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To be found guilty of tax obstruction must a person actually be successful in impeding the IRS’s functions?

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    Vintage / retro style : Blue ballpoint pen antique pocket watch two brass keys and a last will and testament on a vinyl desk pad. A form is waiting to be filled and signed by testator / testatrix.

    The crime of “tax obstruction” exists when someone (anyone) “in any way corruptly . . . obstructs or impedes, or endeavors to obstruct or impede, the due administration” of the tax laws. IRC § 7212. For more, see:

    An “omnibus clause violation,” a specific type of tax obstruction, aims to prohibit taxpayers from impeding the collection of a person’s taxes, the taxes of another person, or the auditing of either. See, e.g., United States v. Kuball, 976 F.2d 528, 531 (9th Cir. 1992). This raises the following question: To be found guilty of “tax obstruction” or an “omnibus clause violation” must a person actually be successful in impeding the IRS’s functions? As explained below, that is not required.

    Normally, when a tax obstruction violation is asserted by the IRS, the person has actually succeeded in impeding the IRS in its administration of the tax laws. Even so, such success is not actually required. There is no requirement that the taxpayer’s actions actually adversely affected the IRS’s tax audit or investigation.

    This question was raised in United States v. Rosnow, 977 F.2d 399 (8th Cir. 1992). There, the taxpayers (defendants) were investigated for various tax law violations, and they filed false Form 1099s “in an effort to cause tax problems for individuals involved in repossessing real estate and other property belonging to [the taxpayers] following the latter’s default on various loans.” The taxpayers issued this 1099 income to their creditors, attorneys, judges, sheriffs, law enforcement officials, and even IRS agents. Essentially, the goal was to force these individuals to pay more income tax than they were lawfully required to pay. One of the defendants claimed to have paid an individual $28 million; another defendant (Rosnow) filed 103 Form 1099s claiming to have paid out over $187 million; and another defendant filed 13 Form 1099s totaling over $86 million.

    As it turned out, the defendants’ strategy did not actually impede the IRS’s investigation of them. The court was unimpressed with their defense that they could not be convicted under IRC § 7212’s omnibus clause on the putative assumption that successful obstruction is required. The Eight Circuit reasoned that the defendants were guilty of tax obstruction because their issuing false Form 1099s was an attempt to impede the IRS’s investigation of them. “All that is necessary is that the defendants intended to ‘intimidate or impede’ the IRS officers,” the court said.

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