Anti-Tax Rebel Indicted On Tax Rap

Irwin Schiff holds a copy of his book "The Federal Mafia: How It Illegally Imposes and Unlawfully Collects Income Taxes," as he leaves the U.S. Federal Courthouse in Las Vegas, April, 11, 2003.
A federal grand jury indicted an anti-tax author and two others Wednesday for helping thousands of taxpayers file bogus returns.

Irwin Schiff, who wrote "The Federal Mafia: How It Illegally Imposes and Unlawfully Collects Income Taxes," argues there is no legal requirement to pay income taxes. Government lawyers have been pursuing civil actions to bar him from selling his book and holding tax seminars.

"There is no magic way out of paying taxes," said Eileen O'Connor, assistant U.S. attorney general for the tax division in Washington, D.C.

Prosecutors say the three were responsible for nearly 5,000 tax returns that fraudulently reported no income. These "zero returns" included zeros on every line related to income and expenses and often claimed a full refund of all federal taxes withheld or paid.

After filing the "zero returns," many of Schiff's clients faced IRS audits and tax collections.

The indictment says Schiff's business, Freedom Books, generated $3.7 million from 1997 to 2002. Schiff didn't report any income on federal tax returns from 1987 to 2002, hiding money in an offshore bank account, the indictment charges.

Schiff, 76, said he'll file a motion to dismiss the case.

"At my arraignment, I will plead guilty to all the charges if they can show me a law in the code that says persons earning income are liable for income taxes," he said.

The 33-count indictment issued in Las Vegas charges Schiff, Cynthia Neun, who helps Schiff conduct seminars, and Lawrence Cohen, an employee of Freedom Books, with helping prepare and file fraudulent tax returns.

Schiff and Cohen also were charged with tax evasion. Neun will face additional charges of willfully failing to file federal income tax returns, Social Security disability fraud and theft of government property.

If convicted, Schiff faces a maximum of 43 years and $3.25 million in fines; Neun up to 51 years and $3.4 million; and Cohen up to 27 years and $1.5 million.

The next court date is April 14; no arrest warrants were issued.

Schiff has been a regular visitor in federal court — two dates this week alone — since the IRS raided Freedom Books in February 2003. On Tuesday, he sought the return of some 14,000 documents seized in the raid; on Thursday, he's set to appear concerning a Justice Department request for an order requiring him to pay $2.5 million in taxes, interest and penalties.