Inside the (my) world as a tax rebel

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My saga as a tax rebel lasted 15 years, with a happy ending, believe it or not. I could say that I backed into being a “tax rebel,” since once I quit IBM and started working for myself there were no easy income records for the IRS to get as there were when IBM filed a “W-2 Wage and Tax Statement” letting them know what they had paid me and what portion had been deducted to help satisfy my tax obligations. Also, at that time, I had very bad habits of recording my income and expenses. Nothing was withheld and, except for an occasional 1099 form that a client might submit, the IRS had no record of my income.

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Being a Libertarian "made me do it"

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However, even those “excuses” would have not been enough if it hadn’t been for my Libertarian leanings that had me regard taxation as “legalized theft.” With my Libertarian connections I knew of a Libertarian subculture that practiced and promoted tax rebellion, not in the form of “cheating,” like many people did it, but by using the law, at least one interpretation of it, to refuse to pay income taxes. 

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"I plead the Fifth"

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It was probably for the year 1969 that I first filed the IRS 1040 form, along with similar income tax forms for the State of New York and New York City, using the “Fifth Amendment” argument against self-incrimination, which included, “No person…shall be compelled in any criminal case to be a witness against himself,...” The IRS and other taxing agencies can and do use information provided on tax forms to bring criminal charges against those who provide that information.

 

Why others don't know about this? 

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So it seemed obvious to me that providing any such information on tax forms that could potentially be used in a criminal prosecution could only be compelled by those taxing agencies if they were willing to specify in writing in advance that no part of any such information provided could be used for possible future prosecution. Of course, no taxing agency would ever consider doing such a thing. They just want you to remain unaware that you had a right to plead "The Fifth" in protecting yourself against possible criminal prosecution by providing information on your tax forms.

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Trying to quash a subpoena

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I did provide my name and I think I even included my social security number when I file those tax forms each year. For all other requests for information, I entered “Fifth Amendment.” Understandably, the IRS does not like it when you do this. 

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I knew a fellow don’t-tread-on-me Libertarian, maybe more anti-government than free-market, who was more knowledgeable in what do than I was. So I consulted with him a bit. At one point, I learned that the government (I forget which level it was, maybe the State of New York) had subpoenaed some payment records from the telephone company about the money I spent on my telephone service. I showed up in court to argue my case pro se against the subpoena. I lost.

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Most Libertarians will frown upon what I was doing

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By the way, if you’re not really familiar with the Libertarian movement, don’t assume that most Libertarians are like me in that they would seriously consider doing what I did in “standing up against the IRS.”

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Special agents came to my door

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Except for the subpoena, the three taxing agencies left me alone for several years. Then one day two special agents showed up at the doorstep of the house that I was renting in Glendale, New York (south Queens). They requested that I come to their office for a discussion. I agreed.

 

Chatting with the good-guy/bad-guy agents

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I brought a tape recorder with me. I found it interesting that they played the good-guy/bad-guy routine. The meeting ended “good naturedly.” Later, when I shared the audio with my tax-rebel consultant, he was critical of me for showing my fear in my tone of voice.

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Maybe I should check with the experts

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After this encounter, I decided to check with some lawyers. I managed to make appointments with five different tax lawyers with offices in Manhattan, several of whom had switched sides from working for the IRS. I had to pay two of them $50 for the consultation, but the other three did it for free with the idea that it might get them a new client.

 

Experts are not necessarily experts

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I laid out my situation with all five lawyers. Interestedly, they all gave significantly different advice yet, at the same time, all their recommendations amounted to capitulating. After getting five different sets of “expert” advice, I decided that I might as well keep doing what I was already doing. These “experts” just talked a good show, but each of the five different prescriptions showed that either four of them, but most probably all five, were speaking through their hat.

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Was the IRS just letting a sleeping dog lie?

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The IRS never really came after me. I think there were several reasons for this.

 

They knew that I would never submit to a decision by a tax court, which is just part of the IRS bureaucracy. I would insist on a jury trial. And, even though a judge would probably instruct to the jury in the “law,” saying that the “Fifth Amendment” defense was not valid when it came to filling your 1040, the IRS would always have to worry about “jury nullification,” the right of a jury to disregard the “law” and find the defendant innocent anyway. The IRS would never want to take any significant risk in bringing a tax protester such as myself and the jury finding them “not guilty.” That sort of news would go national, something the IRS would do everything to avoid.

 

Messing with a nice guy could be deadly

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One final point of why they never came after me. Unlike most other tax protesters, I was an easy-going, friendly type guy, not the more common don’t-tread-on-me breed with a chip on their shoulder. When I had that interview with the two special agents, I am sure they reported to their superior how likable I might come across to the jury if the confrontation were made public. A chip-on-the-shoulder type of person, in contrast to someone like me who was just trying to claim my rights and help the government abide by the law also, would not likely garner any jury sympathy. Consequently, they might take the risk to go after that type of guy. Whereas with me, it would only take one juror to like me enough to hold out for a "not guilty."

