Frivolous Tax Arguments

The IRS recently issued a list of the latest tax scams and frivolous tax arguments it sees in the Tax Court and the IRS appeals process.  These arguments have never worked, nor will they ever work.  Yet the government continues to see these scams and arguments.  So, in addition to listing the frivolous arguments, the IRS goes on to tell how they and the Tax Court will treat these scams when taxpayers use them to try and evade taxes.

Examples of frivolous tax argument are:

1. An argument that First Amendment religious rights are violated by paying taxes and thus is a justification for not paying taxes.

2. Claims that since the income tax is a “federal” tax then only federal employees are subject to income tax; and

3.  Only foreign source income is subject to tax.

You do have the right to contest your tax liabilities.  But if you have relied on these frivolous arguments you could be subject to a number of penalties. If you file a frivolous tax return, you could be hit with a $5,000 penalty.  In addition, there are accuracy-related penalties, civil fraud penalties, erroneous refund claim penalties and failure to file penalties.  If you make a frivolous claim in Tax Court, they can impose penalties as well.

Finally, taxpayers who attempt to use frivolous tax schemes are also subject to prosecution for criminal tax fraud, which could lead to jail time.  The same criminal tax fraud prosecution applies to promoters of frivolous tax schemes.

If you have relied on a frivolous tax argument in the past you could be subject to severe penalties.  If the IRS is assessing these penalties against you as a responsible party, schedule your free consultation by calling (480) 888-7111 [or submit a web request here].