At time, debtors in the tax resolution industry don't seem to understand the gravity of their situation. Since owing the IRS is a rarity, and talking about it with someone who knows what they are talking about is even rare, there is a lot of misinformation and excuses made for tax debt.
The biggest mistake people often make is not taking their debt seriously enough and submitting weak excuses why they should not have to pay, or shouldn't have to pay the full amount. To the IRS, these are considered "frivolous tax arguments."
The name sounds more innocuous that it is. Submitting frivolous tax arguments can hurt your case, a lot. It may disqualify you from certain resolution options, it may extend the time the IRS has to collect on you, it may make collections against you stronger, and it will surely piss off the IRS.
So, the first step in not submitting a frivolous tax argument is knowing what they are.
1. Arguing that the Federal Income Tax System is voluntary. Someone cannot be forced to file.
(Wesley Snipes took this route. Worked out pretty well for him, huh?)
2. Arguing the meaning of "income": "taxable" versus "gross."
3. Arguing the meaning of certain terms used in the IRS Manual:
- Argument 1: Taxpayer is not a “citizen” of the United States, thus not subject to the federal income tax laws
- Argument 2: The “United States” consists only of the District of Columbia, federal territories, and federal enclaves
- Argument 3: Taxpayer is not a “person” as defined by the Internal Revenue Code, thus is not subject to the federal income tax laws
- Argument 4: The only “employees” subject to federal income tax are employees of the federal government
- Argument 1: Taxpayers can refuse to pay income taxes on religious or moral grounds by invoking the First Amendment
- Argument 2: Federal income taxes constitute a “taking” of property without due process of law, violating the Fifth Amendment
- Argument 3: Taxpayers do not have to file returns or provide financial information because of the protection against self-incrimination found in the Fifth Amendment
- Argument 4: Compelled compliance with the federal income tax laws is a form of servitude in violation of the Thirteenth Amendment
- Argument 5: The Sixteenth Amendment to the United States Constitution was not properly ratified, thus the federal income tax laws are unconstitutional
- Argument 6: The Sixteenth Amendment does not authorize a direct non-apportioned federal income tax on United States citizens
- Argument 1: The Internal Revenue Service is not an agency of the United States
- Argument 2: Taxpayers are not required to file a federal income tax return, because the instructions and regulations associated with the Form 1040 do not display an OMB control number as required by the Paperwork Reduction Act
- Argument 3: African Americans can claim a special tax credit as reparations for slavery and other oppressive treatment
- Argument 4: Taxpayers are entitled to a refund of the Social Security taxes paid over their lifetime
- Argument 5: An “untaxing” package or trust provides a way of legally and permanently avoiding the obligation to file federal income tax returns and pay federal income taxes
- Argument 6: A “corporation sole” can be established and used for the purpose of avoiding federal income taxes
To read more on frivolous tax arguments, see the IRS article: "Frivolous Tax Arguments in General"
Now that you know what the frivolous tar arguments are, you need to know what you stand to risk if you file one. Check back next week for "The Frivolous Tax Argument: What You Stand to Loose"
Myth: Taxpayer is not a “citizen” of the United States, thus
Myth: Wages, tips, and other compensation received for personal service are not income, thus
Myth: Filing "Zero" Reduces Your Tax Liability