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I wasn't a leader that would have been much more important to "bring down"

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Finally, since I was not an open evangelist for tax rebellion, inviting others to join me in this “glorious fight for our rights,” I was not a leader that needed targeting because I might affect what other taxpayers believed could be possible regarding paying their taxes.

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The IRS wants things kept "just between you and me"

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I do remember one other incident where I showed up at some tax offices, per their request, with my tax-rebel guy and my girlfriend Loretta. But when they saw that I had come prepared to tape-record the meeting, they would not proceed with their requested interview.

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You owe us $90,000, buddy...pay up! "Let's not go after him criminally...let's threaten him civilly" (al la Al Capone).

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Somewhere in early 1979, maybe because I had messed up in following some recommended tax-rebellion procedure, I learned that the State of New York had gotten a jeopardy assessment of around $90,000 against me. A jeopardy assessment is a special tax liability that occurs without notice. This course of action is taken in cases where the government taxing authority believes that a person is actively taking steps to conceal assets in order to avoid a tax levy. Then they may be allowed to create an arbitrary assessment and seize assets immediately, if possible.

 

LOL… I wish I had made so much money to have owed that much New York State taxes (according to them). Shortly after I got notice of that jeopardy assessment, I decided to move to Arizona (for reasons unrelated to the tax issue). I thought, “Maybe they will leave me alone out in Arizona.”

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The eye of the storm

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And that did happen. For five years I didn’t hear anything. By this time, I had gotten married and my wife Louise and I had bought a house together. I had told Louise about what I had been doing and was continuing to do, reassuring her that I thought we would be left alone. I was wrong.

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The perfect storm

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And it turned out to be a perfect storm of complications when it did. Louise and I had just put our signature on a once-in-a-lifetime deal with multi-millionaire Mansel Ocheltree when he bought the rights from us to “The Computer Poet” software.

 

"The Computer Poet"

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I had designed and programmed the software using BASIC on the Osborne microcomputer. It could easily be ported to other microcomputers using the CP/M operating system. Louise, the behind-the-scenes-poet, had written snippets of limerick-style poems that the software used to create customized three-verse limericks for and about people. Mansel’s new company, The Computer Poet Corporation, incorporated in Incline Village, Nevada was putting together “Computer Poet” kiosks, using the newly released Macintosh, to be placed in greeting card shops around the country.

 

The Poet in action

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Here’s an example of what The Poet could do based upon telling it the person’s name, where they live, two traits, and a message. It did all the rest, presented you with two different poems, inviting you to choose which one you liked, or even let it try again to create a third one to choose from. In this case, The Poet was told the name “Heidi” who lives in “Denver” who is “like a princess,” “loves dogs,” and with the message, “I’m sorry.”

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​​I'm really sorry, Heidi

 

A lass named Heidi there once was

For her I am writing some buzz

Yes, in Denver she lives

She's a princess that gives

Let me tell you of all that she does

 

She cares for and sure will impart

For a pooch, love fills up her heart

From Chihuahuas to Poodles

She sure craves ‘em oodles

A canine fan right from the start

 

I do hope you can forgive me

A smile's what I want to see

With love from my heart

And truth from the start

I say to you that I am sorry

 

Your prince Robert

PS: Hope we can talk...

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A sweet deal with more to come

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Our deal with Mansel was that we received $50,000 upfront, then a minimum of $4000 each month. Then, in any given month, if a specific percentage (I think it was 2.5%) of gross sales for the month exceeded that $4000, then we would be paid that higher amount for that month. We would continue to support The Poet in the process, with Louise writing new verse snippets and me working on software enhancements. Later I took on PR, getting The Computer Poet, which was renamed, “The Magical Poet” a lot of press. For example, a seven-minute video of us and our invention was featured nationally on PBS’ New Tech Times. Louise and I were riding the tail of the dream of a lifetime! Our goal was to make a major dent in the greeting card market.

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The storm develops

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As I said, I was wrong. The State of New York hired a debt collection agency based in California to track me down and collect that jeopardy assessment they had against me. A collection agent started calling me just about the time that we were in the middle of the negotiation with Mansel. I put them off. But I knew they were incentivized. They would keep a substantial portion of whatever they could collect from me.

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Louise and I were in a pickle

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Louise was scared. She had not bargained for this. In general, she was much more risk-averse than I was. And now that I was married to Louise, even though the house was in her name, a lien could possibly be placed on the house. Louise didn’t want to risk that and neither did I. What to do? There was no way we could come up with that kind of money. Even if we managed to make an installment agreement with the State of New York, we could be paying on it the rest of our lives.

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There is a way out! We only have to declare bankruptcy...

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We had just concluded the signing of our long-term business contract with Mansel. Both Louise and I felt we had to keep my State of New York tax problem secret and somehow handled “behind the scenes.” We decided to consult another lawyer. After explaining our tax situation but not the great business deal we had concluded, the tax lawyer suggested that we declare bankruptcy. Surprisingly to us, it seemed that, at least at that time, bankruptcy could be used to dispense with state income taxes, although it could not be used with federal taxes. The attorney also said I should refile my tax forms for the past three years, paying whatever was owed for those years. We proceeded with the plan.

