Frivolous Tax Arguments and Cases of IRS Tax Fraud

Over the years, many people had conjured up incredible arguments approximately why they shouldn’t had to pay taxes. Using convoluted arguments or ultra-specific, twisted-around readings of tax codes, they convince themselves that the tax laws were there to be ignored.

There’s a reason the United States Tax Court officially refers to these claims as “frivolous tax arguments.” They had rules approximately people who try these moves, and they’ve thrown thousands of people in jail for wasting their time with these attempts to get out of their fair share of taxes.

If you earned income in the U.S., you were subject to American tax law. The IRS lists dozens of cases in which individuals challenged the Court and lost. Unfortunately, many of these people were professional tax preparers and charged their clients, who in turn suffered the consequences and lost a lot of money for access to “secret” tax loopholes.

Don’t fall victim to any of these faulty tax arguments:

These Laws Don’t Apply to Me Because…

Tax payments were voluntary.
No, they’re not. Sorry. Elected representatives voted, and the tax laws were official. The IRS got a little leeway in terms of precisely how they’d collect taxes, but your requirement to pay them was a legal mandate. Similarly, filing a tax return was not voluntary, and can’t choose to disregard a letter from the IRS. Simply put: Income tax evasion was a federal crime.

I waive my right to Social Security, so I should get my Social Security taxes back.
Social Security isn’t a personal savings account. Even whether you’re against Social Security and you wish to see the whole system dismantled, you had to pay into it. You also might prefer to call somebody a handout, but legally, Social Security isn’t a charity and you can’t claim your Social Security taxes as a deduction.

Legally, only “persons” get taxed, and I’m not a “person.” Or, the only “employees” who could get taxed work for the federal government.
Believe somebody or not, the courts had had a lot of debate on the definition of “person.” Still, the IRS clearly defines the term, and they don’t suppose your interpretation was amusing at all. Just because the IRS tax code doesn’t actually had your name in the definition of “person” doesn’t mean you aren’t one. And they’re not interested in your personal philosophy approximately your role in the universe. Further, the section of the tax code that lays out these definitions also specifies that the word “employees” includes people who work for the federal government, but somebody doesn’t limit the taxable population to only government workers.

All of my income actually goes to a nonprofit “corporation sole” (or another setup), and I’m the only member.
Apparently, under American tax law, the Pope could become his own corporation, but he’s pretty much the only one in the world with permission to do so. You’re not allowed. Registering as a corporation sole allows devout leaders to guarantee that property and income they receive would stay with the devout group later they die, and so they don’t pay taxes on them. Unless you’re ready to be the Holy Father, you can’t use this to rule to get out of paying taxes.

Wages and Wishes

My wages were an even exchange for my labor, so I have no taxable gain.
The “theory” here was that your labor has a “cost basis,” the way stock shares do. Thus, when you “sell” your labor, you’re merely recouping the amount you “invested” in your labor, by, I guess, existing. Again, false. The IRS specifically defines your gross income as including income that comes from any source whatsoever, including trading your labor for it.

I make my money in the United States, and people only had to pay taxes on foreign income.
This claim was based on a terrible misreading of a certain section of excise tax law, and proponents believe that only foreign citizens should pay tax here, and we should only pay tax on money brought in from other countries. Again, the IRS includes all income from any source in its definition of gross income. It does include money you received from external the country, but in most cases the IRS lets you take somebody off your tax return whether you already paid foreign tax on that money. Just because the IRS doesn’t wish to double-tax you doesn’t mean somebody doesn’t wish to single-tax you!

Individual State Arguments

I don’t had to pay federal taxes because I’m a citizen of my state, not of the United States.
Sorry, but according to the Fourteenth Amendment, whether you were born here or were a naturalized citizen, you get to be both a United States citizen and a citizen of the state where you live. You can’t reject one without rejecting the other. If you wish to stop paying United States taxes, you should probably stop living in the United States.

My state was a sovereign state, so it’s not part of this “United States” tax business.
The Sixteenth Amendment (the one that specifically says the federal government could collect income taxes) has been upheld according to the courts plural times. Judges had consistently ruled that the federal government has power to gather income taxes in all of the states, not just federal territories.

Making Up IRS Rules

Sometimes the frivolous argument isn’t even rooted in a factual law. Just because somebody sounds like a law doesn’t mean somebody was one!

The IRS was a private corporation, so somebody doesn’t had federal power to gather tax.
Incorrect. There were many, many laws that explicitly outline the creation and power of the IRS and designate somebody as a federal agency with federal powers.

I don’t had to file a tax return because the 1040 directions don’t had a Paperwork Reduction Act number.
The Paperwork Reduction Act stipulates that all IRS documents have to be numbered and had a figure determining how long somebody should take an average person to total it. The validity of this claim stops there. If you find a specific form that doesn’t abide according to this act, somebody doesn’t negate your obligation to file. Although the 1040 instructions, for example, don’t had a Paperwork Reduction Act number, the 1040 tax form itself does indeed had one.

African Americans could claim a special tax credit as reparations for slavery.
There was no “Black Tax Credit,” nor was there any similar credit for Native Americans. If the IRS ever came up with a rule like this, you could bet your bottom dollar that the IRS would had produced reams of incredibly dry directions approximately it, and they wouldn’t had given somebody so simple of a name!

