New Frivolous Tax Claims to Avoid

No one enjoys paying taxes – but there’s no way around it. The IRS has more power than debt collectors and is less lenient than creditors. Simply put, you must pay your taxes.

Nevertheless, year after year, people continue trying to find ways to avoid taxes. In response, the IRS recently released a list of four “erroneous legal positions” of which taxpayers should be aware.

The IRS outlines these frivolous claims to alert and warn the public. People caught using these, or previously recognized frivolous arguments, will face a fine of $5,000.

From Notice 2008-14 (pdf):

1. Federal income taxes are unconstitutional or a taxpayer has a constitutional right not to comply with the Federal tax laws… [because] the Ninth Amendment exempts those with religious or other objections to military spending from paying taxes to the extent the taxes will be used for military spending.
2. Only fiduciaries are taxpayers, or only persons with a fiduciary relationship to the United States are obligated to pay taxes, and the United States or the Service must prove the fiduciary status or relationship.
3. A taxpayer who is employed on board a ship that provides meals at no cost to the taxpayer as part of the employment may claim a so-called “Mariner’s Tax Deduction” (or the like) allowing the taxpayer to deduct from gross income the cost of the meals as an employee business expense.
4. A taxpayer may claim the section 6421 fuel tax credit, which is limited to gasoline used in an off-highway business use, even though the taxpayer did not purchase and use gasoline during the taxable period for which the credit is claimed for an off-highway business use. Also, if the taxpayer claims an amount of credit that is so disproportionately excessive to any (including zero) business income reported on the taxpayer’s income tax return as to be patently unallowable (e.g., a credit that is 150 percent of business income reported on Form 1040) or facially reflects an impossible quantity of gasoline given business use, if any, as reported by the taxpayer.

Every year, tax avoiders and scammers create new schemes and variations of old schemes to get out of paying taxes. Some may be alluring, but they are not worth trying. These arguments do not stand up in court and will likely cost you in the long run. For more information, please see this IRS press release (pdf).