>> quick: millions of people do it... >> taxpayer, beware. >> quick: ...some innocently... some knowingly... some criminally. >> actor wesley snipes convicted of failing to file federal tax returns. >> it's over $5,000 a day, just in penalties and interest. >> there's many bad things that can happen. >> quick: cases can go to extremes. >> open that door now. >> quick: so why do millions still choose to cheat? >> we've demonized the tax system. >> quick: and how far is too far? >> anybody who cheats on their taxes intentionally is a crook. >> quick: this is the last place

you want your tax return to end up -- the internal revenue service forensic lab in chicago. i'm becky quick, and in this hour, we'll show you how special agents use csi technology to uncover hidden evidence of tax fraud. so, who is swindling the irs? it could be just about anybody. millions of americans knowingly lie on their tax forms, and every year, the government loses out on roughly $300 billion. but is cheating worth the risk? we'll meet one woman who lost nearly everything after falling for a bogus tax scheme, a former millionaire who's now in prison, and those who hate the irs so much, they've resorted to violence. lakeland, florida. 2008. randy nowak is a construction-business owner being audited by the irs. he failed to pay more than $300,000 in back taxes, and he's hiding $4 million in a jamaican bank account.

to the irs, he's just another tax cheat, until he goes too far. instead of hiring a tax lawyer, nowak decides to hire a different kind of professional -- a hit man. >> he apparently talked to people who were members of a biker gang, that he would like to have the internal revenue service employee -- a young woman -- deleted. he wanted her murdered. >> quick: nowak strikes a deal with his hired killer -- $20,000 for the agent's death. what nowak doesn't know is that one of the bikers has dropped a dime on him, and the feds are watching when nowak orders the hit. nowak has no idea he's really dealing with an undercover federal agent code-named the reaper. >> and it was the reaper who was

supposed to actually commit the murder to -- and dispose of the body and the motor vehicle. >> quick: at their second meeting, the reaper tells nowak the job is done, the agent is dead. >> mr. nowak paid the second installment of $10,000. and it is after the payment of that second installment that the arrest was effected. >> quick: randy nowak is tried and sentenced to 30 years in prison for attempted murder. >> he was a calculating psychopath, in my view. he wanted her "deleted" to ensure that he could avoid his tax obligation. >> quick: two years later, another american taxpayer goes after the irs with a vengeance. >> the whooshing sound airplanes make -- it was whoosh and roar and boom. >> quick: 53-year-old andrew joseph stack flies his single-engine plane into an irs building in austin, texas,

killing himself and an irs employee. stack has been in trouble with the irs several times and left behind a manifesto lashing out at the agency. extreme attacks on the irs are, thankfully, rare. most people don't resort to violence. but threats against the irs have increased 37% since 2008. and millions seem to share a deep disdain for the agency. [ crowd cheering ] in fact, more than one in 10 americans polled think it's okay to lie to the irs. a lot of people cheat on their taxes, and we're trying to figure out why. why do you think that is? >> people don't feel that they have a moral obligation or a civic obligation to pay. >> quick: mm-hmm. >> there is this notion that sort of, "everyone else is doing it, and i'm a dupe if i am paying my taxes when my neighbors aren't." >> quick: from celebrities to professionals, the wealthy and the poor, many seem to think that even though it's illegal, tax evasion really isn't all that bad.

people think it's like smoking pot. "if i choose to smoke marijuana, i'm not hurting anyone. if i choose to not pay taxes, i'm not hurting anyone." >> well, sure. i mean, tax evasion is, in a sense, a victimless crime, or at least the victim is a very remote victim. we don't really see exactly who's being harmed by it. >> quick: the current tax system is based largely on voluntary compliance, so it's easy to cheat. professor stuart green says many otherwise honest citizens become tax thieves and justify it any number of ways. >> almost everyone thinks the tax code is unfair. no one's really satisfied with what we do with our taxes. so whether you think we're spending money on unjust wars or spending money on supporting welfare, whichever side of the political spectrum you're on, you probably don't approve of the tax system. >> quick: according to a recent survey, 15% of americans admit they cheat on their taxes. and the most typical american tax cheat? single men under the age of 45,

