There was a recent post on lesswrong, which also got highlighted on AC10, that struck my interest. It claimed that he had been avoiding taxes for 20 years through "one simple trick:" filing, but not actually paying them. The idea is that the IRS is so small and incompetent that they basically won't do anything against this sort of passive resistance.
Is this too good to be true? I'm not any sort of "effective altruist," I just don't want to pay taxes. And as it happens, I have a lot of capital gains income this year. According to the rules, I'm supposed to write the IRS a big check by Jan 15 for "estimated taxes." I can afford it, but it would make my life better to keep that money for myself. Can I just... not...? This feels like a real Matrix, red pill moment-
"You're telling me that I can dodge taxes?" "No. I'm telling you that when the time comes- you won't have to."
Then again... I really, really don't want to go to prison. even just getting my passport suspended would be a major hassle. And the guy who wrote that post seems like a real hippy... no bank account and no salary income??? how does he live?
Perhaps it would be better to set up a shady small business and claim all sorts of vague tax deductions. Thoughts on this?
btw: long time lurker, first time poster. I'm asking here because you seem like people who are smart, outside-the-box, and not simps for the government.
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Notes -
I'm thinking the IRS probably operates more like a business than most parts of the Federal Government. For any possible enforcement action, they're going to be looking at how much money they put into it versus how much they'd recover, and they'll stick with the things that bring in the most money for the least effort.
Are they going to send a SWAT team to raid your house and drag you off to jail for 20 years? Probably not. All of that is super expensive (dozens of agents tied up all day, plus vehicles and gear etc) and not likely to lead to recovering much money.
If you're living a normal upper-middle-class lifestyle, they're going to write a letter to your payroll processor telling them to fix your withholding and garnish your wages, and they will. Then they'll write a letter to your bank telling them to hand over $x from your account, and they will. That takes 10 minutes of work for one guy at a desk and will probably recover whatever they want. If you think they took too much, well sucks to be you, you can spend your own $$$ and hire a lawyer to sue them, and good luck winning anything back. Maybe they'd let it slide for a few years until the amount owed goes over $100k, but no reason to think they'd forget about it entirely when they can still collect easily.
If you're a weird hippie who went to the trouble to have hard to track income and savings, maybe they'll just ignore it because it's too much work to track down and probably not all that much money anyways. Why bother, when writing letters to compliant corporations regarding normal upper-middle-class people is much faster and easier and yields much more money.
For a Donald Trump level figure (let's say pre-Presidency, so kind of a stand-in for any super-rich cantankerous person with weird complex finances), they can assume it'll take tons of their resources to really audit what's going on with him, and he's going to throw a dozen of his own high-priced lawyers and accountants at you, so maybe they'll just leave it alone unless they think they have a rock-solid case that you owe big bucks that they can actually collect.
I actually read some of the "War Tax Resistance" people's website. They don't seem to have much better advice for avoiding enforcement action. Basically, don't work for people who will report to the IRS and obey their garnishment letters, and don't hold money in banks they can track easily.
I'm sure that's their plan. But I've never gotten the sense that they're even that competant. Partly because the Republicans have shrunk the IRS for political reasons, they're just not even active enough to spend 10 minutes writing a letter to your bank.
They certainly are. And its not even 10 minutes. They are literally just filling out a standard form. They are up on their game when they think you underpaid. That letter comes out swiftly. And if you don't pay or contest the next step isn't much more for the IRS.
Do you have any personal experience with this? Because what you say directly contradicts the post I linked and what I've heard about the IRS in general.
I was a 1099 contractor, at least, in part, for many years. If I ever reported less income than the counterparty I'd get a letter giving me XX days to respond. I always did contest, because I am not a goober. But then they dedicated hours of work to following up with both parties over typically $500-$1000 in income, which means some low hundreds amount in revenue. On top of that, a few years ago my wife, then fiance, got improperly claimed for like $5000 in 1099 income, from a company that somehow got her SS #, but was from another state. We sent at least 10 correspondences on that, spent at least 8 hours on the phone and the agent ultimately had to, at least pretend to read hundreds of pages of bank and credit card statements on top of whatever they got from the fraudulent counterparty claiming it paid out 1099 income. So, it seems to me, they are perfectly willing to chase ghosts over a few hundred speculative dollars. Why wouldn't they be willing to issue a garnishment order which takes 4 minutes and is guaranteed to net them those hundreds/thousands?
Cool, that's the kind of experience I was looking for. That does make them sound a lot more competant than I expected.
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