You might not like those IRS auditors, but take a moment to turn the tables. What if you were an auditor yourself and your day was filled with interesting, creative and downright ridiculous stories from people attempting to reduce their tax bill or get out of paying altogether? The IRS hears them all the time and because of that, they have put together a document that debunks what they call the frivolous claims that people make in their attempt to avoid paying taxes.
Taxes Are Voluntary
The first one in the document cites the idea that paying taxes is voluntary. Those who subscribe to this idea state that in the instructions for form 1040, the word "voluntary" is used in the language. In addition, court case, United States V. Flora uses language that states, "[o]ur system of taxation is based upon voluntary assessment and payment, not upon distraint."
However, "voluntary" does not refer to the payment of taxes. The IRS allows each citizen to calculate their tax bill on their own. The IRS may later adjust the calculations but they do not compute a person's taxes for them. This allows the person to claim deductions and credits before the amount is determined.
The Zero Return
Those who believe that they aren't required to pay taxes sometimes file a return showing no income and no taxes. These "zero returns" are peoples' attempt to voluntarily declare that they owe no taxes citing the same reasoning above.
The IRS cites a series of laws and court cases, including Section 61 of the IRS code that states every citizen has to pay taxes on their gross income and must make reasonable attempts to pay what is owed. There are a several penalties that are imposed on these zero returns, so trying the zero return trick may cost a lot of money.
My Dollars Aren't Worth Anything
Most people know that Federal Reserve Notes, better known as the cash we use every day, aren't backed by gold or any other physical asset. Instead, they are backed by the accepted belief that these bills and coins represent value, but not everybody believes this. Some people believe that they don't have to pay taxes on the money they receive because it has no real value.
The IRS wants those people to know that Congress is empowered "[t]o coin Money, regulate the value thereof, and of foreign coin, and fix the Standard of weights and measures," according to article I of the U.S. Constitution. In United States V. Rifen, the opinion of the court was simply, "federal reserve notes are taxable dollars."
I'm Not a U.S. Citizen
According to some, just because they were born in the U.S. doesn't mean they are citizens of the United States. These people believe that they are citizens of their state, making them exempt from Federal taxes.
The IRS directs those people to the Fourteenth Amendment to the Constitution that defines a U.S. citizen as anybody born or naturalized within U.S. borders. This sets up dual citizenship in both the state and the country. Still not convinced? They list 16 other court cases debunking this claim.
My Religion Says I Can't
Ever heard of people who believe that they don't have to pay taxes because of religious reasons? These people cite the first Amendment that says Congress will make no law that doesn't allow for exercise of religion, but that doesn't mean that claiming religion is equal to a tax-free life. In the 1982 case, United States V. Lee, the court found that claiming religion is not a basis for refusing to claim taxes because the tax system couldn't run efficiently if every denomination were to make separate claims. Additionally, the first amendment doesn't give a person the right to not act in accordance with state and federal law.
The Bottom Line
The 65-page IRS document may debunk some of the reasons outlined above, but that doesn't mean other people won't look for loopholes in the law in order to get out of paying taxes. When that happens, we can be sure that the IRS will update the list.