Do you really have to pay income taxes to the IRS? Some people think not. In fact, there is a substantial tax protester movement claiming that Americans have no legal obligation to pay income taxes.
There is a great deal of misinformation about this on the Internet. Here are two simple facts:
You can find dozens of websites and books touting the tax protesters' claims. Some protesters even sell kits or guides on how to get away with paying no taxes. Unfortunately, many naive (or greedy) individuals are misled by these materials into refusing to pay their taxes. The IRS estimates that every year it receives 20,000 to 30,000 frivolous tax returns--that is, returns in which the taxpayer refuses to pay taxes on invalid grounds.
The IRS has issued a list of positions it considers to be legally frivolous. These frivolous tax arguments include claims that:
All of these arguments and others have been refuted time and again by the courts and IRS. The IRS has created a detailed explanation of why these arguments are untrue. You can find the IRS Publication The Truth About Frivolous Tax Arguments on the IRS website.
Anyone who files a return or other submission to the IRS based on one or more of these frivolous tax arguments is subject to an IRS penalty of $5,000. In addition, if you take a position the IRS deems frivolous, the IRS will not only require that you pay your taxes due, but can also impose a 20% accuracy-related penalty and a whopping 75% civil fraud penalty.
If substantial fines and penalties aren't bad enough, you can also be criminally prosecuted for tax fraud. This is what happened to actor Wesley Snipes. The U.S. Justice Department prosecuted him for tax fraud when he failed to file tax returns and filed false tax refund claims for over $10 million. He based his claims on the tax protestor argument that the domestic income of U.S. citizens and residents is not taxable. Snipes was found guilty of the misdemeanor of willfully failing to file federal income tax returns and sentenced to three years in prison.