The IRS Is Coming For You

TAX CRACKDOWN [Morning Reckoning] September 14, 2023 [WEBSITE]( | [UNSUBSCRIBE]( The IRS Is Coming For You - The Republican-led House seems fine with AI-armed IRS agents coming for you. - Announced September 8th, the IRS seeks to “restore fairness” to the US tax system. - The IRS will have “increasing scrutiny” on the high-income, partnerships, corporations, and promoters abusing tax rules. [New LIVE Demo Video STUNS Crypto Investors]( In [this short 3:28 video…]( Crypto genius James Altucher reveals his most shocking crypto secret yet… A little-known secret that’s delivered over $1,170 in FREE crypto income per month. If you AREN’T using this affordable little device… You’re missing one of the best, easiest ways to earn real cash with cryptos. [Click here to watch this short 3:28 video NOW.]( [LEARN MORE]( Asti, Northern Italy September 14, 2023 [Sean Ring] SEAN RING Good morning Reader, Greetings from a gorgeous Asti, Italy. Everyone pronounces “IRS,” a three-letter agency, as if it were a four-letter word. And for good reason. Because no matter how you slice it, America is a police state writ large now. And police states look an awful lot like the mafia. What’s legal isn’t always moral. If you’ve been reading my column for a while, you know I think taxation is theft — though it’s better described as robbery. The IRS holds a gun on you if you don’t pay up. That, my friend, is the very definition of robbery. Murray Rothbard, the late, great Austrian School economist, put it best: The State is a gang of thieves writ large. He also said: Taxation is theft, purely and simply, even though it is theft on a colossal scale which no acknowledged criminals could hope to match. It is a compulsory seizure of the property of The State’s inhabitants, or subjects. Yes. And… yes. In this edition of the Morning Reckoning, I’ll walk you through what new legalized thievery the IRS has in store for you. [Biden’s 2024 Presidential Run Doomed To Fail – Thanks To New Inflation Surge?]( [Click here to learn more]( Biden has given America its worst inflation crisis in over 43 years. But if you think the worst of inflation is over, think again… [A deadly new “Second Wave” of inflation is coming – one which could send the price of food, gasoline, housing and more skyrocketing much higher than they are today.]( Will this new crisis mean Biden’s 2024 Presidential run is doomed to fail? [Click here now to see my urgent warning.]( [LEARN MORE]( What New Crowbars for Your Wallet? Here’s a sample of the goodies the IRS has in store for high-income taxpayers, partnerships, and corporations: High-Income Taxpayer Initiative: The IRS is increasing its focus on high-income taxpayers, individuals with incomes over $1 million and tax debts over $250,000. The High Wealth, High Balance Due Taxpayer Field Initiative expands on earlier efforts that collected $38 million from more than 175 high-income taxpayers. These high-value cases will be prioritized by a specialized team of Revenue Officers in the upcoming fiscal year of 2024. The IRS hopes to contact 1,600 people who allegedly owe hundreds of millions in back taxes. Expansion of the Artificial Intelligence-Powered Large Partnership Compliance (LPC) Program: The complex organizational arrangements of large partnerships present special tax complications. The IRS started the LPC program in 2021, initially targeting the most intricate partnership returns. More major organizations are being brought into this initiative as of late. The IRS works with data scientists and tax specialists to identify potential compliance concerns using AI and machine learning. The IRS wants to review 75 of the largest U.S. partnerships by the end of the month. These partnerships will come from various industries, including hedge funds, real estate, and law companies. The average assets of these companies are over $10 billion. Partnership Compliance Letters: The Internal Revenue Service has found discrepancies in the financial statements of partnerships with more than $10 million in assets. Over the years, these disparities have grown and now routinely involve multiple millions of dollars. Many taxpayers don't include the explanations that are required. The IRS will begin contacting over 500 partnerships in early October to rectify these disparities. The IRS will also focus on “targeted” compliance areas in 2024. For one, the IRS will increase its focus on digital assets through measures like the John Doe summons and the new broker reporting laws. Initial investigations suggest that up to 75% of taxpayers may not comply. In 2024, lawyers will pursue a greater number of cases. Many high-income taxpayers violate FBAR rules by concealing their income in offshore accounts. If you have over $10,000 in a foreign bank account at any time, you must file an FBAR (Report of Foreign Bank and Financial Accounts). The IRS expects to audit the most severe cases in 2024, and it has identified possible non-filers with average account balances of over $1.4 million. Labor Brokers: The IRS has seen instances where construction contractors are making Form 1099-MISC/1099-NEC payments to an apparent subcontractor, but the subcontractor is a "shell" company that has no legitimate business relationship with the contractor. The Internal Revenue Service focuses more resources in areas like Texas and Florida on this issue. Remember, AI isn’t foolproof. In June, I wrote in the Rude about [how a lawyer used AI and that ChatGPT made up the cases cited for his client]( So, it’s more important than ever to hire a good accountant