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Wednesday, July 6, 2011

Court: Taxpayer Can't Force IRS to Audit Him -- 'There Is No Right to Pay Taxes'

Guess Blog of the Legal Times, Guess? Co-Founder Loses Suit for IRS Investigation:

Guess?, Inc. co-founder Georges Marciano has lost his bid in Washington federal court for an order forcing the IRS to investigate his tax returns and liabilities.

Marciano had argued that the audit could reveal money owed to the government that he believes former employees mishandled. In dismissing the suit on Friday, U.S. District Court Judge Henry Kennedy Jr. noted that the property rights protected under the Fifth Amendment don't guarantee anyone's right to pay taxes.

In his complaint, Marciano claimed that he uncovered evidence of “substantial financial irregularities” in his personal and business affairs around 2005. He believed he was the victim of identity theft, fraud, embezzlement and a host of other financial crimes.

As part of his investigation into these irregularities, Marciano alleges that he repeatedly asked the IRS for copies of previous years’ tax returns, but was told that they were unavailable. He claims he also asked the IRS to do an audit of his previous returns, but they refused. ...

The IRS moved to dismiss the suit, claiming Marciano had failed to state a viable claim and that the court lacked jurisdiction.

In his opinion,Kennedy sided with the IRS, finding that Marciano had failed to exhaust administrative remedies and that Marciano could not sue the IRS through statutes designed to give individuals legal remedies in cases where the IRS is demanding payment. ...

“The extraction by the government of money or property via taxation implicates a constitutionally protected property interest, but, as noted above, Marciano has asserted repeatedly that he owes the government money, rather than the reverse,” Kennedy wrote. “The Court is aware of no precedent establishing a protected property interest in the ability to pay taxes.”

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Comments

What the hell??? Dude can't hire an accounting firm to do an audit? This is a strange one...

Posted by: Joe Greene | Jul 6, 2011 12:41:16 PM

He may already have done so. I'm betting his local prosecutor is just choosing not to convict. I know a guy who got embezzled for over $100,000 and when he took his evidence to the prosecutor he was told, "Sorry, not worth my time. This is Silicon Valley, at a minimum I need $250k in damages plus something interesting. I just don't have the manpower to go after numbers that low."

Posted by: luagha | Jul 6, 2011 9:47:59 PM

basically he sued his former accountants for theft, they countersued for libed/emotional distress and won big. this is just one tiny part of that battle.

http://blogs.wsj.com/law/2009/12/15/when-lawsuits-backfire-the-georges-marciano-tale/

Posted by: anon | Jul 7, 2011 2:36:45 AM

I've often wondered whether (under the everyone-commits-3-felonies-a-day rule) individuals and small businesses could file global declaratory judgment actions against the federal government (include EPA, OSHA, Labor, DOJ, etc.). Kind of a put up or shut up thing, which would then free you from threat of any lawsuits under any random regulation in existence for any past behaviour... Also, I can see why Marciano would want the IRS to do the auditing. Under present disclosure regulations, if he uncovers something he coulda-shoulda known, he might be criminally/civilly liable. If the IRS discovers something, he can have more plausible deniability re knowing or should have known; if the IRS audit didn't discover it, he can't be blamed for not discovering it himself.

Posted by: Deeg | Jul 7, 2011 4:45:11 AM

Maybe he's trying to give himself cover against penalties (and maybe interest) in the case where IRS does audit and find he owes?

Posted by: Dan S | Jul 7, 2011 4:50:27 AM

Um, he's suing the wrong folks. He should be suing his tax accountants, and the folks he suspects of being in his cookie jar. He needn't worry. Once he's done with them, the IRS will be along for its pound of flesh. They'll just be along when they're ready, not when he wants them.

Posted by: Ed | Jul 7, 2011 5:07:49 AM

The proper thing for him to have done would have been to have reported the people he suspects to the IRS for tax fraud. If he is right he would have gotten a reward from the IRS for doing so.

Posted by: An Observation | Jul 7, 2011 6:54:54 AM

Why didn't he just take out a billboard ad against the current administration? They'd have no problem auditing him, then.

Posted by: CJ Casey | Jul 7, 2011 9:58:53 AM

Hmmm.

Only in America do millionaires go on strike for more money.

Only in America is it legally impermissible to force the government to shine a flashlight up your own a**.

Posted by: memomachine | Jul 7, 2011 10:14:27 AM

From what I understand, he did sue his accountants. And lost. And didn't like it. Therefore, the drama.

What I don't understand is why can't he get a copy of his submitted tax returns, I would think that would be a no-brainer.

Posted by: Georg Felis | Jul 7, 2011 11:09:35 AM