The Dangers of Taking Extreme Positions on Tax Returns
Victory Tax Solutions, LLC.
"Americas Trusted Tax Team"
In some corners of the Internet, you can read about how taxpayers aren’t actually required to file taxes, or pay taxes, or maybe if you sign your return under protest it won’t really count. There are a hundred variations on the same theme: that somehow, some way, there’s a legal trick to get out of having to pay taxes.
It’s just not true.
Every year, a small number of people go from taxpayer to tax protester, taking an extreme position on their taxes, or not filing their returns at all in defiance of federal law. When taxpayers become tax protesters they face not only stiff penalties, but possible criminal prosecution.
In 2006, Congress passed the Tax Relief Health Care Act, which in part imposed a $5,000.00 penalty for filing frivolous tax returns or other “submissions” with the IRS in place of an actual tax return. The penalties can be assessed for each tax return or submission, with a maximum penalty of $25,000.00. Taxpayers may also face criminal prosecution for tax evasion in particularly egregious situations under IRC Sec. 7201.
Frivolous positions are defined on a list published by the IRS annually. To review the list, go to IRS.gov and search for “The Truth About Frivolous Tax Arguments.” Common arguments include:
Filing or paying a tax return is voluntary. The Internal Revenue Code Sec. 6011-12 is very clear that unless you fall under one of the clearly outlined exceptions, everyone must file a tax return.
Redefining what counts as “income” to reduce or eliminate what can be taxed. IRC Sec. 61 defines income broadly, and the courts have systematically interpreted it broadly.
Disputing the meaning of terms within the law. For example, claiming that the “United States” is only Washington D.C., federal territories and other enclaves. Obviously, this is not true, legally or by common sense.
Constitutional challenges to taxation. There are many arguments here, mostly to do with due process. But the absolute best argument is that the 16’th Amendment is unconstitutional. That’s right: people actually argue that a part of the Constitution is unconstitutional.
So what can you do if you have already filed a return or a submission with a frivolous position? The good news is that in many situations a tax protester will have administrative opportunities to get right with the law. However, depending on how extreme a position they took, the situation might slip beyond civil penalties and into criminal territory. For that reason, if you find you have taken a frivolous position in the past, you should contact a tax attorney with experience in this area to advise you on how to proceed.
If you have any questions or would like to discuss further, please call Victory Tax Solutions for a free consultation. Our toll free number is 877-772-0123.