You are walking along a deserted beach and you stumble upon what appears to be an urn. Picking up the urn and brushing away the sand, you encounter a genie. “What do you want? Ask me anything and it will be done. But there is a catch…whatever you ask will also be supplied to all humanity.” Oh, where to begin? What is upper-most on your wish list? Well, you may select world peace, abolishing hunger, free adequate education for all, freedom to move about without the fear of bodily harm, prevention of all birth defects, illnesses and diseases, abolishing all taxes… “Whoa”, the genie exclaims, “that will never happen!” Taxes are the scourge of any society and yet without funds to provide the necessities to operate government and the services government provides, no provisions will be provided. The dilemma is created be- cause no one likes paying taxes. It has been stated that resistance to taxes is baked into Americans’ DNA. The Boston Tea Party was an early example of the American ad-verse response to tax. Coining the phrase “taxation without representation” first attributed to Patrick Henry, festered into the American Revolution. Tax protests have continued on and off ever since. As offensive as tax collection can be, it is still defended by the United States Tax Code and the U. S. Court System.
People object to paying taxes for all kinds of reasons, “The IRS and the courts hear many outlandish arguments from people trying to avoid their legal filing and tax obligations,” IRS Commissioner John Koskinen said in a statement. “Taxpayers should avoid unscrupulous promoters of false tax-avoidance arguments because taxpayers end up paying what they owe plus potential penalties and interest mandated by law.” Educated tax strategy can be applied to legally avoid taxes. Taking all your approved deductions or moving money into tax-sheltered accounts like a 401(k) are perfectly acceptable ways to lower your tax bill. However; the following suggestions are not legal and are not suggested.
1. Filing a return and paying taxes Is voluntary-No, it is a system based on the voluntary assessment and payment, but not voluntary, suggesting the ability to reject taxation.
2. The money earned isn’t really income. The law specifically indicates that revenue is taxable, net of certain allowable approved deductions.
3. Taxes are against their religion. In the United States v. Lee, the U.S. Supreme Court ruled that “[t]he tax system could not function if denominations were allowed to challenge the tax system because tax payments were spent in a manner that violates their religious belief.”
4. Paying taxes violates the Fifth Amendment. Use of the Fifth Amendment in opposition to filing taxes requires perversion of the spirit of the law. Privacy in tax reporting is not a defense. In cases like the United States v. Sullivan and the United States v. Neff, the courts back the IRS’s position.
5. Paying taxes is a form of slavery. In 1865, when the 13th Amendment was ratified, abolishing slavery and does not suggest the tax system is a form of slavery.
6. The 16th Amendment doesn’t count. Frivolous augments about the ratability of the amendment negates its use. Hogwash, ignorance is no excuse. For example, if you are taxed at 20%, that would indicate that the element of slavery is only 20%. Rediculous!
7. Their state “Isn’t part of the United States.” The District of Columbia, federal territories, or on Indian reservations or military bases have to pay federal income tax. Everyone else is supposedly a citizen of a “sovereign” state, not the U.S., which means they’re exempt from federal income tax. Not so, says the IRS. Nice try, but frivolous!
8. The IRS Is secretly a private corporation. Some conspiracy theorists are convinced the IRS isn’t actually part of the federal government at all. Supposedly, it’s a private corporation masquerading as a government agency, and it actually has no authority to enforce the tax code. In the 2002 case Edwards v. Commissioner, the court dismissed the claim as “tax protester gibberish.”
Trying to claim that filing a tax return is optional, that you aren’t really a citizen of the U.S., that the Constitution allows such opposition or that only certain types of income are taxable will backfire. When you submit a frivolous return or slam the IRS with other off-the-wall requests the result may be a fine of $5,000 to $25,000. Plus, you could also be prosecuted for tax evasion, a felony punishable by prison time and penalties of up to $250,000. Then you may summon your genie to spring you from your cell. Good luck with that.
For more information, call Wilson & Wilson, PC, CPA, CFE at 615-673-1330 or email jim@ wilsonandwilsoncpa.com