WASHINGTON - A federal court in Las Vegas has issued a permanent injunction barring Irwin Schiff and his former associate, Cynthia Neun, from preparing federal income tax returns for others and from promoting Schiff’s fraudulent "zero tax" plan or other tax-fraud plans, the Justice Department announced today. The court order makes permanent a restraining order and preliminary injunction entered against the two notorious tax defiers in 2003.
According to the government complaint, the Internal Revenue Service (IRS) estimated that Schiff's customers attempted to evade more than $56 million in income taxes during a three-year period.
In October 2005, a federal jury convicted Schiff and Neun of conspiring to defraud the United States, aiding and assisting in the preparation of false income tax returns, filing their own false tax returns and evading the payment of millions of dollars in taxes.
The entry of the permanent injunction follows Schiff’s sentencing last month to 11 months in prison for criminal contempt of court. The 11-month sentence is to be served consecutively to the 151-month sentence that was previously imposed. Neun is scheduled to be released from prison in 2010. The permanent injunction ensures that Schiff and Neun cannot promote tax-fraud schemes from within prison or when they are released from prison.
In entering the permanent injunction, the court found that Schiff and Neun promoted abusive tax schemes, including Schiff’s "zero income" tax return scam, that helped customers file false federal income tax returns claiming they received zero income and owed zero tax. The court found frivolous Schiff’s "zero income" tax return scheme and his contentions that the "payment of income taxes is voluntary," "there is no law requiring Americans to file tax returns or pay income taxes" and that "the income tax only applies to corporate profits."
"The Internal Revenue Service and Justice Department have strong civil and criminal enforcement tools available to stop tax defiers who promote fraudulent schemes," said Nathan J. Hochman, Assistant Attorney General for the Justice Department’s Tax Division. "Under the National Tax Defier Initiative, the government has moved forcefully, effectively and strategically to shut down peddlers of illegal tax defier nonsense, like Schiff and Neun."
Assistant Attorney General Hochman thanked Justice Department attorneys Evan Davis and Michael Roessner, who handled the injunction case, as well as the many agents of the IRS’s Small Business/Self Employed Division and Criminal Investigation Division whose work aided the Justice Department in obtaining the permanent injunction.
Since 2001, the Justice Department’s Tax Division has obtained more than 355 injunctions to stop the promotion of tax fraud schemes and the preparation of fraudulent returns. Information about these cases, as well as the National Tax Defier Initiative, is available on the Justice Department Web site, as is information about the Justice Department’s Tax Division.