Tax Returns -- How To File
September 8, 2009
Last Revised: May 23, 2012 4:50 PM
In filing an income tax return in the US, possibly many other countries, there are two legal issues that should be understood:
There is an obvious expectation of honesty and truthfulness. In fact, the returns are normally signed to be true, under penalties of perjury. This does not completely answer the possible question of "what happens when you make a "mistake" on the return?"
1. The first issue is whether you KNEW or DID NOT KNOW, when you signed the perjury statement that some of the information WAS FALSE. The point here is that the "wrong information" must be given with the knowledge that it was "wrong." When this is proved it can be classified as a felony -- possible jail time for committing perjury.
2. The second issue is whether you BELIEVED that the information you provided was true and correct. The point here is that the information may later turn out, with new inspection or facts, to not be true. But at the time you signed the statement, you "HONESTLY BELIEVED THAT THE INFORMATION WAS TRUE AND CORRECT." You can believe you are right, even though, in fact, you are wrong, particularly if you can cite credible reasons for believing as you did. Often a magazine article is enough to persuade you, even others including the IRS, in the absence of any obvious data to the contrary, that you reasonably "believed your data was true" and did not know that the information you provided was wrong. This is called a misdemeanor under the IRS laws and regulations. A misdemeanor is punishable by a fine and interest, but not jail time. (There is a legal concept that, "You are presumed to know the law," but that can hardly be much enforced when you deal with the millions of pages of changing laws and regulations that you may be affected by.)
Based on these two primary rules, you must realize that SOME of the information you place in a tax return is generally obtained, precisely, from some official document -- such as a W2 (payment to an employee) or a Form SA - 1099 (payment to a contractor). If you received pay that was subsequently reported to the government, and to you, on a W2 Form, you cannot fudge that figure on your Form 1040.
You would hardly be expected to KNOW how much had been withheld from your pay check. If you use a figure for total earnings or total withholdings and that figure is a penny off from the actual figure on an official form? Can't be a problem.
If you, however, use a figure for your income of $1,335.54, and the actual figure was $14,892.11, it would not look logical to say "I made a mistake." (You may be called on to convince a jury, even just a judge, and the difference between $1,335.54 and $14,892.11 would be hard to call a mistake.)
However, you could "truly believe" that you were entitled to deduct expenses for use of part of your home as a business expense. There are explicit laws covering "home office deductions." If you use one room of your five-room house for an office and that room is used ONLY for your business, you might think you could "write off 1/5 th of your total house rental, but if the percentage of space used for this office was only 1/10 th of the total space the IRS might ask you to prove your deduction was within the law (which you are "presumed to know").
You could probably show the IRS a "newsletter from a tax attorney" that showed you could deduct cost of a home office on the basis of the percentage of all the rooms compared to the one room used for the office. If you had a 5 room house, used one room for the office, that would be 20% of the rooms but NOT 20% of the space. Most probably the law requires more than a "room count."
This example is trivial, but it should serve to illustrate the point.
There are many other areas where you might honestly believe, and even be able to quote a credible legal authority, something -- only to find out that your source had it wrong.
There is some gray area here, but if your "belief" sounds reasonable and cannot be easily shown to be wrong, it is not likely that the allegation of fraud, felony, will be made, or stand.
That, then, brings up the next important rule about filling in a tax return:
The third issue is that SOME of the data you are supposed to put in your tax return is so easily available to you that a "mistake" in that area would be unbelievable.
There is an assumption here that you ALWAYS FILE a return because there is hardly any credible reason that explains non-filing as a "mistake" and therefore only a misdemeanor.
For instance, if your sales are about $1,000,000 per year, you would not likely insert $100,000 for your tax return.
It would be illogical to claim you made a "mistake" of $900,000 in your return.
But, a mistake of $800, either way, would not be much of a problem if the actual figure were 1,000,800.
You should work with the simplicity of this data -- you now have a considerable POWER when it comes to data on your tax return.
SOME of the figures must be precise and not ever provable to be wrong. Each of these figures has a "label" a name, such as "total gross income" and some of these labels are carefully defined in the law.
Others of your figures must also have labels, the "significance" of the figure, but they are subject to someone's opinion of what is right.
If you buy a computer for your office, but take it home to use for personal computing, is it OK to charge the entire cost of the computer to your business activity?
It is in this area that "creative" tax reporting, or "defendable" tax reporting lies.
The guiding Policy I follow is from LRH:
A "PTS" is a potential trouble source by reason of contact with a suppressive person or group.
Suppression is "a harmful intention or action against which one cannot fight back." Thus when one can do anything about it, it is less suppressive.