and get your FBARs in order if you haven’t already! But let’s get into why income tax and, by extension, the IRS are anathema to freedom. Who Thought Up the Income Tax? In 1660, Denmark became the first country to impose an income tax. The one percent tax rate applied to all people and income levels. King Frederick III instituted the tax to generate revenue for the Thirty Years' War. Other nations copied Denmark's example. Both Sweden (1662) and England (1799) enacted income taxes. In 1848, Karl Marx used “A Heavy Progressive or Graduated Income Tax” as the second plank of The Communist Manifesto. During the Civil War, the United States enacted an income tax in 1861; it was later repealed. The 16th Amendment to the Constitution, which established the modern federal income tax system, was ratified in 1913. The income tax was established on the premise that it was a just means for a government to generate resources. The theory is that higher-income people should contribute a more significant share of their earnings to the government. Various schools of thought exist on categorizing and levying taxes on "income." The ability to pay is a central tenet of specific systems, whereas others emphasize the value received. Most countries impose a progressive income tax—the tax rate increases with increasing income due to the system's graded nature. The goal is to have everyone contribute to the government coffers, regardless of their financial situation. However, the overarching principle is that all taxes collected should be used to finance publicly provided services. That’s if you believe the government should provide those services at all. Why the Income Tax is the Root of All Evil. Frank Chodorov's book Income Tax: The Root of All Evil critiques income tax. Chodorov argues income tax is a violation of individual rights and that it’s a significant cause of economic stagnation and government tyranny. Chodorov begins by arguing income tax is a form of forced labor. He points out that income tax is not voluntary and is not based on any quid pro quo arrangement between the taxpayer and the government. He writes the taxpayer doesn’t receive any goods or services in exchange for their tax payments. I’d say the taxpayer gets compulsory lousy service from the government, or the taxpayer chooses to use private means if possible. Chodorov also argues that the income tax is a violation of property rights. He points out that income is a form of property and that the government has no right to take it without consent. Chodorov then says income tax is a major cause of economic stagnation. He points out that income tax discourages investment and entrepreneurship. When people know their income will be taxed, they’re less likely to invest their money or start new businesses. This slows economic growth. Finally, Chodorov argues income tax is a major cause of government tyranny. He points out that the government uses the income tax to finance its wars, welfare programs, and other wasteful spending. This leads to a more extensive and intrusive government, eventually leading to tyranny. I completely agree, especially with the last one. I’m an enthusiastic fan of the “starve the beast” plan. The more income you retain, the more freedom you have and the less the government must work with. But… never, ever cheat on your taxes. You’ll get caught eventually. Tax Freedom Day! Tax Freedom Day is the day in the year when the average American worker has earned enough money to pay all their federal, state, and local taxes for the year. In 2023, Tax Freedom Day for the average American worker was June 8. That’s five months out of twelve paid to the government. From June 9, you could keep your money. The good news, if you can call it that, is that TFD for 2024 is May 25. Wrap Up Sure, the IRS pledges not to go after people who make less than $400,000. But do you believe them? “If you like your doctor…” and all that? And what will they do with the extra 20,000 tax collectors they hired once the big guns are taken care of? Think they’ll fire them? I don’t. I think they’ll send them after you. So, I’m not enthusiastic about the IRS, its AI, or its army of collectors. I’d rather they just leave you alone. But hey, let me know what you think about it by emailing me [here](mailto:feedback@dailyreckoning.com). All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com X (formerly Twitter): [@seaniechaos]( [“The Mainstream Media Is Lying To You!”]( The media would have you believe that the worst of the supply chain issues are over. But the opposite is true… Behind the scenes, things are getting much, much worse. Bob Biesterfeld, CEO of one of the biggest logistics firms in the world, warns “the pressures on global supply chains have not eased, and we don’t expect them to any time soon.” This is going to impact every American’s life in a potentially major way… And I’m urging everyone I can to prepare now. [To see the #1 move to make before this problem gets any worse, click here now.]