Fraud Tip of the Day - April 9

Be wary of outlandish tax avoidance schemes

You don't have to be an expert to ask yourself whether some of these tax avoidance schemes are too good to be true.

There are some bad tax ideas floating around. Some have turned the peddling of these ideas into businesses. These businesses make their money designed by tricking taxpayers into signing up for a program or purchasing materials related to these "bad" ideas. The IRS calls many of these bad ideas frivolous tax arguments. They could also be called myths or urban legends. These arguments are listed and refuted on the IRS website.

On this site you'll see IRS arguments against old time favorites like:

Voluntary Nature of the IRS Claims

• It's voluntary to file a tax return, not mandatory
• It's voluntary to pay taxes, not mandatory.
• Taxpayers can reduce their federal income tax liability by filing a "zero return."
• If you fail to file, the IRS has to prepare a federal tax return for you.
• Compliance with an administrative summons issued by the IRS is voluntary.

Wouldn't you have to question these? If you're wrong the penalties will be quite severe. Trying your luck with any of these involves enormous risk. I'd see what the IRS and court rulings have to say about it before you do.

The Meaning of Income: Taxable Income and Gross Income

• Income doesn't include wages, tips, and other recompense received for personal services.
• Only income from foreign-sources is taxable.
• Income doesn't include Federal Reserve Notes.

The Meaning of Certain Terms Used in the Internal Revenue Code

• Taxpayers in the United States are not the same as citizens and as such are not subject to federal income tax laws.
• When defining the "United States", it only includes the District of Columbia, federal territories and federal enclaves - not states.
• The Internal Revenue Code doesn't define a Taxpayer as a "person" and as such people are not subject to federal income tax laws.
• Federal income tax only applies to employees of the federal government, not to employees of other entities.

Taxpayers aren't allowed to unilaterally define terms as it suits them. Take this to court if you'd like. You might want to find out how the courts have ruled in the past first.

Constitutional Amendment Claims

• Taxpayers can refuse to pay income taxes on religious or moral grounds by invoking the First Amendment.
• The Fifth Amendment is violated by Federal income taxes because the amount to a "taking" of property without due process of law.
• The Fifth Amendment provides Taxpayers protection from filing returns because self-incrimination includes the divulging of personal, financial information.
• The Thirteenth Amendment's servitude protection is extended to compliance with federal income taxes as they are considered a form of servitude.
• Proper ratification was never completed for the Sixteenth Amendment, thus making federal income taxes unconstitutional.
• Direct, non-apportioned federal income taxes on U.S. citizens are not authorized in the Sixteenth Amendment.

Wouldn't it be great if all of the above were true? It would mean that no one ever has to pay taxes. How could we all be such idiots not to have noticed it before? I would recommend doing some research first to find out what happened to the last person to make these claims in a courtroom.

Fictional Legal Bases

• Agencies of the United States don't include the Internal Revenue Service.
• The OMB control number required by the Paperwork Reduction Act doesn't appear in the instructions or regulations associated with the 1040 Form, so Taxpayers aren't required to file a federal income tax return because of that.
• There are special tax credits for African Americans as reparations for slavery and other tyrannical conduct.
• Taxpayers are permitted a refund of the Social Security taxes paid during their lifetime
• Taxpayers can legally and permanently avoid filing and/or paying federal income taxes by creating an "untaxing" package or trust.
• A corporation sole can be established and used for the purpose of avoiding federal income taxes.

These are only a few. Some of them are classics. One of these tax avoidance schemes may be new to you but the IRS has heard them all before. Any time you hear a new plan to cut your taxes refer to the following website for the complete list and full text.

Read about all of them and discover The Truth About Frivolous Tax Arguments on the IRS website.