Tale of a daring taxman

By Bill Steigerwald
TRIBUNE-REVIEW
Sunday, April 10, 2005

It's nice to know my former accountant isn't in the federal pen anymore.

My taxman from the early 1980s -- let's call him Sheldon -- is apparently back in Los Angeles doing what he's really good at: working hard to help middle-class people save money on their taxes.

I couldn't get him on the phone when I called his office the other day. But my guess is that Sheldon is not quite as aggressive in looking for tax loopholes as he was when I met him.

Twelve years in federal prison for massive tax fraud can blunt even the sharpest accountant's pencil.

'Sheldon's Shelters'

Back in L.A. in 1983, Sheldon was a former IRS agent getting rich by democratizing tax avoidance. He was making it possible for hundreds of poor schmoes like me to take advantage of the same legal but shaky tax shelters designed for the wealthy.

I don't remember the details of "Sheldon's Shelters," as we called them. They had something to do with heavy-equipment leasing and rapid depreciation schedules and leveraged write-offs.

All I knew was if I paid Sheldon about $1,000 upfront to do my taxes, I'd get back every dime of federal tax I had paid in the previous three years, plus my 1982 tax bill would be zero. I couldn't wait to sign the forms.

Sure enough, as Sheldon promised, the IRS mailed me full refund checks for 1979, 1980, 1981 and 1982. Since I was a part-time copy editor making $21,000, my tax refunds totaled only $11,000. Several of my unmarried workmates' checks added up to $35,000 -- $67,000 in today's money.

It took seven years for the IRS to catch up with Sheldon, who was my taxman until he went to federal prison. After two years of living in terror of the mailman, I and hundreds of his clients had to pay back every dollar, plus interest.

My Aprils are no longer so exciting. TurboTax does my taxes now for $40 a year -- and never asks if I want to get into the latest tax shelter. But why would I ever risk getting into another one?

My federal bite in 2004 was a meager 6.3 percent of adjusted gross household income. Like most taxpayers in my five-figure income range, I paid more last year in Social Security payroll taxes.

I haven't sold out to the socialists. Like Judge Learned Hand, patron saint of tax consultants, I still believe that arranging your affairs to keep your taxes as low as possible is neither unpatriotic nor immoral.

I also still believe with Frederic Bastiat that the income tax is an act of "legal plunder" and hope to live to see the 16th Amendment repealed and the IRS disappear.

Tax it flat

Meanwhile, until that glorious day, I'm a fan of the Fair Tax, the proposed 23 percent national retail sales tax that would replace all federal income taxes, death taxes, capital gains taxes and Social Security payroll taxes.

The Fair Tax, which is slowly picking up supporters in Congress and among pundits, isn't perfect and it may ultimately raise my total tax bill. It's also revenue-neutral and therefore won't downsize Big Government. But it sounds pretty good for the real world.

Its proponents say, among many good things, that the Fair Tax would benefit the economy, let you keep your entire paycheck and make April 15 just another spring day. It'll also keep a few daring accountants like my old pal Sheldon out of jail.

Bill Steigerwald can be reached at bsteigerwald@tribweb.com or (412) 320-7983.

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