many of whom admit they push the limits to see what they can get away with. whatever reason a tax cheater may have for trying to bilk the system, the odds of succeeding are actually in his favor. every year, barely 1% of all returns are audited, and only nearly 100,000 irs employees conduct civil audits nationwide. in most cases, they filter tax returns through a computer program called the discriminant function system. the system uses mathematical formulas to identify returns with discrepancies. attorney jeff schnepper, an expert on u.s. tax policy, breaks it down in simple terms. >> so, if you're living in beverly hills and you show an income of $20,000, there may be an issue. it's gonna click the computer. if you're living in the ghetto and you're showing a $30,000 charitable contribution, it's gonna click the computers. >> quick: still, most cheaters

are not caught. but before you think scamming the irs sounds like a good deal, think about this. >> if people paid what they owed, we'd fund social security, we wouldn't have a deficit. even states like california, in the long run, would be in the black instead of the red. >> quick: it's called the tax gap -- $300 billion a year in uncollected taxes -- the difference between what is actually reported and paid to the irs and what the agency says should be reported and paid. nina olson is the national taxpayers advocate. her government office helps taxpayers and proposes irs reforms to congress. >> essentially, the tax gap translates into $2,200 that each taxpayer pays for someone else not paying their own taxes. >> quick: and there's all this outrage at the irs. why not more outrage at the cheaters? >> absolutely. they're not cheating the irs, but your next-door neighbor is

gonna pay more in taxes if you cheat. >> quick: and then there's the possibility of becoming one of the 4,700 targets the criminal investigation division goes after each year. if you're suspected of cheating, the cid may soon be on your trail. and these irs special agents aren't just pencil pushers. >> we're accountants that carry a gun and a badge, and we'll find your money. we have undercover, we do surveillance, we have arrest warrants, we have search warrants. >> quick: overall, irs enforcement results are impressive. for every dollar they spend on investigations, they recover $4.50. >> our cases are criminal in nature. they're not a misunderstanding of the tax code or an adding-machine error. the folks we go after are those folks that lie, they cheat. it's not, you know, a real gray area. it's very black-and-white. >> quick: what's the lowest level of taxes owed that your office might get involved with? >> there's no minimum dollar, and there's no maximum dollar. we work cases as low as $10,000

and as high as $100 million. >> quick: it doesn't matter what you're worth. if you're a cheater, the irs wants to find you. coming up on "the american tax cheat," country-music legend willie nelson sells his memories to help pay a $16 million tax bill. but first, small-town accountants turn unwitting clients into tax evaders. >> he said, "you know, you could clients into tax evaders. >> he said, "you know, you could look at prison time for this."

>> quick: high up in arizona's white mountains, railroad supervisor shirley cornett finds out how far the irs will go to recoup their losses. for several years, she uses a local firm named accurate consulting to prepare her taxes. >> they've been around for 25 years, up here in our little small community, and been preparing taxes for that long. >> quick: accurate had been getting her about $4,000 a year in tax refunds. then, in 2008, the firm tells clients about special new tax-preparation methods that yield even larger refunds, with the company pocketing 10%. they tell cornett it is a well-kept secret normally reserved for a privileged few. >> it was the way senators,

congressmen, you know, everybody in the government prepared their return, and so that's how they were gonna do it for us. >> quick: the new system yields cornett a refund 20 times greater than the previous year. >> me and my husband make around $200,000 a year. their refund for that year was $83,000. and it was astronomical compared to what we'd ever received before. >> quick: she questions her preparer about the amount. >> i was like, "are you sure that's right?" and she says, "believe me, everything we've done is right." and i said, "is it legal?" and she said, "everything we've done is legal." >> quick: the cornets cash their $83,000 irs check and use it to remodel their home, but soon after, the small town starts buzzing with disturbing rumors. >> that the irs had come in, in full task force, to accurate consulting and was going through their files and that sort of thing. >> quick: the cornetts know they're caught in a bad

