Friday, March 16, 2007
The IRS yesterday listed 40 frivolous positions that taxpayers should avoid in filing their 2006 returns. From IR-2007-61:
The guidance lists 40 positions which have no basis for validity in existing law or which have been deemed frivolous by the United States Tax Court or other federal court. If these or other frivolous positions are contained in a tax return, taxpayers could face a $5,000 penalty – 10 times the previous maximum. ...
Notice 2007-30 contains a list of frivolous positions that will trigger the increased penalty amount. Four revenue rulings issued in conjunction with the notice address specific frivolous claims often made to the IRS. The revenue rulings center on:
- Rev. Rul. 2007-19: False arguments that wages are not taxable income.
- Rev. Rul. 2007-20: Filing returns and paying taxes are voluntary.
- Rev. Rul. 2007-21: The IRS must provide taxpayers with a summary record of assessment made on a Form 23C, “Assessment Certificate-Summary Record of Assessments”, before overdue taxes may be collected.
- Rev. Rul. 2007-22: Income is not subject to taxation when the taxpayer declares that he is not a United States citizen because he is a citizen of an individual State or claims he is not a person as defined by the Internal Revenue Code....
The IRS continues to investigate promoters of frivolous arguments and to refer cases to the Department of Justice for criminal prosecution. In addition to tax and interest, taxpayers who file frivolous income tax returns face a $5,000 penalty, and may be subject to civil penalties of 20 or 75 percent of the underpaid tax. Those who pursue frivolous tax cases in court may face an additional penalty of up to $25,000.