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We thought we were out of the woods

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We breathed a sigh of relief, which lasted not so long. Mansel’s business attorney, who had negotiated with our attorneys for the deal we signed, happened to notice the legal notice of my bankruptcy filing in the local paper. Of course, he notified Mansel and Mansel called us. Shit was hitting the fan. Louise and I were so frightened of the deal falling apart with Mansel and The Computer Poet Corporation. A big emergency summit meeting was scheduled in Mansel’s attorney’s office in downtown Phoenix, along with our business attorney. We also asked our tax-bankruptcy lawyer to join us.

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Will there be a solution or not?

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Of course, the two sets of business lawyers were surprised to learn about the bankruptcy lawyer and vice versa. They were understandably quick to disavow any knowledge of what Louise and I were doing with the other lawyers.

 

I cried

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I was nervous and I showed it, not trying to hide it. I explained openly to the business attorneys about my 15+ years of being a tax rebel and the pickle I had gotten myself into. I even broke down crying a bit as I explained how important The Poet was to Louise and me and we would do everything we could to make this right.

 

Thank God for creative lawyers!

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Mansel’s attorneys were validly concerned that my bankruptcy filing would compromise the status of us having the right to sell this intellectual property to Mansel. After a bit of discussion, the three sets of lawyers had a solution. We would change my filing from “Chapter 7” to “Chapter 11,” which meant that it was a business reorganization bankruptcy filing, and Louise and I would retain the ownership of The Poet and other assets in the process of getting through the bankruptcy. Then our (prior) ownership of The Poet would not be in question.

 

OMG, Louise and I dodged a big bullet! We were so grateful to Mansel and all the lawyers for coming up with a viable solution for Mansel and his company to continue with our long-term partnership.  

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Mansel is proud of how much taxes he paid

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Mansel, in commenting on my attitude about paying taxes, bragged that he had set a record of paying more Arizona State taxes than any other person in history. That seemed a bit over the top to me, but I didn’t comment.

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Why was Mansel rich?

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By the way, Mansel was originally an Iowan family. He discovered that single-cross-bred corn was hardier and more productive than double-cross-bred corn. He was able to invent a way to create viable seed corn that was single-cross-bred. He founded a seed-corn company around this idea. Being a rather jocular, salesman type, at the beginning he went around to neighboring farms, almost forcing the different, conservatively oriented farmers to try it out the new seed corn. Step by step he was successful and, in the process, ultimately transformed the corn production of the entire world from double-cross-bred to single-cross-bred, making a "few" million dollars for himself and his wife in the process.  

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How rich?

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Although Mansel never told us directly how much he was worth, I was able to guesstimate that it was well north of $20,000,000. He owned a seven-million-dollar lakeshore home, with an indoor swimming pool, in Incline Village, Nevada. He and his wife Pat lived there during the summer. In the winter, he and Pat would drive their top-of-the-line motorhome to spend the winters in Paradise Valley, Arizona. Their home in Paradise Valley cost over a million dollars, which he bragged about when he was showing it off to Louise and me. When talking openly with his wife Pat in front of us about his desire to start up the Computer Poet Corporation, he was reassuring her, "We should be able to get this off the ground for less than a million dollars." He was "in retirement," but he was bored and he wanted something exciting to do again.

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I've gotten many good things in life against my intentions

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In retrospect, it was probably a very good thing that Mansel’s lawyer had outed us. That "Chapter 7" filing could have come back to bite us later.

 

I felt a bit bad (but not totally) for my other debtors, even the credit card companies. I could have easily paid off those debts. Yet I was legally prohibited from treating any of my debtors differently. 

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The bankruptcy judge declares us free and clear of the State of New York's jeopardy assessment

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When the time finally came to appear before the judge regarding the bankruptcy, we asked for special confirmation through our bankruptcy lawyer that the judge had declared the State of New York jeopardy assessment against me to be null and void. Yes!

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Looking back from January 2022: what I learned and how I grew

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Since that time, I’ve been on the straight and narrow regarding my income taxes. Looking back and having it all behind me, I can enjoy the adventure and drama of it all. I pushed the boundaries with the taxing agencies and discovered things that others never suspect. But I don’t need or want that anymore.

 

Whatever rebelliousness I had toward governments in the USA, or any government for that matter, has long since dissolved. I make a game out of paying whatever taxes I owe and otherwise abiding by the rules and regulations that may affect me. And, in general, I am thankful for many of the services that governments provide to me and others, even though the actions of those same governments often inflict significant and even deadly costs to many of their constituents.

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Louise became a lawyer working for Maricopa County in Arizona

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Ironically, I found that Louise later got her law degree and went to work as an attorney for Maricopa County in Arizona. We had separated and had a friendly divorce in 1991.