( [LEARN MORE]( In Case You Missed It… Bitcoin Bros Never Learn Greg Guenthner, Editor [Greg Guenthner] GREG GUENTHNER Good Morning Reader, I was mindlessly scrolling on my phone waiting for my turn at the barber shop when the kid started talking about crypto. I popped my head up from my screen and the barber and I exchanged annoyed glances. Like most old-school barber shops, this was a safe space for old men to complain about taxes and enjoy politically incorrect conversations without fear of cancellation. It was not a place to speak enthusiastically about pretend money. But the young lad didn’t seem to care. He went on to explain he just graduated college and was in the process of moving out of his apartment to head to California, where he was going to work at a crypto startup. Now, this particular barber was an old-school, motorcycle riding rock-and-roller who kept a loaded .38 by his beard trimmer and liked to collect silver coins. But he was polite enough to tell the kid he didn’t know jack about crypto, brushed off his neck, and wished him luck with his cross-country move. No one else in the shop said a word. It’s important to note this event took place well before Bitcoin’s first full-fledged rocketship ride to $18,000 in 2017. But Bitcoin was gaining traction. And normal folks (including a few old men who sit around in barber shops) were vaguely aware of its existence. But by my calculations, this occurred almost ten years ago. At the time, there was no reason to view crypto as a viable career path, trading vehicle, or money-maker in any capacity. Which is why the young crypto scholar received nothing but cockeyed stares when he revealed his master plan. All the Wrong Moves I still think about this encounter whenever something “big” happens in the crypto space. I wonder if he hit it rich, bought a Lamborghini, and lived the high life of a young mogul during the post-Covid crypto bubble… I wonder if his crypto startup ever got off the ground and cashed in on the alt-coin boom… And as Bitcoin knifes below support at $25K early this week, I wonder if the barber shop crypto savant ever had a moment of clarity and took some profits off the table during the boom times. As much as I hope he cashed out and rode off into the sunset with a few suitcases of US Dollars, a more realistic prediction is that he crashed and burned alongside so many other crypto believers. I wish this wasn’t true. But I’ve spent my entire career studying the bizarre habits of the investing masses. While I’ve encountered some smart (or lucky) folks who were able to break the spell and take profits near the top, most of us possess an inescapable urge to double-down or hold tight when the charts go parabolic. I suspect our young, inexperienced crypto bro did the same. After all, he had only known a world where the line goes up. Buy the dip! Any dip! It will always snap back! This strategy can lead to spectacular results in roaring bull markets. That’s why savvy fund managers love to lean on young, inexperienced traders during frothy markets. Older traders who’ve lived through a crash or two can hardly ever rake in the wildest gains due to their annoying reliance on risk management. But don’t worry — these grizzled vets are much better suited for today’s environment. Meanwhile, the young guns who survived last year’s bust are hopefully learning some valuable lessons. Crypto Reset vs. “Echo Boom” [Back in February]( we discussed the 2022 post-boom cleanse in crypto. Bitcoin was in the earlier stages of its rally off the November lows below $16,000, and had gained more than 40% thanks in part to the January tech-growth snapback. At the time, I asked if the previous year’s drawdown was enough pain to effectively reset the market and help launch a new rally. “My main concern with this crypto rally is that it’s happened too soon,” I wrote. “Yes, we’ve witnessed bankruptcies and scandals throughout the crypto world. The NFT market completely collapsed. The worst of the froth has evaporated. But was it enough?” In March, the market decided it was enough when Bitcoin broke above my line in the sand at $25,000. For reference, this is an important pivot as it also marks the relief rally highs from summer 2022. Six months later, we’re right back where we started. Yes, Bitcoin broke above $25K and rallied above $30K into the summer. But it failed to extend higher, and the rally is now losing stream. [chart] More importantly, Bitcoin price action has been uncharacteristically tame lately. Huge price swings and weekend volatility used to be crypto hallmarks. Now, Bitcoin barely budges. The most excitement we’ve enjoyed recently came after the Grayscale ruling snapped the coins out of their funk — but only for a hot second. The fact that Bitcoin and Ethereum posted big rallies on the news, then immediately gave back the gains speaks volumes. It’s beginning to feel like this year’s rally is turning into an echo boom — a temporary pop form a formerly hot asset that fails to kickstart a move to new highs. I’m also starting to see signs of some other Covid-era trends that are quietly dying off. We’ll talk more about these ideas next week. What do you think? Am I right about Bitcoin? Is this the end of the boom? Or just another long crypto winter we must endure before the inevitable march higher? Let me know [here](mailto:feedback@dailyreckoning.com). Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com Thank you for reading The Morning Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Sean Ring] [Sean Ring, CAIA, FRM and CMT]( is a former banker and financial educator and is the editor of the Rude Awakening. Sean has trained interns and graduates from Goldman Sachs, Morgan Stanley, Citi, Bank of America, Standard Chartered Bank, DBS (Singapore), the Abu Dhabi Investment Authority (ADIA), Bank Indonesia (the central bank), HSBC, Barclays, RBS, and BlackRock. He knows the global economy is being corrupted by forces that most people can't understand and has used his unique and worldly experiences to help people navigate the markets. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. 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