Saturday, August 14, 2010, AM | 4 Comments
Once in a while we hear that someone has sued the Internal Revenue Service, otherwise known as IRS, for taxpayers’ various contentions. In many such cases brought before the courts, some taxpayers assert that they are not required to file federal tax returns because the filing of a tax return is voluntary. If you look closely at Form 1040 instruction book, it clearly says so.
IRS says “Nope! You are mistaken. That’s not what it means.” The voluntary part of tax filing means that IRS is not looking over your shoulders and does not force you to report all your income [give me a break]. Let’s say I am working as a waiter. I get cash in tips. It’s my choice to add it to my total. [IRS can catch you if you report nothing or less than what IRS determines you should have gotten in tips.]
Another explanation sweet IRS gives is that the tax system allows taxpayers initially to determine the correct amount of tax and complete the appropriate returns, rather than have the government determine tax for them from the outset. I think both explanations kind of overlap each other.
Some taxpayers think they can reduce their federal income tax liability by filing a “zero return.” Click on Pay No Income Tax and find out how. The IRS says there is no authority in the land that permits a taxpayer that has taxable income to avoid income tax by filing a zero return.
Wages from personal services
Some taxpayers contend wages, tips, and other compensation received for personal services are not income. IRS says Nope! It’s taxable income and it has to be reported. However, there have been a few cases where taxpayers did not, in good conscious, file tax return because of total ignorance. IRS states, in those cases, they were not convicted. But its extremely hard to prove it.
Compliance with an administrative summon
Some folks assert that compliance with an administrative summon issued by the IRS is voluntary. IRS says Nope! Taxpayers must comply because the agency is statutorily authorized to inquire about any person who may be liable to pay any internal revenue tax, and to summon a witness to testify or to produce books, papers, records, or other data that may be relevant or material to an investigation.
False arguments may be followed by penalty
In most cases, the courts found that sanctions were appropriate against both the taxpayer and the taxpayer’s attorney for making groundless arguments. In all cases, the amount of fine was different. So unless you are 100% sure that your argument is fool proof against IRS, stay away from suing the agency.
In a Nutshell
The IRS says that any taxpayer who has received more than a statutorily determined amount of gross income is obligated to file a return. Failure to file a tax return could subject the non-complying individual to criminal penalties, including fines and imprisonment, as well as civil penalties.
- Aug 14, 2010: IRS vs Voluntary Tax Arguments : Tax Pros 100 Blog