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What happens when you refuse to pay taxes for 40 years?

MarketWatch logo MarketWatch 2/22/2017 Maria LaMagna
In addition to political demonstrations, some who oppose President Donald Trump have said they will not pay federal income taxes. © Provided by Dow Jones & Company, Inc. In addition to political demonstrations, some who oppose President Donald Trump have said they will not pay federal income taxes.

Ed Hedemann, who works as an independent contractor for several nonprofit organizations and lives in Brooklyn, hasn’t paid federal income taxes since 1970. He pays Social Security, Medicare, state and local taxes, but refuses to pay federal income tax every year because he opposes all war and spending on the U.S. military.

“There’s a lot of talk about people protesting because of Trump’s border wall,” he said. “That pales in comparison to military spending.”

Hedemann, 72, still files tax returns every year, and he doesn’t falsify any information on them, he said, but he’s still had plenty of legal problems as a result. With his tax returns he includes a letter explaining that he does not want any of his taxes to be spent on war or the military. He then takes the money that would have been allocated to the federal government and donates it to organizations he cares about, which have included Planned Parenthood, non-government funded schools, refugee aid groups and Parkinson’s disease research. In total, he estimates he’s donated $85,000, the amount he would have sent to the federal government.

Hedemann isn’t alone in his refusal to pay federal income taxes. There are entire organizations dedicated to providing information to those who don’t want to pay, including the organization for which Hedemann is a founder, the National War Tax Resistance Coordinating Committee.

It’s difficult to determine how many people decide not to pay federal taxes as a form of protest, and how many the IRS fines for that, Hedemann said. The National War Tax Resistance Coordinating Committee estimates there are several thousand each year who refuse to pay some or all federal income taxes, or refuse to pay federal excise tax for local service or landlines because they oppose war. The number has varied over the years and was likely at its peak during the early 1970s when an estimated 20,000 refused at least some of their income tax and 500,000 refused their telephone taxes, he said. Hedemann predicts the number will grow this year, and in the next several years, but “it’s way too early to tell.”

This year, there are some U.S. citizens who say they won’t pay their taxes because they oppose President Donald Trump’s policies, as the Guardian recently reported. Actress Mia Farrow and activist Gloria Steinem have both spoken about refusing to pay federal taxes in order to oppose Trump policies, including a wall between the borders of the U.S. and Mexico.

Steinem’s office confirmed to MarketWatch her comments in The Guardian, that this year she is planning to send funds to Planned Parenthood that otherwise would go toward her federal income taxes.

There is a long history of protesters like Hedemann refusing to pay taxes, said Kathleen DeLaney Thomas, an assistant professor of law at the University of North Carolina. The Internal Revenue Service has a history of fighting back against tax protest arguments as a valid reason to not file or to avoid paying altogether, she said.

“Historically, these don’t end well for taxpayers,” she said. “And I don’t see any reason they’d end well this time around either.”

The IRS did not respond to MarketWatch’s request for comment on Americans who refuse to pay taxes as a form of protest.

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“In realistic terms, this is not a good way to deal with things,” said Roberton Williams, a senior fellow at the Tax Policy Center, a joint venture of social and economic policy group Urban Institute and research group Brookings Institution, based in Washington, D.C. “The IRS knows who you are and where to find you.”

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Hedemann said the IRS has attempted to collect from him in various ways; in the past, when he was not self-employed, he would quit jobs before the IRS took a portion of his salary, he said. Now, he makes a point to never be owed money by his clients that the IRS could seize, he said, although he accepts payments for his work in checks and is rarely paid in cash. He has even closed a bank account so the government would be unable to locate his funds there. The Justice Department served him with an order to appear in federal district court in 1998; the judge did not find him guilty of being in contempt of the court, he said, after he refused to give any incriminating evidence about himself in court.

Although it’s rare for those who don’t pay their federal taxes to be jailed, that is a possible penalty, DeLaney Thomas said. In 2013, the singer-songwriter Lauryn Hill was sentenced to three months in jail for tax evasion due to failure to pay federal income taxes. Last year, she posted a message on Twitter saying she was working toward a resolution.

“This has been an ongoing process, and I have been working steadily toward a resolution,” Hill said. “It has been an uphill battle, but we’re getting over the hump.”

Those who don’t pay often face civil penalties. When Americans fail to pay their federal income taxes without “reasonable cause,” they may be charged a late penalty of 0.5% of the taxes owed for every month or part of the month the tax remains unpaid, up to 25% of the total amount, according to the IRS.

They also have to pay interest on the amount not paid: The IRS charges the federal short-term rate at the time, plus 3%.Some protesters may actually be giving up money by not filing their tax returns. The average tax refund is about $3,000, according to the IRS.

Hedemann said he encourages those who decide not to pay their taxes to keep enough money aside in case the IRS does try to collect.

He said he is glad he is part of the National War Tax Resistance Coordinating Committee so he’s not navigating the tax protests on his own.

“One of the great things about it, aside from the information available, is that if something should happen to me, like being taken to court, I can count on moral support from people in my area and around the country,” he said. “People will not allow me to disappear anonymously.”

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