Feds Move Against Tax Withholding Protestors

July 22, 2003 (PLANSPONSOR.com) - Federal officials have gone to court to force three companies to withhold federal taxes from employee paychecks.

According to a New York Times report, the lawsuits requesting court orders forcing the tax payments, are part of a stepped-up fight against those who argue that the federal tax code only requires a few Americans – mostly employees of foreign-owned businesses – to pay wage taxes.

The US Justice Department, which filed the federal court lawsuits, dismissed that argument as “patently frivolous,” according to the newspaper. The defendants include:

California Flight Bag Maker

Al Thompson, owner of Cencal Aviation in Lake Shasta, California. a maker of flight bags and other accessories for pilots. Thompson told his 25 employees in September 2000 that no law required payment of taxes and he has asserted that the federal government has no authority over his business. Thompson should have withheld $429,400 from paychecks since July 2000, according to court papers filed with the suit in US District Court in Sacramento.

In May 2002, a state judge jailed Thompson for several days after he told the judge he would turn his business records over to state auditors but then told The Redding Record-Searchlight that he had made the promise under duress. Thompson later complied.

The Justice Department said that “the public interest would be advanced in enjoining Thompson” because it “will stop his illegal conduct and the harm that conduct is causing to the United States Treasury and Thompson’s employees.” It said his employees were harmed because they must calculate their taxes on their own and pay them quarterly to comply with the law.

California Florist

The second case, also filed in Sacramento, was brought against James and Sandra Molen, owners of Touch of Class Florist in Chico, California. The Molens sought a refund of all taxes withheld from 1997 through 1999. The Internal Revenue Service sent them a check for $30,698 in error, the Justice Department said. That refund plus taxes that should have been withheld since 1999 total $110,927, according to court papers.

“They can take a hike,” Molen told the newspaper. “I do not intend to abide by any command of me, flesh and blood, to do anything.” Molen is part of a movement that contends that court actions in which names are typed in all capital letters, as the case filed yesterday was, are not valid, according to the Times story.

Colorado Muffler Shop

The third injunction request, filed in US District Court in Denver, was sought against Richard Rudd Sr.; his wife, Dolores; their children and their spouses; and their company, Colorado Mufflers Unlimited, also known as Exhaust Pros, in the Denver suburb of Northglenn.

They owe more than $210,000 for taxes not withheld from paychecks of the company’s nine employees, according to court papers. In addition, the IRS erroneously refunded $88,768 that had been withheld from employees of the muffler business in 1997 and 1998

Last month, another corporate tax protestor, Richard Simkanin, the owner of Arrow Custom Plastics in Bedford, Texas, was indicted. He is being held without bail pending trial after a judge ruled that he was a threat to federal judges. On his Web site, Simkanin had threatened that any officials who moved against him would be consumed with fire.