situation. >> my husband said, "we need to get an attorney. we need to get one now, because i'm afraid we're in a lot of trouble." >> quick: the principals of the accounting firm are indicted on criminal charges of conspiracy to defraud the government and suspected of filing more than $24 million in fraudulent tax returns since 2001. >> we'll go after those unscrupulous return preparers and put them in jail. but what's unfortunate is those clients that come in and get sucked into that, they're responsible for all the back taxes and penalties and interest. >> quick: the cornetts and the 122 other clients of accurate consulting can't escape the long arm of the irs. their fate was decided by their own hands. >> if you sign the return, you're swearing to the accuracy of the return. and if you don't look at it and if you don't ask questions, you're responsible, you're liable. >> my attorney told me that. he said, "you know, you could look at prison time for this. your irs return for that year is fraudulent.

first thing we have to do is get your taxes amended." >> quick: cornett files an amended return and avoids criminal charges, but she and her husband still owe the irs $110,000 in taxes, penalties, and fees. their wages we haven't quit our jobs, even when we're not getting a paycheck. we're still going to work every day. you have to keep going. what i want to get out there is, taxpayer, beware. be careful who you pick to do your taxes. >> quick: the rich and famous can afford the finest accountants, yet time and again, we see them in trouble with the irs, as well. in 2011 alone, actor al pacino, director martin scorsese, and

willie nelson with $16 million in back taxes and penalties. >> it's over $5,000 a day, just in penalties and interest. >> quick: the agency seizes most of nelson's assets. they stage auctions of his personal belongings, and fans rally to support him. >> i think it's a shame, you know, that that has to be happening with him. that's why i'm here. i'm here to support him, help the man out, give him some money. >> quick: nelson blames his tax trouble on bad advice. >> i feel like that i was duped. i was advised to go borrow $12 million over here and get into a tax shelter. >> quick: to pay off his debt, nelson releases an album called "the irs tapes: who'll buy my memories?" >> they didn't take my ways of making a living. so -- and they can't take that. so, fortunately, i'm still

healthy and i can still work. >> quick: officially, the irs says it doesn't hunt for high-profile cases, but exposing a-listers' tax troubles pays off twofold -- recouping lost revenue and deterring the masses from cheating. the former chief of the irs criminal division sheds some light. >> they are clearly in what we call the general-deterrents business. the few cases are brought to deter a much larger number of people. hence their need to get the best publicity and attention they can to those relatively few cases. >> quick: the irs does admit to taking a closer look at your return if you happen to be wealthy. >> the irs spends much more of its resources auditing much higher-income individuals, because, you know, that's where the money is in the system. >> quick: in 2009, the irs creates a task force to focus on wealthy americans. a year later, audits on those earning at least $10 million jumps 64%.

the strategy has its critics. >> i think it's bad tax policy to make them out to be the enemy and to target them out for selective and very aggressive audit and collection procedures, because businessmen and women, or entrepreneurs, are the engines of our economy. >> quick: but for the irs, it makes sense to go where the money is and welcome the press that goes with it. big tax stories scare even small taxpayers. and that fear makes it more likely that most americans will comply with the tax code, and most do. in 2009, americans paid the irs more than $2 trillion in total tax revenues. but for those who don't pay, the criminal investigation division is on the case. >> our job is to increase that voluntary compliance and narrow that tax gap. >> quick: next on "the american tax cheat," tax protesters openly revolt. >> are you that oblivious to what's truly going on in this country? >> quick: but first, a millionaire behind bars.

>> i told my lawyer that i didn't do it. >> they were making the case that, of course, he was the biggest individual tax evader in that, of course, he was the biggest individual tax evader in history.

