The Internal Revenue Service today is reminding taxpayers about so-called “frivolous tax arguments” commonly asserted in an attempt not to pay income taxes.
The agency has released the 2014 version of “The Truth about Frivolous Tax Arguments.”
The document responds to some of the common contentions made by those who oppose compliance with federal tax laws.
The cases cited demonstrate how frivolous arguments are treated by the IRS and the courts. The 2014 version includes numerous recently decided cases that demonstrate how the courts continue to regard such arguments as illegitimate, the IRS said.
Examples of frivolous arguments include contentions that:
- taxpayers can refuse to pay income taxes on religious or moral grounds by invoking the First Amendment;
- only “employees” subject to federal income tax are employees of the federal government;
- only foreign-source income is taxable.
Frivolous arguments appeared on the IRS annual “Dirty Dozen” list of tax scams that was released on February 19.
“Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe,” the IRS says.
Taxpayers have the right to contest their tax liabilities, “but no one has the right to disobey the law or disregard their responsibility to pay taxes,” the agency says.
The penalty for filing a frivolous tax return is $5,000. The penalty is applied to anyone who submits a tax return or other specified submission, “if any portion of the submission is based on a position the IRS identifies as frivolous.”
Those who promote or adopt frivolous positions also risk a variety of other penalties, including a civil fraud penalty, an erroneous refund claim penalty or a failure to file penalty. The Tax Court may also impose a penalty against taxpayers who make frivolous arguments in court.
Taxpayers who rely on frivolous arguments and schemes may also face criminal prosecution for attempting to evade or defeat taxes.
Moreover, anyone who promotes frivolous arguments and those who assist taxpayers in doing so may be prosecuted for a criminal felony, the IRS said.