IRS calls local tax preparer a tax protester

Suing after it paid out nearly $1.2 million in fraudulent refunds, agency says she made 'absurd and utterly false tax defier contentions'

Email | Print By E. Thomas Wood

Web sites promoting the 'redemption' tax resistance concept often espouse conspiracy theories such as the notion that the United Nations wants to create 'one-world government' and that control of the Federal Reserve is in the hands of shadowy elites.

The Internal Revenue Service has filed suit against a Nashville woman, accusing her of being part of a nationwide tax-protesting movement whose adherents have fraudulently requested some $3.3 trillion in refunds over the past few years.

The tax authority claims that Karen Liane Miller, who lives in the Glencliff area, has been preparing false returns for like-minded people around the country since January. The allegedly illegal deductions her clients have claimed total more than $8 million, and IRS paid out $1.17 million of that in refunds, according to the complaint.

The government filed the lawsuit yesterday in Nashville's U.S. District Court. Today, the Department of Justice announced the filing of similar legal actions in Los Angeles, Panama City, Salt Lake City and Pocatello, Idaho. DoJ outlined the defendants' alleged actions as follows:

Under the tax fraud scheme, known as the "redemption" or "OID redemption" scheme, participants file a series of false IRS forms, including tax returns, amended returns, and Forms 1099 (including Form 1099-OID) or Forms W-2, to request fraudulent tax refunds based on phony claims of large income tax withholding.

According to papers filed in these cases and earlier cases against other alleged scheme promoters, redemption scheme promoters are tax defiers who falsely tell customers that the federal government maintains "secret" accounts of money for its citizens. Promoters claim to be able to help customers access the secret funds by filing the false IRS forms.

The IRS wants the court to impose an injunction on Miller, preventing her from filing tax returns for others or asserting the "redemption" concept in her own filings. The court can also impose monetary penalties on preparers for filing "frivolous" returns.

Miller formerly owned the Cubby Holes Self Storage facility on Westcap Road in Whites Creek. A bank foreclosed on that property in 2005, reselling it for $1.2 million.

Early this month, she submitted a "public notice, declarations and lawful protest" for certification by the Tennessee Secretary of State and recording by the Davidson County Register of Deeds. The document states:

Karen Liane Miller is a living breathing free Woman upon the free soil, an American citizen of the American Republic, beneficiary to the Original Jurisdiction. Karen Liane Miller is not a United States Citizen, subject, vessel or "person" as defined in Title 26 United States Code, Section 7701 or elsewhere, or any other ens legis artificial person, individual, entity, fiction of law, procedural phantom or juristic personality, notwithstanding the reproduction of any such fictions in any media, computer, record or instrument, written or electronic.

Several online providers offer legal forms and seminars meant to aid taxpayers in making arguments like the one Miller made.

The IRS ruled in 2007 that "any argument that a taxpayer’s income is excluded from taxation because... the taxpayer is not a person as defined by the Internal Revenue Code and is, therefore, not subject to federal tax, has no merit and is frivolous."

Assistant United States Attorney Michael L. Roden is representing the government in the Miller case, along with DoJ Tax Division attorney Brian H. Corcoran.