Wednesday, Apr. 06, 2011

Taking a Political Stance Against Taxes

For years, the IRS has warned taxpayers about taking positions they consider to be frivolous on a federal income tax return in order to avoid paying taxes. Such arguments run the gamut from "payment of federal income tax is voluntary" to "the tax code was never ratified under the Constitution." Despite publicity from the IRS, these schemes continue to make the rounds. If you try one of these out, the results can't be that bad, right?

Likely consequence: The IRS and Congress have made enforcement of laws relating to these arguments a priority in recent years. And the IRS has a number of options for going after people they think are using political arguments to avoid paying taxes. At the very least, the IRS can hit you with a $25,000 civil penalty. But if the agency thinks your effort to avoid taxes has been egregious, or you have lied about your income or used some other dodge in order to claim you don't owe taxes, then the IRS can file criminal charges against you. If that happens, you could be looking at a fine of up to $250,000 and as much as five years in prison.