IRS Debunks Frivolous Arguments Used To Avoid Payment Of Tax

by Leroy Baker, Tax-News.com, New York

23 March 2006

The Internal Revenue Service has issued a warning to taxpayers not to be tempted to avoid paying their income taxes based on "frivolous" arguments such as that income taxes are technically illegal under federal law, and therefore need not be paid.

“Taxpayers need to avoid being taken in by groundless theories suggesting that they don’t have to pay taxes or file returns,” announced IRS Commissioner Mark W. Everson.

“The truth about these frivolous arguments is simple: They don’t work," he added.

IRS Notice 2006-31 describes 26 frivolous arguments that taxpayers should avoid when filing their returns. Five revenue rulings issued in conjunction with the notice address specific frivolous claims often made to the IRS. These include false arguments that taxpayers can attribute income and expenses to a purported trust to avoid federal income tax liability, that a general “Native American treaty” exists allegedly providing tax-exempt status, and that only federal employees and persons residing in Washington, D.C. or federal territories and enclaves are subject to federal tax.

The IRS has also heralded the imminent publication of a 65-page document, entitled: “The Truth About Frivolous Arguments,” addressing false arguments about the legality of not paying taxes or filing returns. The updated document includes citations from numerous cases decided by the courts in 2005 and 2006, and responds to 40 frivolous contentions.

"Our rulings on frivolous arguments emphasize that the IRS and the courts reject these arguments about the validity of the income tax and ‘too good to be true’ schemes to eliminate tax liability," observed IRS Chief Counsel Donald L. Korb.

The IRS went on to warn that in addition to tax and interest, taxpayers who file frivolous income tax returns face a $500 penalty, and may be subject to civil penalties of 20 or 75 percent of the underpaid tax. Those who pursue frivolous tax cases in court may face an additional penalty of up to $25,000.

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