Frivolous tax arguments are false and unreasonable claims used to support fraudulent tax returns. The IRS maintains a non-exclusive list of frivolous tax arguments and can impose severe penalties on taxpayers who file frivolous returns.
Common Frivolous Tax Arguments
All of the following positions have been commonly used as frivolous tax arguments:
- Paying income tax is voluntary.
- Wages are not taxable income.
- Taxpayers are citizens of specific states, not U.S. citizens, and are therefore exempt from federal income tax laws.
- Taxpayers can refuse to pay taxes on religious or moral grounds.
- The federal income tax laws are unconstitutional.
Many taxpayers have tried and failed to use these arguments in court. There is abundant case law to show that these arguments are simply wrong, but tax protestors and promoters of frivolous tax arguments continue to try to use them.
Frivolous tax arguments were one of the Dirty Dozen Tax Scams listed by the IRS for 2019 and in previous years.
Consequences of Frivolous Tax Arguments
Taxpayers can face both criminal and civil penalties for using frivolous tax arguments. The civil penalty for filing a frivolous return is $5,000, and this penalty can also be assessed when a collection due process request or other document is submitted contains a frivolous position.
You could also face many other tax penalties when you fail to report income, filing returns, or pay taxes due to frivolous tax arguments, such as:
- The failure-to-file penalty of 5% of unpaid taxes per month.
- The failure-to-pay penalty of 0.5% of unpaid taxes per month.
- Interest charged on unpaid taxes.
- Accuracy-related penalties of 20% of underpaid tax.
- Civil fraud penalties of 75% of unpaid taxes.
- Erroneous refund claim penalty of 20% of the over-claimed amount.
- Fraudulent failure-to-file penalty of 15% per month.
On top of all that, you’ll have a backlog of unpaid taxes that you’ll need to pay off.
Even if you truly believed that these frivolous arguments were correct, you could still face all of these penalties and more. Contact a tax resolution attorney to determine whether you are eligible for penalty abatement or an IRS installment agreement to repay your tax debt.
The Gartzman Law Firm can evaluate your case to determine your best tax resolution options. Use our contact form to request a consultation with an Atlanta tax resolution attorney.