A lack of seriousness; self-indulgently carefree; given to undue levity: these are, according to the dictionary, essential components of frivolity. If there is one group of people who are not given to carefree levity, it’s the people who work for the Internal Revenue Service.When the IRS dismisses a frivolous tax argument, it’s worth noting that this is an argument you want to avoid making if you find yourself embroiled with the federal agency in a tax controversy.
The IRS has gone to some lengths to try to discourage people from making these arguments, but the arguments persist. Sometimes people believe they have stumbled upon or researched their way to a foolproof method of avoiding paying taxes, or they believe their new spin on an old argument is bound to carry the day and relieve them of their tax burden.
Let’s take a brief look at some of the arguments, and the counterarguments by the IRS that have carried the day in court.
A popular, though ultimately frivolous, contention is that the paying of federal taxes is voluntary. Proponents point to IRS literature and to a court case (Flora v United States) using the word “voluntary” when referring to taxes. The IRS counters the argument by pointing out that “voluntary” refers only to taxpayers being able to calculate their owed taxes themselves, rather than having government doing it for you.
Neither filing nor paying taxes are voluntary, the agency notes. It has a raft of court cases on its side that back up its contention in strong terms.
Another popular argument: wages received for personal services don’t count as income (and are therefore not taxable). The argument basically contends that if you exchange labor for money, that money does not count as taxable income.
The IRS hits back hard with this counterargument: “For federal income tax purposes, ‘gross income’ means all income from whatever source derived and includes compensation for services.” Again, the agency cites a slew of court decisions that support its contentions.
Another popular argument has been that wages are not taxable income if they’re received in exchange for “personal services.” Again, the IRS retorts: wrong.
“...all income from whatever source…” is considered taxable income, including income from services. Once again, the agency has court decisions to back up its position.
What about military retirement pay? Some people have argued that it doesn’t constitute income. Short rebuttal from the IRS: wrong (yet again). Look at the above quote from the agency: “...all income from whatever source…” Military retirement pay fits neatly into the definition of “income” for tax purposes.
Some people have renounced their U.S. citizenship in favor of state citizenship in hopes of avoiding U.S. taxes. The problem for them is that the 14th amendment wipes their argument out.
Still another argument put forward on occasion is that only federal employees owe federal taxes. This particular dispute rests on a misinterpretation (deliberate or otherwise) of U.S. Code in which it is stated that taxes from wages are to be withheld from “an officer, employee, or elected official of the United States, a State, or any political subdivision thereof …”
But in that same stack of case law it points out that private citizens are taxed just as federal employees are taxed. One court even referred to the argument as “inane.”
Our post is not to suggest that there aren’t good reasons to dispute IRS claims and tax statements. There are indeed. However, the good reasons don’t include frivolous arguments that have been repeatedly dismissed by courts.
Those who face a tax controversy do well to have experienced tax attorneys make sound arguments on their behalf rather than risking the wrath of an aggravated taxman. The tax lawyers at Robert J. Fedor, Esq are ready to help you today.
