Washington (May 27, 2004) -- A federal court in Seattle has barred a Tacoma, Wash., resident from selling fraudulent tax schemes based on an argument that employees don’t have to pay taxes on income they get from U.S. sources.

Schemes based on the  “Section 861 argument,” named after the provision of the federal tax code it misinterprets, have been rejected as frivolous by numerous courts.

According to papers filed in the pending case, Jack Cohen, through his "Tax Ax" Web site, told employers to stop withholding federal income and social security taxes from the wages of their employees, and sold products such as the "W-4 Killer Pack," which he advertised as "a kit for employees who wish to stop the withholding process." He also sold the "Tax-Collecting Employer Challenge" for $250, a kit that told employees to send letters to their employers threatening to sue them unless they stopped withholding taxes from their paychecks.

Pursuant to the court's order, Cohen must post a copy of the injunction on his Web site and must remove all false statements about the tax laws on the site. The order also requires Cohen to send a copy of the court's order to his customers and requires him to give the Justice Department a list of his customers.

-- WebCPA staff

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