The IRS hears so many of the same ridiculous arguments by people claiming they are not liable to pay income tax that it has posted a 64-page document on its website called “The Truth About Frivolous Tax Arguments.” It sets out the basis for each argument, and then meticulously sets the record straight, complete with citations from the Internal Revenue Code, the U.S. Constitution, and examples of actual cases (all of which were decided against the frivolous arguer).
Those who make stupid arguments in order to evade paying taxes – or try to promote these schemes to others – run the risk of incurring civil and criminal penalties, including fines up to $250,000 and imprisonment for up to five years.
Below are ten of the recurring tax evasion arguments that never win.
I don’t have to file an income tax return and pay taxes – it’s voluntary: Oh come on, if it were optional, none of us would pay taxes. Yet some argue that IRS publications note that our tax system is “voluntary.” This means only that taxpayers calculate the amount of their taxes and fill out the forms, rather than have the government do it for them. The requirements to file an income tax return and pay are not voluntary.
My wages, tips, and other compensation are not income: Many of us feel that we are underpaid for our work. But it’s a weak argument that when you “exchange” your labor for money, there is no taxable gain. The law is clear that for federal income tax purposes, “gross income” means all income from whatever source derived, and includes compensation for your personal services.
I’m not a citizen of the U.S.; I’m a citizen of a particular state: OK, so you’re proud of your home state. However, you can’t renounce your Social Security Number and U.S. citizenship in favor of state citizenship and then claim you don’t have any obligation to pay federal income tax. Even more ludicrous is the argument that even though you were born here, you were never a U.S. citizen because you were born a citizen of a sovereign state.
Only federal government employees owe tax, not private sector employees: You won’t try this frivolous argument if you work for Uncle Sam. It is based on a misinterpretation of the Internal Revenue Code that “employee” means only federal employees and officials. However, it is clear that workers in the private sector are also liable to pay income tax.
The First Amendment to the Constitution protects me because I’ve got moral or religious objections to paying taxes: Ah, the good ol’ freedom of speech/freedom of religion argument. The position is that you can refuse to pay federal income taxes because of your religious or moral beliefs, or to protest the use of your taxes to fund certain government programs. The First Amendment to the U.S. Constitution has nothing to do with expressing your views by withholding the payment of your income taxes. The First Amendment provides, in part, that “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof . . .”
I’ll take the Fifth – I don’t have to incriminate myself by filing a tax return: Would you believe that some people argue that you can refuse to provide financial information on your federal income tax return because your Fifth Amendment privilege against self-incrimination will be violated? Sorry, this just won’t fly.
It constitutes slavery to make me pay taxes: The argument is that if you are compelled to comply with federal income tax laws, it violates the Thirteenth Amendment to the Constitution. This amendment prohibits slavery and involuntary servitude, except as punishment if you’ve been convicted of a crime. You may feel like you’re a slave to your job, but paying taxes isn’t your sentence.
African Americans and Native Americans can claim a special tax credit as reparations for slavery and other oppressive treatment: Unscrupulous tax preparers or promoters try to sell a scheme that African Americans are entitled to a so-called “Black Tax Credit” on their federal income tax returns as reparations for slavery and other oppressive treatment, and that Native Americans are entitled to a similar credit. No such credits exist.
The IRS is not an agency of the U.S.: Some people have tried to argue that the Internal Revenue Service is not an agency of the U.S. but is instead a private corporation or an illegal organization. You may have a few choice words to describe the IRS, but there is clear constitutional and statutory authority that the IRS has the authority to enforce the Internal Revenue Code.
I’m not a “person” as defined by the IRS, and so I’m not subject to federal income tax laws: Some people claim that they are not a “person” or “individual” as defined by the Internal Revenue Code, and therefore they are not subject to the federal income tax laws. This argument holds about as much water as saying that it depends on what “is” means.
You can read the entire “The Truth About Frivolous Tax Arguments” and more stupid arguments for not paying your income taxes at the IRS website (pdf file).