Pay no taxes? Never file again?

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New York Gov. George Pataki signed into law a tax cap on diesel and gas purchases that will limit sales tax to 8 cents whenever the price of fuel is at least $2 per gallon. Pataki also proposed eliminating the sales tax on renewable fuels, a property tax credit for installing renewable fuel pumps, and a plan for the state Thruway’s travel plazas to add fuel pumps for biodiesel, ethanol and compressed natural gas.

Federal Trade Commission said that its investigation into post-Hurricane Katrina gas prices revealed no illegal market manipulation. In a report mandated by Congress, FTC analyzed financial data for 30 refiners, 23 wholesalers and 24 single-location retailers. It found seven refiners, two wholesalers and six retailers had higher average gasoline prices in September 2005 compared to August, but the higher prices were not attributable to higher costs or to national or international market trends. Factors such as regional market trends explained the pricing in nearly all the cases, the FTC reported.

Internal Revenue Service, citing especially businesses that hired additional workers following recent natural disasters, has reminded businesses of their obligation to classify workers properly as either employees or independent contractors. The agency last month issued a fact sheet to help in classification. For a copy, visit this site and search FS-2006-21.

Fleet One named John Frankenfield senior vice president as well as president of its Fleet One Factoring unit. Frankenfield will focus on business development and strategic alliances to expand Fleet One Factoring’s customer base, and its programs and services designed exclusively for the transportation industry.

Every few months, one of my clients brings me a letter, e-mail or website printout that claims that he is a fool for paying taxes or filing tax returns. Often, this happens as the individual’s tax bill rises and more and more income is reported over the years. Or maybe he read a crusader article railing against evil rich folks or big corporations and their tax-avoidance schemes.

Sure, people are sick and tired of paying taxes. The bars and Internet are filled with folks bragging about their schemes, and after someone endures a painful filing year, it can be mighty tempting to tell the IRS to “Take this return and shove it!” Nevertheless, I urge them not to get drawn in by these arguments, and for Pete’s sake, don’t pay people for “secret information” on this stuff.

In March 2006, the IRS updated the long list of such arguments and cited its responses, with relevant law and court cases backing up each one. The 66-page online document describes and rebuts each scheme for not having to file or pay U.S. taxes. While 66 pages may sound lengthy, consider the actual tax code is a bit more complex at tens of thousands of pages.

The official IRS position from ” ‘Dirty Dozen’ Tax Scams for 2006″ states that “Promoters have been known to make the following outlandish claims: the Sixteenth Amendment concerning congressional power to lay and collect income taxes was never ratified; wages are not income; filing a return and paying taxes are merely voluntary; and being required to file Form 1040 violates the Fifth Amendment right against self-incrimination or the Fourth Amendment right to privacy. Don’t believe these or other similar claims. These arguments are false and have been thrown out of court.”

IRS Notice 2006-31, which you can find by searching by its name at this site, describes 26 of the most common claims and the agency’s response. Here are some of the more common arguments, grouped by type of contention:

· The income tax is voluntary: Five general contentions center on the notion that the filing of returns or the payment of tax is voluntary.
· Certain things are not income: These defenses play on semantics and the meaning of the word “income” or other key words. Frivolous argument promoters will tell you that wages are not really income, that only foreign-source income is taxable, and that Federal Reserve notes (U.S. currency) are not gold or silver, and thus not exchangeable for real value, and therefore not income when you receive them.
· Certain terms in the tax code provide exemptions: Proponents of these schemes like to argue that you are not a “citizen” of the United States; rather, you are a citizen of a state, that the words “United States” only applies to the District of Columbia, and that taxpayers are not “persons” as defined in the Tax Code, and thus are not subject to tax.
· Constitutional legitimacy: These types of claims include refusal to pay based on the First Amendment (religious or moral grounds), Fifth Amendment (lack of due process when taking the tax, or no self-incrimination), Thirteenth Amendment (a form of servitude) and Sixteenth Amendment (not properly ratified because Ohio was not yet a state).
· Fictional legal base: These arguments claim that you don’t have to file because the IRS is not an agency of the U.S. government, that the IRS filing instructions fail to display an Office of Management & Budget “control number,” or that somehow taxpayers are entitled to refunds of Social Security taxes withheld.
· Certain collection processes simply are invalid: This group contains a myriad of catch-all claims that say “the process is invalid because it is not signed by the proper authority or does not contain the proper form.”

If you’re tempted by these types of arguments, you have to ask yourself if you are willing to lose everything fighting for the argument, ruining your credit with tax liens, getting hauled into court, and paying accountants and attorneys thousands to argue cases that dozens of other folks already have tried.

When I try to comfort my clients, I often joke that even the Bible says to “render unto Caesar that which is Caesar’s.” But I haven’t met anyone that enjoys that rendering process.


RESOURCES
“IRS Debunks Frivolous Arguments on Paying Taxes,” updated guidance describing and rebutting frivolous arguments taxpayers should avoid when filing their tax returns; website

“The Truth about Frivolous Tax Arguments,” online paper by the IRS updated to reflect the latest court decisions rejecting numerous false arguments about the legality of not paying taxes or filing returns; website or this site

“IRS Announces ‘Dirty Dozen’ Tax Scams for 2006,” website

“Tax Scams: How to Recognize and Avoid Them,” website