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Saturday, April 12, 2014

IRS Debunks Tax Protester Arguments

IRS Logo 2The IRS yesterday released (IR-2014-51) its annual update of The Truth about Frivolous Tax Arguments:

This document describes and responds to some of the common frivolous arguments made by individuals and groups who oppose compliance with the federal tax laws. The first section groups these arguments under five general categories, with variations within each category. Each contention is briefly explained, followed by a discussion of the legal authority that rejects the contention.

A. The Voluntary Nature of the Federal Income Tax System

  1. Contention: The filing of a tax return is voluntary
  2. Contention: Payment of tax is voluntary
  3. Contention: Taxpayers can reduce their federal income tax liability by filing a “zero return”
  4. Contention: The IRS must prepare federal tax returns for a person who fails to file
  5. Contention: Compliance with an administrative summons issued by the IRS is voluntary

B. The Meaning of Income: Taxable Income and Gross Income

  1. Contention: Wages, tips, and other compensation received for personal services are not income
  2. Contention: Only foreign-source income is taxable
  3. Contention: Federal Reserve Notes are not income
  4. Contention: Military retirement pay does not constitute income

C. The Meaning of Certain Terms Used in the Internal Revenue Code

  1. Contention: Taxpayer is not a “citizen” of the United States, thus not subject to the federal income tax laws
  2. Contention: The “United States” consists only of the District of Columbia, federal territories, and federal enclaves
  3. Contention: Taxpayer is not a “person” as defined by the Internal Revenue Code, thus is not subject to the federal income tax laws
  4. Contention: The only “employees” subject to federal income tax are employees of the federal government

D. Constitutional Amendment Claims

  1. Contention: Taxpayers can refuse to pay income taxes on religious or moral grounds by invoking the First Amendment
  2. Contention: Federal income taxes constitute a “taking” of property without due process of law, violating the Fifth Amendment
  3. Contention: Taxpayers do not have to file returns or provide financial information because of the protection against self-incrimination found in the Fifth Amendment
  4. Contention: Compelled compliance with the federal income tax laws is a form of servitude in violation of the Thirteenth Amendment
  5. Contention: The Sixteenth Amendment to the United States Constitution was not properly ratified, thus the federal income tax laws are unconstitutional
  6. Contention: The Sixteenth Amendment does not authorize a direct nonapportioned federal income tax on United States citizens

E. Fictional Legal Bases

  1. Contention: The Internal Revenue Service is not an agency of the United States
  2. 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
  3. Contention: African Americans can claim a special tax credit as reparations for slavery and other oppressive treatment
  4. Contention: Taxpayers are entitled to a refund of the Social Security taxes paid over their lifetime
  5. Contention: An “untaxing” package or trust provides a way of legally and permanently avoiding the obligation to file federal income tax returns and pay federal income taxes
  6. Contention: A “corporation sole” can be established and used for the purpose of avoiding federal income taxes
  7. Contention: Taxpayers who did not purchase and use fuel for an off-highway business can claim the fuels tax credit
  8. Contention: A Form 1099-OID can be used as a debt payment option or the form or a purported financial instrument may be used to obtain money from the Treasury

The second section responds to some of the common frivolous arguments made in collection due process cases brought pursuant to sections 6320 and 6330. These arguments are grouped under ten general categories and contain a brief description of each contention followed by a discussion of the correct legal authority. A final section explains the penalties that the courts may impose on those who pursue tax cases on frivolous grounds. The court opinions cited as relevant legal authority illustrate how these arguments are treated by the IRS and the courts. Note that courts often decline “to refute [frivolous] arguments with somber reasoning and copious citation of precedent” for a variety of reasons. Wnuck v. Commissioner, 136 T.C. 498 (2011) (quoting Crain v. Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984)).

This document, including the relevant legal authorities cited, is not intended to provide an exhaustive list of frivolous tax arguments. Merely because a frivolous argument is not included in this document does not mean that it is not frivolous. Taxpayers may not rely on frivolous arguments to avoid or evade federal taxes. The government and courts are not precluded from penalizing taxpayers who raise a frivolous argument not addressed in this document.

http://taxprof.typepad.com/taxprof_blog/2014/04/irs-debunks.html

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Comments

The fact that the IRS feels the need to release this document yearly says something about how "frivolous" these arguments are.

Posted by: Bill Daburgereater | Apr 14, 2014 11:56:40 AM