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Tax Scammers’ “Sovereign Citizens” Defense

March 19, 2013

After tax cheats have been caught, they try to defend their fraud by using various defenses. One such defense is the “sovereign citizens” defense. James Beavers and his wife attempted this defense to explain their tax filing scam.

The Beavers, according to federal prosecutors, duped the IRS out of about $600,000 before the IRS discovered their scam. The Beavers are now using “sovereign citizens” strategy to claim that they are beyond the reach of the government and its rules. It is unlikely that their claim will stand against hard facts, but it is a common defense used by taxpayers to escape the punishment for tax fraud.

“Sovereign citizens” are those people who believe that they are accountable only to common law and do not have to answer to any federal, state or municipal level rules or statutes. They reject most forms of taxation and deem them illegitimate. They are opposed to taxes and other laws put forth by the government. They believe this status allows them to choose which laws they deem recognizable.

Shawna Hemline, an IRS agent, testified before the court that the tax preparer of the Beavers used fake forms to prove that the Beavers paid about $1 million in withholding taxes on investments when the money was actually debt that the Beavers owed.

According to Hemline, the IRS did not review the documents before issuing the refund. The reason behind the negligence was quoted as, “We have 45 days from April 15 before we have to start paying interest (on refunds owed) so we have incentive to act as quickly as possible.” According to Hemline, the IRS processed 147 million tax returns last year.

The Beavers refused to speak to the court, claiming to be living beneficiaries. Judgement is awaited.

Along with knowingly evading taxes, tax scammers are also contributing in the IRS losing money every year. Tax scams and tax fraud, whether by individual taxpayers or seasoned crooks, remains prevalent.

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