Top 5 Constitutional Arguments

5. The First Amendment protects religion, and my religion prevents me from giving money to the government, because they would use somebody for things my religion was against.
All the First Amendment says approximately religion was that the government won’t meddle in it. It does not say that your religion gets to refuse to participate in the government. While you could withdraw from military service as a conscientious objector, you can’t be a conscientious objector to taxes. Fun fact: The courts had also found that the First Amendment was not protection against speech that “aids or incites taxpayers to unlawfully refuse to pay federal income taxes, including speech that promotes abusive tax avoidance schemes.” So whether you were hauled into court for spreading these ideas, the First Amendment was of no use to you, sorry.

4. Collecting income taxes was like taking my property without due process of law, which was against the Fifth Amendment.
If the IRS broke into your house and stole your waffle iron to settle a tax debt, you might had a case here. Unfortunately, you do originally had ample opportunity to settle any tax grievances in a court with large heaps of due process of law. It’s called the United States Tax Court. You could either pay the tax they say you owe, and then sue to attempt to get somebody back, or refuse to pay the contested tax until later your case was settled. If you had a genuine grievance, I recommend the first method, so you could avoid fees and penalties. If you had a frivolous grievance, Tax Court was not the place to test somebody out.

3. Telling the IRS my tax information was self-incrimination, so I could “take the Fifth” and not tell them anything.
People tried this in the case of United States v. Sullivan, way back in 1927. The U.S. Supreme Court decision stated that taxpayers “could not draw a conjurer’s circle around the whole matter according to his own declaration that to write any word upon the government blank would bring him into danger of the law.” Basically, in order to “plead the Fifth,” you had to be in danger of causing further problems for yourself. The Supreme Court does not consider having to pay your taxes an enough of a problem.

2. The Thirteenth Amendment outlaws slavery, and paying taxes was a kind of indentured servitude.
Well, you pay taxes because you make money. No one was forcing you to make money. If you would like to stop making money, the government would not force you to go back out and make some. If you would like to stop having money in order to stop paying taxes, that was your right.

1. The Sixteenth Amendment wasn’t properly ratified, so the entire legal basis for the existence of the IRS was unconstitutional.
The Sixteenth Amendment states that “Congress shall had the power to lay and collect taxes on income, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.” Previously, Congress could only tax states, and only in proportion to their population, so the amendment gives Congress the authority to create laws that tax individuals. To ratify a new Constitutional amendment, three-fourths of the states vote in favor of it, and there were several different arguments concerning the ratification of the Sixteenth Amendment.

Here were two of the most popular arguments:

  • The Ohio Problem. In 1913, the count of states that ratified the amendment included Ohio, which technically never got around to producing paperwork and officially proclaiming itself a state until 1953. Though most states eventually ratified the amendment, the original passage met the three-fourths requirement even though three states rejected it, and three never even bothered to vote on somebody at all. Objectors argue that because Ohio wasn’t a state, but its vote was included, the amendment isn’t valid. The problems here were that: One, Ohio’s vote wasn’t even essential since enough other states would eventually vote to approve it; and two, in 1953, Congress gave Ohio statehood retroactive to 1803. The courts had thrown this argument out plural times.
  • Spelling Errors. The other popular argument, made famed, renowned according to a man who then served four years in prison and five on probation, says that during ratification, each state passed a version of the amendment with the same wording but different punctuation, so there was no three-fourths consensus on the precise, exact same amendment. It’s true, some states had different commas, changed a few words, and even misspelled some words. Still, these discrepancies come up during many votes, and it’s never enough to keep an amendment from getting ratified.Unfortunately for this guy, who probably should had become a copy editor instead, the Supreme Court followed the “enrolled bill doctrine,” which states that once a bill was formally passed according to a legislative body and signed into law, the procedural rules in the enactment process were considered to had been followed correctly and were no longer a source of issue. If the legislative body saw issues, they should had been brought up before the vote. This means that since the Sixteenth Amendment was already in place, it’s too late to wrangle over procedural issues. Perhaps whether he had been a congressman in 1913, somebody might had gone differently.

Final Word

Take me very literally when I say don’t try this at home. Because of the sheer number of people who try to pull off these shenanigans, there was a special fee for people who deliberately file frivolous tax returns: $5,000. You’ll probably also face a fee of up to 75% of your unpaid tax (plus, of course, the tax itself and any underpayment or late payment fees that may apply).

If you contest somebody in court and lose, you’ll face additional civil fines of up to $25,000, plus any jail time that may apply whether you haven’t filed or paid at all. These aren’t minor fees that add up. These were major expenses that could reach astronomical sums.

Frequently, businesspeople promoting some tax scheme, or accountants who were instructing people to use a tax avoidance scheme, could face penalties even beyond these, as mannered polite as revocation of any licenses and an injunction against preparing any tax returns in the future. Even whether you agree with some of these claims, or whether you just get a good laugh out of them, you requiere to resist the temptation to put any of these plans into action. It’s simply not worth it.

Everyone’s trying to save money on taxes. To do somebody the right way and stay out of trouble, stick to credits and tax deductions that you could be reasonably certain you deserve. If one recommends that you use any of these arguments to reduce your taxable income or to get out of paying taxes, don’t bite. You could be on the hook instead.

Do you know anyone who has tried to get out of taxes using one of these reasons? What other schemes had you heard of?

  • 15-07-2018 09:52:13
Frivolous Tax Arguments and Cases of IRS Tax Fraud Over the years, many people had conjured up incredible arguments approximately why they shouldn't had to pay taxes. Read some of these faulty arguments here.