The IRS and parents have something unexpected in common: They don’t have time for frivolous arguments. In fact, the IRS has heard so many frivolous arguments (and yes, that’s the official term) that it has published a long list of them and meticulously explains why they don’t work.
Nonetheless, year after year, people make a variety of claims about why they don’t have to pay taxes. Two tax pros explain a few of the most popular frivolous tax arguments — and what could happen if you try to use them.
1. 'Paying taxes is voluntary'
The general claim: Some IRS publications and a well-known court case use the phrase “voluntary compliance.”
Why it doesn’t work: The word “voluntary” simply means that you get to calculate your tax owed and fill out your return on your own, rather than the government doing it for you. The requirements to file a tax return and pay taxes are not voluntary, and several sections of the tax code explain this, says David Du Val, an enrolled agent and chief customer advocacy officer at TaxAudit, an audit-defense firm in Folsom, California.
“If it was voluntary, none of us would volunteer to pay taxes. We'd keep all the money for ourselves. But truly, in the [tax] code it's very clear,” he says.
2. 'Wages and other income aren’t really taxable'
The general claim: There’s no taxable gain when a person exchanges labor for money; money is just a reimbursement for time.
Why it doesn’t work: “Gross income” means all income from all sources — and that includes compensation for services. It’s all taxable unless the IRS specifically exempts or excludes it, Du Val notes. Some people will try to file a tax return showing zero income or tax liability — called “zero returns” — so they can say they technically complied with the requirement to file a tax return. “There's no meaning to that,” Du Val says.
3. 'Technically, no one is a U.S. citizen'
The general claim: People are actually citizens of particular states, and so they’re not subject to federal taxes.
Why it doesn’t work: The 14th Amendment to the U.S. Constitution says that people born or naturalized in the United States are citizens of the United States and of the states where they live. “It's not a choice,” Du Val notes. “I don’t get to say I am a Californian, not an American.”
4. 'The IRS is actually responsible for doing everyone’s taxes'
The general claim: It’s the IRS’s job to prepare tax returns for people; if it fails to do so, the taxpayer owes no tax.
Why it doesn’t work: Although the IRS does sometimes file returns for people, it typically does so because a person hasn’t filed for a long time, explains Jeffrey Schneider, an enrolled agent and certified tax resolution specialist at SFS Tax & Accounting Services in Stuart, Florida. That’s usually not a good thing — the IRS uses information on hand to do the math, and the resulting tax bill could be artificially high because the IRS may not know if the taxpayer qualifies for certain deductions or credits. The IRS might tack on a few penalties as well.
Playing with fire
Leaning on a frivolous argument to avoid filing a return or paying taxes is a bad idea. You could get hit with tens or even hundreds of thousands of dollars in penalties, or face prison time, Schneider warns.
“They lose every time,” he says.