Kwon are not entirely unusual. Taxing agencies are not required to show proof of wrongdoing before placing tax liens and seizing property. Instead, they first make a claim that you owe some amount, usually based upon an estimate derived from some hypothesis, no matter how flimsy. In order to avoid liens and seizures, a person must prove that they do not owe the money. It is one of those occasions where a person is assumed to be guilty until he or she can prove otherwise. In the meantime, the person can lose everything. Their business can be closed, their business and personal assets can be seized, and they can have complete financial ruin.
It is often assumed that taxing agencies are devoid of incentive to act unethically or to proceed with harsh and brutal tactics without cause, and the public typically assumes someone who has a tax lien is some sort of criminal, deserving of whatever consequences he receives. However, there are plenty of incentives – both financially and otherwise – for these agencies to act in ways that have no ethical core. The IRS is much less concerned with auditing their own numbers and making sure people owe what the IRS claims than they are focusing on closing cases and tracking the number of asset seizures. Revenue officers are recognized for getting a case closed as quickly as possible and tracking the ratio of cases they close out of cases they have been assigned. Accuracy is somewhat irrelevant. In many cases, states will also hire outside auditors on a contract basis that do not work directly for the state. In some cases, these auditors can lose their contract if they are not closing enough cases, and in some cases, they may even be receiving compensation based upon the amounts they collect. They have every incentive to act in ways the public would never support (if the public actually cared).
Collection agents know that it costs large amounts of money to fight any sort of claims they place against you. They know from experience just how far they can push a taxpayer before the cost of fighting exceeds the amount of debt, as well as whether a person has the means to hire counsel and fight. They have the power to place many business tax debts directly on individual owners, and even if a person has never been an owner of a business but has signed even one check for that business, liens and seizures can occur against them as well. If a person is in a dire circumstance that suddenly alters their means to pay debt, they have the option of bankruptcy with secular debt, but no such relief exists for taxes. Taxes are non-dischargeable and must be paid ahead of any other debt. It is unfair to people desperately needing relief, and it is unfair to other creditors.
People are losing everything on amounts they don’t owe. While most people assume if someone has tax problems they must have done something wrong or are just a tax dodger, in the majority of cases there are plenty of attachments of debt that have been wrongfully and unethically conceived. I’m irritated with people at their complete lack of interest in protecting small business owners. Small business owners are the target of, by a very wide margin, the largest number of audits and tax liens. The majority of these liens contain amounts the business owners should not legally have to pay. Small businesses suffer so many instances of prey because nobody really cares. Libertarians maintain slogans, such as “taxation is theft,” “all rights for all people, all the time,” or “don’t tread one anyone.” Yet, when it comes to small businesses and small business owners, most people, including libertarians, stay as silent with the “as long as it isn’t me” type of thinking. As long as no one cares about the financial atrocities committed by taxing agencies against small business owners, this group of people will always be stolen from at a rate greater than any other group of people. People with tax problems aren’t criminals, and may even owe some money. But, in the majority of cases, there is at least some amount of money that acts as theft on top of theft – taxes they do not owe.
Featured image: patriotsoftware.com
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