>> quick: every year, nearly 300 billion tax dollars escape the coffers of the internal revenue service, and irs criminal investigators search the globe to recover the missing billions. on the white-sand beaches of the caribbean, the irs finds the

biggest tax-evasion case in u.s. history with telecom entrepreneur walter anderson. in the early '90s, anderson's company mid-atlantic telecom merges with frontier communications. the deal nets anderson more than $6 million. he transfers the profits to offshore companies in the british virgin islands and panama and continues to invest in telecom projects, increasing his wealth by more than 60 times in just seven years. in this exclusive phone interview, walter anderson acknowledges his success. >> we were at the right place at the right time. we got very lucky. we -- on paper, the value, by, certainly, 1999, was over $400 million. >> quick: throughout the late '90s, anderson travels by private jet, purchases expensive artwork, and donates more than $40 million to fund private space exploration. >> walter anderson played an

important role in actually getting the first space tourist, dennis tito, up to the international space station. >> quick: tito, wide-eyed, weightless, but feeling right at home. in 1998, anderson's british virgin islands holding company, gold & appel, earns $126 million. but he reports just $67,000 in income and pays less than 500 bucks in federal income tax. the irs begins investigating anderson, but the millionaire says he has no reason to be concerned, claiming that his offshore companies had been created to fund charitable ventures and that he would not personally see any of the profit. >> i can't do anything that would effectively move money from gold & appel into my pocket. if i did, i would have a tax liability, obviously, because then it would be my personal money. >> quick: he says his offshore

dealings are transparent and legal. >> none of this was done outside of the light of day and does not have a u.s. tax liability, according to u.s. law, according to my lawyers, my advisers. >> quick: the irs does not agree. it charges that anderson devised a complex network of offshore companies to disguise his true stake in the profits of gold & appel and that he had one goal in doing so -- to avoid paying u.s. taxes on more than $400 million. in february 2005, after a 5-year investigation, irs agents arrest anderson at dulles airport on charges of criminal tax evasion and fraud. considered a flight risk, anderson is sent to jail. two years later, and still behind bars, awaiting trial, he pleads guilty to all charges and is sentenced to nine years in federal prison. from his cell, anderson insists that, despite his confession, he

is, in fact, innocent. he claims that the terrible conditions of the jail drove him to plead guilty. >> i pled guilty, and it was -- i was coerced. i was treated really, really badly. but i told my lawyer that i didn't do it. i told my friends and family that i was very unhappy with the idea of pleading guilty. >> quick: tax expert jeff schnepper isn't buying anderson's claims of innocence. >> there are gray areas in the code, but when you talk about an anderson, it's really relatively simple. did you have income? are you an american citizen? you have to pay the tax. >> quick: walter anderson may yet owe $100 million in restitution to the irs and the district of columbia as his case makes its way through civil tax court. the former space pioneer and telecom mogul is not scheduled to be released until 2014. because the case is active, the

irs won't comment. there are countless other americans who have been stashing their money in overseas banking institutions and getting away with it. for more than 70 years, foreign secrecy laws shielded u.s. accounts from the irs -- that is, until late 2006, when congress strengthened the whistleblowers program and gave the irs a valueable collection tool -- motivated informants. >> if you've got evidence of tax evasion by someone else, you can come in and disclose that information, and the whistleblower can earn as much as a third of the taxes that are recovered. >> quick: in late 2007, former ubs banker bradley birkenfeld registers with the whistleblowers office and provides details of u.s. accountholders that ubs has allegedly concealed from the irs. the u.s. government sues the swiss banking giant, accusing it of assisting 19,000 u.s. clients in hiding close to $20 billion. in 2009, u.s. courts forced ubs

to pay a $780 million fine and release the names of more than 4,000 u.s. clients to the irs. do you think this is a real game-changer? because, i have to admit, i always assumed that people could keep money if -- if they were smart enough and rich enough, they could keep money in a swiss bank account -- maybe they could keep it in the cayman islands -- and just avoid all of this. >> and that's what, for years, folks thought. we're now working criminal investigations on those folks and civil audits on those folks. i'm just making incredible inroads in getting information from foreign governments, identifying u.s. taxpayers that think they can hide money. and my agents are out there finding that stuff, and there's nowhere where they can hide that money. >> quick: in may 2009, the irs offers a 5-month voluntary disclosure period. "come forward, and you won't face criminal charges." 15,000 americans reveal their hidden foreign accounts. >> the account ranges were anywhere from $50,000 to

