- Days left

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?

Increase your money and finance knowledge from home

Managing your Portfolio

Keeping your portfolio and financial life fit!

View Course »

Introduction to Preferred Shares

Learn the difference between preferred and common shares.

View Course »

TurboTax Articles

Cities with the Lowest Tax Rates

The total amount of tax you pay reaches far beyond what you owe the federal government. Depending on where you live, most likely you're required to pay additional taxes, including property and sales tax. The disparity between the amount of tax you pay in a low-tax city and that in a high-tax city can be dramatic. Living in any of these 10 cities could save you a bundle, although the exact amount may fluctuate based on your income and lifestyle choices.

Cities with the Highest Tax Rates

Much ado is made in the press about federal tax brackets, but cities can carry a tax bite of their own. Even if you live in a state that has no income tax, your city may levy a variety of taxes that could eat away the entire benefit of living in an income tax-free state, including property taxes, sales taxes and auto taxes. Consider all the costs before you move to one of these cities, and understand that rates may change based on your family's income level.

Great Ways to Get Charitable Tax Deductions

Generally, when you give money to a charity, you can use the amount of that donation as a deduction on your tax return. However, not all charities qualify as tax-deductible organizations. While there are many types of charities, they must all meet certain criteria to be classified by the IRS as tax-deductible organizations. There are legitimate tax-deductible organizations in many popular categories, such as those listed below.

A Freelancer's Guide to Taxes

Freelancing certainly has its benefits, but it can result in a few complications come tax time. The Internal Revenue Service considers freelancers to be self-employed, so if you earn income as a freelancer you must file your taxes as a business owner. While you can take additional deductions if you are self-employed, you'll also face additional taxes in the form of the self-employment tax. Here are things to consider as a freelancer when filing your taxes.

Tax Deductions for Voluntary Interest Payments on Student Loans

Most taxpayers who pay interest on student loans can take a tax deduction for the expense ? and you can do this regardless of whether you itemize tax deductions on your return. The rules for claiming the deduction are the same whether the interest payments were required or voluntary.

Add a Comment

*0 / 3000 Character Maximum