We have yet to meet an individual who enjoys paying income taxes to the US Federal and State tax authorities under the United States voluntary system of taxation. However, many individuals take their unhappiness to an extreme to avoid paying income taxes. With the 2008 tax return filing deadline looming we have noted below a sampling of arguments used in a vain attempt to avoid paying US Federal individual income tax.
Why Pay Taxes? — The Truth About Frivolous Tax Arguments
The Truth About Frivolous Tax Arguments addresses some of the more common false "legal" arguments made by individuals and groups who oppose compliance with the US Federal tax laws.
The Voluntary Nature of the Federal Income Tax System
Contention: The filing of a tax return is voluntary. I choose not to file
Contention: Payment of tax is voluntary. I choose not to pay
Contention: Taxpayers can reduce their federal income tax liability by filing a
“zero return.”
Contention: Compliance with an administrative summons issued by the IRS is
voluntary and I choose not to comply
The Meaning of Income: Taxable Income and Gross Income
Contention: Wages and other compensation received for personal services are not income
Contention: Only foreign-source income is taxable
The Meaning of Certain Terms Used in the Internal Revenue Code
Contention: Taxpayer is not a “citizen” of the United States, thus not subject to
the Federal income tax laws (taxpayer is a citizen of a State)
Contention: The “United States” consists only of the District of Columbia,
Federal territories and Federal enclaves
Contention: Taxpayer is not a “person” as defined by the Internal Revenue
Code, thus is not subject to the Federal income tax laws
Contention: The only “employees” subject to Federal income tax are employees
of the Federal government
Constitutional Amendment Claims
Contention: Taxpayers can refuse to pay income taxes on religious or moral
grounds by invoking the First Amendment
Contention: Federal income taxes constitute a “taking” of property without due
process of law, violating the Fifth Amendment
Contention: Taxpayers do not have to file returns or provide financial
information because of the protection against self-incrimination found in the
Fifth Amendment
Contention: Compelled compliance with the Federal income tax laws is a form
of servitude in violation of the Thirteenth Amendment
Contention: The Sixteenth Amendment to the United States Constitution was
not properly ratified, thus the Federal income tax laws are unconstitutional
Contention: The Sixteenth Amendment does not authorize a direct nonapportioned
Federal income tax on United States citizens
Fictional Legal Bases
Contention: The Internal Revenue Service is not an agency of the United
States
Contention: Taxpayers are not required to file a Federal income tax return,
because the instructions and regulations associated with the Form 1040 do not
display an OMB control number as required by the Paperwork Reduction Act.36
Contention: African Americans can claim a special tax credit as reparations for
slavery and other oppressive treatment
Contention: A “corporation sole” can be established and used for the purpose
of avoiding Federal income taxes.
Frivolous Arguments in Collection Due Process Cases
Invalidity of the Assessment
Contention: A tax assessment is invalid because the taxpayer did not get a
copy of the Form 23C, the Form 23C was not personally signed by the
Secretary of the Treasury or Form 23C is not a valid record of assessment
Contention: A tax assessment is invalid because the assessment was made
from a substitute for return prepared pursuant to section 6020(b), which is not a
valid return.
Invalidity of the Statutory Notice of Deficiency
Contention: A statutory notice of deficiency is invalid because it was not signed
by the Secretary of the Treasury or by someone with delegated authority
Contention: A statutory notice of deficiency is invalid because the taxpayer did
not file an income tax return.
Invalidity of Notice of Federal Tax Lien
Contention: The form or content of a notice of Federal tax lien is controlled by or
subject to a state or local law, and a notice of Federal tax lien that does not
comply in form or content with a state or local law is invalid.
Tax Court Authority
Contention: The Tax Court does not have the authority to decide legal issues.
Challenges to the Authority of IRS Employees
Contention: IRS employees lack credentials. For example, they have no pocket
commission or the wrong color identification badge.
Penalties for Pursuing Frivolous Tax Arguments
The Seventh Circuit Court of Appeals noted in United States v. Sloan, “Like moths to a flame, some people find themselves irresistibly drawn to the tax protester movement’s illusory claim that there is no legal requirement to pay Federal income tax. And, like moths, these people sometimes get burned.”
Taxpayers filing returns with frivolous positions may be subject to the accuracy related
penalty under section 6662 (twenty percent of the underpayment attributable to negligence or disregard of rules or regulations) or the civil fraud penalty under section 6663 (seventy-five percent of the underpayment attributable to fraud) or the erroneous claim for refund penalty under section 6676 (twenty percent of the excessive amount). Additionally, late filed returns setting forth frivolous positions may be subject to an addition to tax under section 6651(f) for fraudulent failure to timely file an income tax return (triple the amount of the standard failure to file addition to tax under section 6651(a)(1)).
The purpose of Internal Revenue Code Section 6673 . . . is to induce litigants to conform their behavior to the governing rules regardless of their subjective beliefs. Groundless litigation diverts the time and energies of judges from more serious claims; it imposes needless costs on other litigants. Once the legal system has resolved a claim, judges and lawyers must move on to other things. They cannot endlessly rehear stale arguments . . . . There is no constitutional right to bring frivolous suits . . . . People who wish to express displeasure with taxes must choose other forums, and there are many available.”
Taxpayers who rely on frivolous arguments may also face criminal prosecution for: (1) attempting to evade or defeat tax under section 7201, a felony, for which the penalty is a fine of up to $250,000 and imprisonment for up to 5 years; or (2)
making false statements on a return under section 7206(1), a felony, for which he penalty is a fine of up to $250,000 and imprisonment for up to 3 years.
The above examples were gleaned from the Internal Revenue Service website. For those interested in reading the entire Internal Revenue Service article, go to www.irs.gov |