$100 million. the number is staggering. we got that money. we got those taxpayers to come back into the system, pay the tax and interest and penalties that were due on that. >> quick: in january 2011, wikileaks, the organization built on leaks of classified data and other secrets, announces that it intends to release the name of 2,000 u.s. accountholders at the swiss bank julius baer. at a press conference, wikileaks founder julian assange accepts the information from former baer banker rudolf elmer. [ camera shutters clicking ] i bet it's even worse, now that they hear they drumbeat of not knowing if it's gonna come out on wikileaks that you've been evading your taxes. >> wikileaks is a good example. switzerland was just the tip of the iceberg. in my 23 years, i've never had this many banks under

investigation. it's just the recognition that the gig is up, as far as hiding money internationally. >> quick: the number of hidden foreign accountholders is still unknown, but estimates claim that they may rob the treasury of 100 billion tax dollars every year. in february 2011, the irs launches a new period of voluntary disclosure. "come clean within six months, or risk criminal prosecution." next on "the american tax cheat," an irs crime lab straight out of "csi." >> this is a class 4 laser, which is one of the most powerful lasers you can use. >> quick: and see how tax collectors help take down some of the country's most vicious criminals. >> we're talking about some of the cruelest people i've ever met in my life, and i've worked gangsters, i've worked met in my life, and i've worked gangsters, i've worked everything. give up caliving, because

rohove hereplaced the l egs. w and noy hoveround cohimes with tndy tote bag and fcup holder force aco your favorite items. and gright now,his d limited edroition hove erica travel mug freeth wir hoveround delivery. [singiunng] hoveround takes me where i wanna go. call or log cohoveround. find out where a hoveround ycan take >> quick: the internal revenue service has been collecting taxes since 1913, but it's during the prohibition era that irs special agents make their mark as c.i.s -- criminal investigators -- with their most infamous target. >> public enemy number one? they don't come any bigger than

alphonse capone. >> quick: at the irs archives in washington, c.i. deputy director rick raven proudly shows off the original al capone case file. >> of all the years that law enforcement tried to get him on the prostitution and the bootlegging and the organized crime, it was this income-tax investigation that actually put him in jail. for that time, the amount of unreported income was well over a million dollars. >> quick: this is amazing. i mean, in some cases, it says that his meat and poultry bills were anywhere from $20 to $50 a day. >> and that's the level of detail that our special agents get down to, is, "exactly how much are you spending, a day, on food?" >> quick: yeah, this is pretty thorough stuff. but this is the same way you do things today? >> it's exactly the same way we investigate today. we track expenditures of taxpayers to see where that money is going. we follow the money. we followed it back in 1933, and we follow it today. >> quick: only today, in capone's hometown of chicago, agents at the national irs crime lab have a new arsenal of tools as cutting-edge technology

uncovers physical evidence of tax crimes. so, it's your job to find the smoking guns? >> that's exactly what we're looking for. >> our crime lab functions just like a crime lab for the fbi or for atf or any other agency that's out there. we see hundreds of cases a year that come through the lab. >> quick: in the latent-print lab, diode class 4 laser testing can tie an individual to a suspicious document. so, is that enough to positively identify who touched something, without an inch of doubt? >> absolutely. >> quick: luminescent testing uses filters to reveal that, first, one type of ink... >> depth of filters. >> quick: ...and then another were used on this forged check. okay, so that means it's different ink? this is telling me that that check was originally written out to mr. thomas here, and that was a check for $1,000, not $21,000. >> correct. >> the dollar amounts can be pretty staggering -- hundreds of millions of dollars in false returns that have been filed.

