No matter how many times the courts reject certain claims of nontaxability, there is always a new crop of taxpayers that will assert them on their tax returns. The sources of the claims are websites, books, and unscrupulous promotors, among others. It will now be more expensive for taxpayers to assert them. The Tax Relief and Health Care Act of 2006 amended Code Sec. 6702 to increase the amount of the penalty for frivolous tax returns from $500 to $5,000 and to impose a penalty of $5,000 on any person who submits a "specified frivolous submission." In a number of pronouncements, the IRS has now listed out a number of frivolous positions that will trigger the$5,000 penalty.
Some of these positions include:
- Claiming that filing a Federal tax or information return or paying tax is purely voluntary under the law;
- That a taxpayer may lawfully decline to pay taxes if the taxpayer disagrees with the government's use of tax revenues;
- That a taxpayer's income is excluded from taxation when the taxpayer rejects or renounces United States citizenship because the taxpayer is a citizen exclusively of a State (sometimes characterized as a "natural-born citizen" of a "sovereign state"), that is claimed to be a separate country or otherwise not subject to the laws of the United States;
- That United States citizens and residents are not subject to tax on their wages or other income derived from sources within the United States, as only foreign-based income or income received by nonresident aliens and foreign corporations from sources within the United States is taxable;
- That the First Amendment permits a taxpayer to refuse to pay taxes based on religious or moral beliefs;
- The Fifth Amendment privilege against self-incrimination grants taxpayers the right not to file returns or the right to withhold all financial information from the Service.
There are forty of these items provided for in Notice 2007-30. Many of the taxpayers that assert these positions believe in their correctness. However, that belief is not going to save them from these penalties.
Notice 2007-30, 2007-14 IRB ; Rev Rul 2007-19, 2007-14 IRB , Rev Rul 2007-20, 2007-14 IRB , Rev Rul 2007-21, 2007-14 IRB , Rev Rul 2007-22, 2007-14 IRB ; IR 2007-61.