I, Karl Loren, have devoted a lifetime doing something, "anything," about suppression.
In fact, this has been an extraordinary career of exposing suppression in the fields of health, particularly heart disease; in the field of cancer where I helped the Healer From St. Jude in Tijuana and cured my wife of esophagus cancer; in the field of taxes, with the IRS working diligently to put me in jail, but failing while I published a book (Trust, Taxes and Freedom) that virtually single-handedly forced the IRS to reverse some of the most suppressive techniques of tax collection; currently in the area of exposing the Obama Fascist Team, its intentions and successes, with publishing the Dark Times Digest; finally creating, in Vibrant Life and its new staff, a team that will continue these victories on into the future.
My work continues, personally, with, THIS DATE, September 14, 2009, with the creation of the Journal of the Golden Age which celebrates the FIRST BULLET struck into the heart of Local Master Puppet, Obama, when our modern Paul Revere, in this Second American Revolution, called out "LIAR" in the presence of the otherwise feckless Congressmen, violating the very rules of Senate Decorum that kept so many of the earlier Americans on the sidelines while the 56 who signed the Constitution risked and often lost their estates and, some who were not there to sign, their lives.
So, today, the great bulk of even the most "conservative" self-proclaimed warriors called for Joe Wilson's apology, while he was denounced as breaking the rules of decorum. THEN Fox News (with Rush Limbaugh, Sarah Palin and Greta van Sustern) started organizing the true soldiers (not the Congress) NOW willing to fight -- this time NOT with real bullets, but with exposures of lies, corruption and deliberate attempted destruction of the American economy and American freedom.
My earlier actions, with the Dark Times Digest, chronical many of the evil deeds by the Obama Team on this list of highlight pages:
Click here for my advice to Vibrant Life staff, vendors and customers for how to recognize and handle something about the global suppression now engulfing the financial sectors of the planet.
While my work continues, I am satisfied with what I've done and started into the future, to defeat planetary suppression.
My work is not finished yet.
. . . .
As such PTS personnel impinges on top executives, these can also go PTS and the org gets harmed to say the least.
As one cannot easily disconnect from suppressive society points without leaving the society, it remains that an executive must handle, if not the SP social groups, at least the situation developing from them and into the org.
Ideally one removes the SPs in the social groups. But where that is not possible one can do several things.
a. Limit the number of org personnel such groups contact.
b. Give such org personnel as do contact such suppressive elements [Search & Discoveries] occasionally.
c. Change such personnel frequently.
d. Develop a system to restrain the SP from easily influencing such org personnel as may may remain in contact.
e. Work gradually but steadily into a position to be able to remove suppressives from the social groups in question, such as becoming more influential as an org, suing, exposing, public education and other means.
The first indicator an org executive has of a unit or staff member going PTS is noncompliance. Such personnel are being overwhelmed in various ways by the SP social groups and have no energy left to undertake their duties or forward org programs.
Another indicator is the amount of illness and lack of case progress on the part of such PTS staff members.
A third indicator is an executive getting the hat of such a personnel on his own plate.
An executive who doesn't notice such indicators is being in turn PRS or simply isn't of executive caliber.
METHODS OF BALKING
There are several methods by which a staff member acting as an org contact point in connection with suppressives can balk the agents of SP groups.
One is to always tape-record visibly whatever the agent from such a suppressive group says. "Ah, Mr. Figuretwost of the Tax Division? Good. Now wait a moment so I can record whatever you say. Good. It's now recording. Go ahead." We used to handle the Internal "Revenue" Service of the US this way quite successfully. The org contact point always stopping the IRS inspector they sent around, turning on a portable recorder and then, and not until then, letting the man speak. Quite effective. That org only got into tax trouble when it stopped doing this. After the recording was dropped out as a drill, the SP utterances of IRS agents were in full cry at the staff and they went PTS and began to make crazy errors and ignore org orders re tax.
Any time such agents come around they try to get as many staff into it as possible. And yap and yap and threaten and enturbulate. One must put them in Coventry (silence treatment) from staff other than the contact point Staff members of a unit that could go PTS must be ordered to walk off without a word whenever such an agent shows up. No "bull sessions" or arguments with such a person. The staff personnel who handles should point at the agent if other staff is about and say some key word like "This is a government man" at which all other staff in the unit turns its back or pointedly walks off. If you do this, such agents can't take offense but they get very uneasy, transact quickly, forget their mission to be enturbulative and go away soon. Don't ever think politeness will help you. Tipping one's hat to snakes never stopped a person getting bitten. Walking off has.
Staffs are so "reasonable" they think these SP group representatives are there for necessary purposes or serve some purpose or can be reasoned with -- all of which is nonsense.