and we see those tax returns come through here. it's like what we describe as an investigative pie. >> quick: another slice of the pie? computer specialists, who work 95% of cid's cases each year, scour suspect hard drives for clues to tax fraud and even search social-networking sites. >> people brag about the money that they've made. they brag about the vacations that they've taken, the assets that they've accumulated. and those items all play into an investigation. >> quick: al capone couldn't brag about his exploits on facebook. his downfall was his flamboyant lifestyle. many of today's criminals also think they're untouchable. in las vegas, nevada, pimps running illegal prostitution rings boast about living large and unwittingly place themselves squarely in the cross hairs of the irs. >> open that door now. open the door.

>> quick: in february 2011, the las vegas metro police and swat team descend on a home in a quiet suburban neighborhood. they arrest a suspected high-level pimp accused of forcing a young woman into prostitution. it's a typical las vegas vice case, only these days, police have backup from the feds -- the irs. >> why does irs work with local law enforcement? >> i will tell you that we're in the business of hunting down big tax evaders, regardless of their income source. there's a strong correlation between criminal activity and tax evasion. >> quick: which is why the las vegas vice squad teamed up with irs criminal investigators to take on the leaders of prostitution rings. for several years, police have seen an upswing in violence against prostitutes. >> murders, stabbings, torture. these women are strangled, they're burned, they're raped,

they're abused. it's a very, very violent subculture. >> quick: but with lenient state sentences for prostitution and pandering, arrested pimps can be back in business quickly. so vegas police look to the irs to apply the capone treatment -- follow the pimps' money and seize it. >> in the prostitution subculture, status is everything -- jewelry and clothing and brands of clothing and houses. when you bring somebody of that status down, it's speaks volumes to his pimp friends. if i can get the u.s. attorney's office to prosecute one of our pimp cases because there's tax evasion or a money-laundering component, they'd better be afraid. >> quick: the vegas vice-irs partnership began in 2009. in one of their first cases together, they brought a violent pimp to justice. >> his name is kramer -- fidaryl kramer. and he lived in a pretty exclusive neighborhood where

you'll find a lot of judges and, you know, attorneys, people of influence, that kind of thing. >> quick: kramer had two luxury homes and three prostitutes working for him. after he beat one of the women, she turned to the police and led them to kramer's doorstep. search warrants uncovered the spoils of a criminal enterprise. >> there's jewelry sprawled across counters. there's, like, hidden places with stacks of thousands, you know. $5,000 here, $10,000 in the drawer over there. there's mercedes-benzes, there's range rovers, there's maseratis. >> quick: kramer is arrested but faces a maximum sentence of just five years. waiting for his criminal trial, he makes a deal for the asset part of his case, surrendering half of the nearly $400,000 in cash seized by police. >> the best part is that, basically, this guy thinks he's gonna get away, he's gonna get the other $200,000 of the cash, along with some jewelry -- some very expensive jewelry -- and

his cars, so he thinks he's making out. >> quick: then, the irs shows up at his jail cell. >> they had put a lien on everything. and at the same time that they're handing him the paperwork, the agents are going into the different properties. >> quick: ultimately, kramer surrenders it all and is convicted on two felony counts. he receives a suspended sentence and is now out of the las vegas prostitution business, living under strict probation in texas. >> it was great because he was left with nothing, you know, which is pretty much what he left his victims with -- with nothing. >> ours is the al capone legacy, and that is relentlessly following the money and bringing to justice people who thought that they were untouchable. >> quick: next on "the american tax cheat," many resent paying taxes. but what if you believe you don't have to? >> he was convinced, at one point, that the tax laws were unconstitutional.

>> quick: and some take their defiance to the extreme. >> we either walk out of here free or we die. >> quick: we'll be right back.

