It may seem like a long way until April 2011, but rest assured, many people are already taking steps to reduce next year's tax burden. Everyone hates taxes, and most people will do almost anything to get out of paying them. As long as you're practicing legal forms of tax avoidance, it is your right to ensure you don't pay a penny more than you have to. But some people will make all kinds of excuses to get out of paying - and even go as far as to claim that the payment of taxes is voluntary, or that wages earned are not considered income.
Claims like this and others like them fall into a category of arguments that the Internal Revenue Service (IRS) considers frivolous, and taxpayers who make these arguments are guaranteed a civil fine, back interest, penalties and maybe even a jail sentence if they persist or advocate these arguments to others. Here are some of the arguments against paying taxes that the government just won't accept.
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1. The Tax System Is Voluntary
One argument made by taxpayers is that the filing of a tax return is voluntary. Advocates of this stance often quote a 1960 Supreme Court opinion, which states that "our system of taxation is based upon voluntary assessment and payment, not upon distraint." The word "voluntary" is also repeated in various IRS publications. Another concurrent claim is that the payment of taxes is voluntary, as supporters claim there is nothing in the Internal Revenue Code or federal law that requires payment. (For more, check out How To Owe Nothing On Your Federal Tax Return.)
Not so fast. The position of the government is that the term "voluntary" in this context refers only to allowing taxpayers to calculate the amount of tax owed, rather than have the IRS compute it for taxpayers. Federal law and case law makes it clear that the government has the power to force compliance through involuntary means if necessary.
Failure to file a return and/or pay taxes due is punishable by fines, back interest and civil and criminal penalties. A taxpayer who makes these frivolous claims can be convicted of tax evasion, and even be sentenced to time in prison.
2. The Definition of Income
Another frivolous claim concerns the definition of the word "income" with some taxpayers claiming that wages, tips and compensation are not income because an individual exchanges his or her labor or time for the money. Since the value of that labor is equal to the funds received, there is no gain to be taxed. Once again the IRS code, revenue rulings from the agency and dozens of court rulings clearly define gross income as "all income from whatever source derived."
3. The Meaning of Terms
The next category of frivolous arguments that taxpayers make, according to the IRS, concerns the definition of specific terms in the IRS code, or federal law. The terms that are contentious to these taxpayers include "citizens," "United States" and "person."
Some taxpayers make the argument that they are not "citizens" of the United States, but are citizens of a particular state. The argument here is that federal tax laws apply only to United States citizens. Others claim that the term "United States" refers only to residents of the District of Columbia and territories of the United States like Guam and Puerto Rico. Others quibble about the meaning of the word "person" and claim that since they are not one, they are not required to pay taxes.
These claims are nonsense according to the IRS, and the agency has dozens of court rulings to back them up. If you try any of these, you will face civil penalties, back interest on taxes due and possibly criminal charges. (To learn more, see The History Of Taxes In The U.S.)
4. Constitutional Claims
The final category of frivolous claims involves constitutional arguments against paying taxes. Some contend that the First Amendment to the United States Constitution allows them to refuse to pay taxes on religious grounds.
Another constitutional argument is that the payment of income taxes violates the Fifth Amendment, which prohibits the taking of property without "due process." This same amendment is invoked to make the claim that filing a tax return violates the ban on "self incrimination."
As with other frivolous claims, these constitutional arguments and others have been debated over the years by many courts and rejected by all of them, including the U.S. Supreme Court.
The Bottom Line
After nearly 100 years of collecting taxes, the IRS has seen nearly every inventive excuse out there. Don't fall victim to one of these frivolous arguments - if you owe taxes, you will be required to pay them. (For more tips, see Top 9 Solutions To An Unexpected Tax Bill.)