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Morally or Legally Opposed to Paying Taxes? The IRS Is Going to Get You

Don't end up like Wesley Snipes -- frivolous tax arguments result in huge penalties from the IRSEvery year about this time, there seems to be an increase in the number of arguments that suggest you don't really have to file and pay taxes. The arguments run the gamut from objections on religious and moral grounds to the idea that the Tax Code was never actually ratified and is, therefore, not valid.

Time after time, the IRS has debunked these frivolous arguments through policy statements and Tax Court wins. And yet many of the arguments still persist, especially at tax time.It's worth a reminder, then, that Congress increased the amount of the penalty for frivolous tax returns from $500 to $5,000 as part of the Tax Relief Health Care Act of 2006. The penalty applies when a taxpayer submits a tax return or takes a position with a tax filing that the IRS has identified as frivolous.

And it can get worse. Section 6673 of the Tax Code allows the courts to impose a penalty of up to $25,000 if they decide that:
  1. a taxpayer instituted a proceeding primarily for delay,
  2. a position is frivolous or groundless, or
  3. a taxpayer unreasonably failed to pursue administrative remedies.
Taxpayers who rely on frivolous arguments to not file or pay federal taxes may also face criminal prosecution. The penalty for attempting to evade or defeat taxes can be a fine of up to $250,000 and up to five years in prison. The penalty for making false statements on a federal tax return can similarly result in a fine of up to $250,000 and up to three years in prison.

Some of the most popular frivolous tax arguments that the IRS has encountered are:
  • The filing of a federal income tax return or the payment of federal income tax is voluntary.
  • Only foreign-source income is taxable.
  • The "United States" consists only of the District of Columbia, federal territories and federal enclaves -- not the separate states.
  • The only "employees" subject to federal income tax are employees of the federal government and not private sector workers.
  • Taxpayers can refuse to pay federal income taxes on religious or moral grounds by invoking the First Amendment.
  • The Sixteenth Amendment to the United States Constitution was not properly ratified, thus the federal income tax laws are unconstitutional.
  • A "corporation sole" can be established and used for the purpose of avoiding federal income taxes.
You can read all the arguments -- and the IRS' response to them -- in the IRS' online document, The Truth About Frivolous Tax Arguments. The IRS releases the list each year to "help taxpayers avoid wasting their time and money with frivolous arguments."

The IRS and the Justice Department have to work a little harder these days to rebut these arguments because of the proliferation of sites on the Internet that perpetuate them. The IRS, however, cautions you to take a step back and think before you act.

Nobody likes paying taxes. But it's the law. If you're tempted, ask yourself: Is it worth it?

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