>> quick: tax cheats have one thing in common -- hiding their money from the irs. [ horn honks ] but across the country, groups of self-proclaimed tax protesters openly denounce the

tax system. [ crowd cheering ] some loudly proclaim their right to not pay taxes. >> of course i didn't give them a dime, because i reported only zero income. >> quick: these are people who fundamentally believe that the government has no right to force them to pay taxes. where do they fall? >> you know, they go to their seminars and they subscribe to their pseudo-history of their understanding of constitutional history and so forth, and they think that the tax code is somehow unconstitutional. >> quick: the anti-tax movement has attracted followers from all walks of life, including international film star wesley snipes. in december 2010, snipes reports to federal prison for tax evasion. the government alleges that snipes tried to defraud the irs, using a tax-protester theory that income is not taxable. it also says he filed no returns from 1999 to 2004 and that he filed an amended 1997 return claiming a $7 million refund.

attorney robert bernhoft represented snipes at his criminal trial and says his client is not entirely at fault. >> wesley snipes hired some cpas and tax attorneys, and he relied on them, and the advice they gave him was very, very bad. >> quick: somebody like a wesley snipes, who's not paying taxes, who owes millions of dollars in back taxes. >> wesley is an excellent actor, but he sucks as a tax preparer. [ laughs ] he was convinced, at one point, that the tax laws were unconstitutional, that he didn't have to pay taxes on certain of his income. i don't blame wesley. i blame his advisers. >> quick: you think he's a victim? >> i think he's a cooperating victim. >> quick: for his part, snipes says he's actually not a tax protester but someone who put too much trust in his advisers. >> people whom i thought had the -- the knowledge and expertise in the areas of

finance and tax law, that would protect my interest. >> quick: but for any taxpayer, bad advice is not necessarily an acceptable defense. and for wesley snipes, it means that 3-year prison sentence. his former attorney believes that snipes was treated unfairly. >> there's no doubt that that harsh sentence was imposed, in large part, again, to send a message to other americans, that, "look, if we can send wesley snipes to prison for three years, don't mess with the irs." >> quick: for hard-core tax protesters, it seems no message is strong enough to convince them to pay, even if it means jail time or worse. in the small new england town of plainfield, new hampshire, edward and elaine brown appeared to be a model couple. he's a retired exterminator, she's a successful dentist. but they are also self-proclaimed constitutional rangers who believe that no law exists requiring them to pay federal income tax.

>> i wanted to bring this to the attention of the general public. so, the only way we could do that was through civil disobedience and say, "hey, okay, let's stop paying taxes for a while and get everyone's attention." >> quick: for seven years, the couple does not file tax returns. in january 2007, the browns are convicted of tax evasion and fraud and ordered to pay the irs $625,000 in back taxes. again, they refuse to pay and barricade themselves in their home. seeking a peaceful resolution, law enforcement keeps a loose perimeter, allowing supporters and the media to come and go. >> we have no wish to have a violent encounter with them or, in any way, shape, or form, have to hurt either one of them. >> quick: believing they are under siege, the browns attempt to rally their fellow tax protesters. >> if they come in, it's -- we're dead. that's it. we will not -- we will not -- we will not be arrested. we will not volunteer to go into

their prison for a non-crime. we have committed no crimes. >> so we don't submit to any of this intimidation. >> we told them we either walk out of here free or we die. >> quick: in october 2007, six months into the standoff, u.s. marshals pose as supporters and enter the brown house. >> by the time ed and elaine brown realized this, they were in custody. >> quick: in 2009, they are convicted of multiple obstruction-of-justice and weapons-related charges. each is sentenced to more than 30 years in federal prison. next on "the american tax cheat," what do you really know about the qualifications of your tax preparer? >> we found one place that was a dog groomer's salon, but they >> we found one place that was a dog groomer's salon, but they also prepared taxes.

