Taxing Lessons From Court Decisions

Decisions — Taxes and the Constitution

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Image source: National Archives of the United States [Public domain], via Wikimedia Commons
Image source: National Archives of the United States [Public domain], via Wikimedia Commons
Tax protesters generally seek to support their positions by citing the US constitution, such as stating the Sixteenth Amendment was never ratified. These claims are dismantled in tax court opinions on a regular basis.

But the US constitution does have a bearing on tax cases, particularly in criminal matters.

Here are three recent cases in which taxpayers asserted constitutional rights.


The taxpayer operated an under-the-table payroll scheme that allowed businesses to evade paying Social Security, Medicare and income taxes.

In March 2004, a magistrate judge issued a warrant that authorized a search of the taxpayer’s home. Four days later, armed IRS agents executed the warrant and seized evidence the government later used against the taxpayer.

The taxpayer was convicted in 2009 on one count of conspiracy to defraud the United States by obstructing the collection of payroll taxes and two counts of tax evasion.

He appealed.

His argument: The evidence seized in the search should be suppressed because the statute dealing with the authority of internal revenue enforcement officers (internal revenue code section 7608) does not grant IRS agents explicit permission to carry guns if they are not investigating offenses involving alcohol, tobacco, or firearms.

Therefore, the search was unlawful because the manner of its execution was not authorized by statute, and the performance of the search by armed agents constituted an unreasonable intrusion into his dwelling.

The case: United States v. Adams


The taxpayer submitted fraudulent federal tax returns for two separate trusts for tax years 2009 and 2010. The returns resulted in claimed refunds of $800,000. The IRS issued a refund check of $350,000, which the taxpayer cashed.

The taxpayer was convicted and sentenced to 41 months in prison for conspiracy to defraud the government and knowingly making a false claim to the government.

She appealed.

Her argument: The government indictment named only one of the trusts (involving two tax returns). However, the government introduced the tax returns of both trusts (four returns) into evidence.

Since the indictment specifically mentioned only one trust, presenting the tax returns of the second trust amounted to introducing evidence that invited the jury to convict the taxpayer on different bases than those set forth in the indictment.

The case: United States v. Betty Phillips


The taxpayer participated in tax schemes involving the creation of phony loans that formed the basis for fraudulent partnership losses. The losses were claimed as tax deductions on his individual tax return.

A jury convicted the taxpayer of three counts of filing false income tax returns. He received a sentence of 42 months imprisonment and was ordered to pay restitution and a fine.

He appealed.

His argument: His trial counsel labored under a prejudicial conflict of interest.

The taxpayer says his trial counsel’s relationships with three individuals who were involved in the same fraudulent scheme that gave rise to his convictions produced conflicts of interest. Those conflicts prevented his trial counsel from calling the individuals as witnesses to provide testimony at the taxpayer’s trial.

In addition, the taxpayer says his counsel had a years-long relationship with one of the tax scheme’s planners that became personal and was depicted in a romance novel the planner wrote. That planner prepared and signed two of the three returns the taxpayer was indicted for signing.

The case: United States v. Dehlinger


Note: Taxing Lessons provides a summarized version of sometimes lengthy court decisions. The full case may include facts and issues not presented here. Please use the links provided to read the entire case.

This information should not be considered legal, investment or tax advice. Taxing Lessons and Top Drawer Ink Corp. do not provide legal, investment or tax advice. Always consult your legal, investment and/or tax advisor regarding your personal situation.


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The Fourth Amendment (prohibits unreasonable searches and seizures and requires any warrant to be judicially sanctioned and supported by probable cause).

The First Circuit court of appeals held that a search of the taxpayer’s home conducted by armed IRS agents, allegedly in violation of internal revenue code section 7608, did not warrant suppression of the evidence seized.

The court said: Whatever intrusion may have occurred was not of constitutional dimension. While the defendant assuredly had a constitutionally protected privacy interest in his home, that interest is protected in the first instance by the warrant requirement of the Fourth Amendment—a requirement that was fully satisfied in this case. The defendant has not challenged the validity of the warrant, and the warrant authorized the agents to enter the home and conduct the search.

We add, moreover, that the fact that the agents were armed had no impact either on the scope of the search or on the extent of the evidence collected. Indeed, the record here does not show the slightest connection between the alleged statutory violation and the avails of the search. So viewed, the supposed violation was not a but-for cause of procuring the evidence. The constitution was not implicated and suppression was, therefore, unwarranted.

The Fifth Amendment (specifically the Grand Jury clause).

The Seventh US Circuit Court of Appeals said this argument was unpersuasive because the indictment could be read naturally to include all four tax returns.

“The first sentence of the indictment describes a conspiracy to “submit false, fictitious, and fraudulent claims” that lasted from March 2009 to April 2010. These dates include the returns submitted for both the trusts. The fact that only returns for one trust are mentioned in the indictment does not preclude the government from relying upon extremely similar evidence that also falls within the charged dates and of which the taxpayer clearly had notice.

Therefore, this was not a situation where “the proof at trial establish[ed] offenses different from or in addition to those charged by the grand jury.” Indeed, “admission of evidence intricately related to the charged crimes … does not constructively amend the indictment.”

This case is similar to a wire fraud case in which the government presented evidence about wire transfers other than the ones charged in the indictment, but which followed the same fraudulent pattern. There we found no constructive amendment occurred because “[t]he government simply supplied more technical details that easily fit with the allegations in the indictment.”

Here, the taxpayer submitted two returns that followed the same fraudulent pattern, and the returns of the second trust merely supplied “more technical details” about the mechanics and depth of the conspiracy. Accordingly, we reject the taxpayer’s argument that the government constructively amended the indictment.”

The Sixth Amendment (specifically the right to counsel).

The Fourth Circuit disagreed with the taxpayer, and affirmed the conviction. The court stated that generally, in order to prevail on a claim of ineffective assistance of counsel, the defendant must prove two things: one, that counsel’s performance fell below an objective standard of reasonableness; and two, that counsel’s deficiencies prejudiced defendant’s defense.

Based on its review of the record, the court concluded that the lawyer’s decision to refrain from calling the tax scheme planners was based on objectively reasonable strategic considerations.