Protesting taxes, an American tradition dating back to the original Tea Party, has moved from Boston Harbor and into the court system where the debate over who has to pay taxes has been raging for decades.
The IRS, ostensibly sick of wasting time and money prosecuting tax protestors, warns Americans who use “frivolous” arguments to avoid paying taxes that they could face fines, penalties and prison time. In its cautionary publication “The Truth About Frivolous Tax Arguments,” the IRS sets up and shoots down common tactics used to avoid paying taxes. Taxpayers considering using the IRS equivalent of “the dog ate my homework” may want to heed the outcomes of for tax rebels who’ve made the following contentions:
1. The taxpayer is not a citizen of the United States and is thus not subject to federal income tax laws. Some individuals argue that they have rejected citizenship in the United States in favor of state citizenship and therefore are relieved of their federal income tax obligations. Nice try, says the IRS, but if you persist in this frivolous arguments and its variations you may end up like Lynn N. Ealy who in January 2006 was sentenced to 27 months in prison and ordered to pay the IRS $84,174 in restitution.
2. The taxpayer is not a “person” as defined by the IRS code and so is not subject to federal income tax laws. This argument is based on a “tortured misreading” of the code and can get you into buckets of trouble, says the IRS.
3. Taxpayers can refuse to pay income taxes on religious or moral grounds by invoking the First Amendment. This protest is based on religious or moral objections to use taxes to fund certain government programs. The IRS cites copious case law establishing that the First Amendment does not extend to people refusing to pay taxes on religious or moral grounds. What’s more, says the IRS, the First Amendment does not protect people who incite taxpayers to unlawfully refuse to pay their taxes.
4. Some taxpayers try to take the “Fifth” and claim they would incriminate themselves with financial information requested on tax forms. The IRS counters, “There is no constitutional right to refuse to file an income tax return on the grounds that it violates the Fifth Amendment privilege against self-incrimination,” states the IRS.
5. Paying taxes is a form of involuntary servitude and violates the Thirteenth Amendment prohibiting slavery. “Courts have consistently found arguments that taxation constitutes a form of involuntary servitude to be frivolous,” says the IRS.
6. The filing of a tax return is voluntary. No, says the IRS, actually it’s required for any American receiving qualified income.
7. Paying taxes is voluntary. Some Americans argue that our system of taxation is based upon voluntary assessment and payment, and claim that there is no federal statute that requires them to pay income taxes. The IRS, of course, disagrees and points to section 6151 of the tax code, which it says clearly sets forth the requirement to pay taxes.
8. The only employees subject to federal income tax are employees of the federal government. Nope.
9. Taxpayers can reduce their federal income tax liability by filing a “zero return.” This strategy, according to the IRS, involves reporting that you have no income, even though you actually do. The IRS retorts, “there is no authority that permits a taxpayer that has taxable income to avoid income tax by filing a zero return.”
10. The IRS must prepare a federal tax return for a person who fails to file. Wrong again, says the IRS. Taxpayers who use this excuse can be subject to fines, imprisonment and civil penalties.
11. Wages, tips and other compensation received for personal services are not income. This argument asserts there is no taxable gain when a person “exchanges” labor for money. The IRS counters this argument by citing section 61 of the code that defines gross income as “all income from whatever source derived.” Tax payers failing to report all gross income could be subject to fines, imprisonment and civil penalties.
12. Only foreign-source income is taxable. Some tax protestors claim there is no federal statue imposing a tax on income derived from sources within the United States by citizens or residents of the United States, but argue that federal income taxes are excise taxes imposed only on nonresident aliens and foreign corporations for the privilege of receiving income from sources within the United States. The IRS says this argument is a misreading of code and adds “These frivolous assertions are clearly contrary to well-established legal precedent.” The IRS tells the cautionary tale of Mr. Larken Rose, who was sentenced to 15 months in prison and fined $10,000 and made to pay all taxes, interest and penalties upon his August 2005 conviction on five counts of willful failure to file taxes based on this frivolous argument.
13. Military Retirement Pay Does Not Constitute Income. Actually it does, says the IRS.
14. The “United States” consists only of the District of Columbia, federal territories and federal enclaves, such as American Indian reservations, and does not include the sovereign states. Other taxpayers insisting on this frivolous argument have ended up in prison and one Mr. Wayne C. Bentson paid the IRS restitution of $1.1 million for the false advice he gave to clients on this matter.