There are no good reporters. There are no good government of SP group agents. The longer you try to be nice, the worse off you will be. And the sooner one learns this, the happier he will be.
Some staff member in such contact points in the org should be the only one who handles and all other staff should be given chits for talking to such a person.
This limits the area of enturbulation. The handling staff member can become expert. But even so, watch for bad indicators in that staff member, and the moment they show up, change the contact point.
Never give such a person access to persons high up in the org -- or unit. Turn such over to special personnel who can get the business over with at once and get the agent off the premises soon.
If you see a manager snapping terminals with such agents, transfer him to another post in the org. Unless you do so, he'll soon cease complying with policy and will soon have the place falling apart.
When such agents act or sound very suppressive, get them investigated, find the scandal and attack. It is a fortunate truth such people also have crimes in their background that can be found. Find and expose them.
SPs are at war. Pleasant contact, mean conduct, any conduct at all is simply more war. So wage the back action as a battle.
In all the history of Scientology no interviewing reporter ever helped. They all meant the worst when they acted their best and we are always sorry ever to have spoken. Even if the reporter is all right, his newspaper isn't and will twist his story. We have done best when we have blocked off reporters and worst when we've been nice. So the moral is, a person from an SP group will eventually make an org or some part of it PTS regardless of the agent's conduct.
These words may seem harsh and unreasonable, yet truth is truth and only when we ignore it do we get fouled up. Agents from SP groups lead to PTS staff, units or sections, leads to noncompliance, leads to a mess.
It isn't just imagination that SPs attack Scientology. The evidence has been around in plenty for sixteen years.
We began to prosper the day we cut public SPs' correspondence off the org lines and sent it to dead file. Our executives began to function, policy to be followed and we began to grow.
So we'll attain new expansion just by applying what is in this policy letter.
I personally find such agents rather pitiful in their attempts to make trouble.
I think the contemporary attempts to upset us and accusations of things we never do quite prove the fact such mean us no good. But many staff and executives try desperately to be nice to them.
Handle the business they present as effectively as possible on special channels and happier org. After all, real suppressive only constitute about 2 1/2 percent of the total population. Why spend more than 2 1/2 percent your time on them?
The whole stunt is realizing that certain groups are SP and recognizing them and then handling them.
Be alert and stay alive. It won't always be this way.
L. Ron Hubbard
Source: HCOPL 26 Dec 1966, PTS Sections, Personnel, and Execs. Admin Know-How Series 12, (Remimeo) page 159, Vol 1, Mgt Series.
Eventually you run into questions on a tax return -- questions that do NOT involve the providing of a figure, but consist of a "yes or no" question, such as the line in the California Partnership Return in red below.
If you are not sure the past answer or a guess are correct it is worth spending a bit of time to look up the code reference.
L. Is any partner of the partnership related (as defined in IRC Section 267(c)(4)) to any other partner? .
You can guess, or use the same answer as last year without looking up the reference, or you can be safe and find the code section, which reads:
Section 267 of the Internal Revenue Code
Title 26 — Internal Revenue Code
Sub Title A — Income Taxes
Chapter 1 — Normal Taxes and Surtaxes
Subchapter B — Computation of Taxable Income
Part IX — Items Not Deductible
Updated: Tuesday, January 2, 2007
Section 267 — Losses, expenses, and interest with respect to transactions between related taxpayers
(a) In general --
(b) Relationships --
The persons referred to in subsection (a) are:
(1) Members of a family, as defined in subsection (c)(4);
(c) Constructive ownership of stock --
For purposes of determining, in applying subsection (b), the ownership of stock --
(4) The family of an individual shall include only his brothers and sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants; and (source)
Here are some "yes-no" questions which seem vital, but are usually so far from your normal operation that you need to look them up only once and be comfortable with reliance on using your previous answers. (Many of this type of question was brought into the Federal and State Returns SPECIFICALLY because of the success of Karl Loren, personally, in finding loopholes in the IRC which, when used, allowed legal reduction of tax liability -- Karl's personal motive in exposing these loopholes, as written in his Book, Trust, Taxes and Freedom, was completely achieved when the IRS made the changes.
Karl also appeared before a Federal Grand Jury, as a "cooperative witness" and "told the total truth"
U (1) Does the partnership have any foreign (non U.S.) nonresident partners? .
(2) Does the partnership have any domestic (non-foreign) nonresident partners? .
(3) Were Form 592, Form 592-A, Form 592-B, and Form 592-F filed for these partners?
Quotes from L. Ron Hubbard are copyright 1994 © by the L. Ron Hubbard Library. All rights reserved.