>> quick: according to the irs, the law is clear -- you must pay

your fair share in taxes. but even for the honest taxpayer, figuring out what is owed is no simple task. >> we've got a tax system that people don't understand. it's complicated, it's convoluted. it changes every year. >> quick: and every year, americans spend more than 6 billion hours complying with tax laws. >> it's a mountain of paperwork and a mountain of money and aggravation. >> quick: it spells huge profits for the tax-preparation industry. 60% of americans pay for help to file their returns, spending an average of $258 every tax season to navigate the more than 3 million words in the u.s. tax code. >> we spend about $20 billion a year, roughly, just filing our tax returns. it's big business. and with the complexity of the law, we need them to help us file our tax returns. >> quick: as we've seen, paying for tax advice does not guarantee a perfect filing. there is no licensing system for

the estimated 900,000 preparers in the united states. >> anybody could just open a shop, you know, hang up a shingle, and prepare taxes. we found one place that was a dog groomer's salon, but they also prepared taxes. >> quick: in 2011, the irs announces a plan to curb the tide of bad advice, beginning with those calling themselves "tax preparers." >> they will be registered with the internal revenue service. and going forward, tax preparers will have to take an exam to demonstrate their competency for preparing taxes. >> quick: steps have also been taken to simplify the process of filing. california offers a readyreturn program for state tax returns. taxpayers start with a return that is partially completed with their reported income. to file, they simply need to verify the state's numbers and sign. >> almost everything the

government asks you to supply in your tax return, it already knows. visa doesn't send you a blank piece of paper each month and ask you to put down all your purchases and add it up and then fine you if you're wrong. they start the ball rolling by sending you a bill. so that's the readyreturn approach. >> quick: proponents say that providing taxpayers with what the government already knows cuts down on mistakes and saves time and money. >> we found the average taxpayer saved about $30 in a half an hour, and this is just for having a simple state tax return prepared in advance. so that gives you a sense, with 140 million federal returns, how many billions of dollars in time and money we could be looking at. >> quick: but not everyone is a fan. >> the tax-preparation industry, not surprisingly, doesn't like it. some companies see this as a threat to the business.

>> quick: the tax preparers do have an interest in the tax code staying complicated. >> absolutely. >> quick: if it's too easy, i don't need you anymore. >> there's no question that tax preparers have as strong an interest as anyone in having a complex tax code. >> quick: back in 1986, congress tried to simplify the federal tax code. >> we went down to three rates. we disallowed a whole bunch of deductions. we said, "let's keep it nice and simple and clean." >> quick: it sounded like a good idea, but, little by little, congress bowed to lobbying from nearly every segment of society. new deductions and complex rules were added, leaving us with an even more complicated code today. >> wherever you are, you probably are lobbying indirectly for congress. so, if you're a schoolteacher, there's a schoolteachers' lobby. if you're an environmentalist, there's an environmental lobby. and of course, if you're a businessperson, there's lots of business lobbying. >> quick: with so many

deductions ripe for the picking, many taxpayers are tempted to claim things they don't necessarily qualify for. >> they view it as so complex and they view that others take advantage of loopholes, and they're gonna get themselves a loophole. >> quick: and there's still the problem of the 15% of americans who say they think it's okay to cheat the irs. >> quick: is it enforcement that would stop people from doing this? is it a simpler tax code? is it fear itself? >> right. well, it's probably all three of those things. to change the way we talk about taxes in our political process would help. i think that having a tax code that was more understandable and less complex would make people more inclined to pay their taxes and cooperate with the government. >> the moral of the whole concept here is relatively simple. pay your taxes. obey the law. or they're gonna get you. they might not get you this year, they might not get you

next year, but, eventually, they're gonna get you. >> quick: like it or not, taxes are here to stay. and for many, so is the temptation to lie about what they owe. as we've seen, playing a game of chance with the irs can lead to financial ruin, even prison. and those who aren't caught cheat us all, forcing honest citizens to bear the burden of the revenue shortfall. so, to cheat or not to cheat? that is the question. the final decision is yours. i'm becky quick. the final decision is yours. i'm becky quick. thanks for watching. -- captions by vitac --