Actor Wesley Snipes, star of the “Blade” movie series, became a poster child for celebrity tax troubles in the 2000’s when he was convicted of willfully failing to file tax returns for 1999, 2000 and 2001.
The actor tried many arguments to avoid the charges. He maintained that he was innocent of tax evasion and was misled by his tax advisors. He also maintained that the IRS was an illegitimate government agency, that he was a nonresident alien, and that he received incorrect information from associates. The IRS rejected Mr. Snipes’ claims, labeling them as “frivolous tax arguments.” Wesley Snipes was given the sentence of three years in federal prison for failing to file the tax returns.
To avoid getting into trouble with the IRS, taxpayers need to know what constitutes frivolous arguments. In many cases, it is unscrupulous tax advisors that encourage taxpayers to evade taxes by quoting arguments that will not stand up in a court of law or with the IRS.
The IRS makes it clear which arguments are unacceptable to them and to the court. These are:
- The federal income tax is voluntary or the filing of a tax return is voluntary.
- Taxpayers can reduce their federal income tax liability by filing a “zero return”.
- The IRS is required to prepare and file tax returns for those taxpayers who do not file.
- Compliance with administrative summons such as letters and notices issued by the IRS is voluntary.
- Only income from foreign sources is taxable.
- Federal reserve notes are not income.
- Military retirement pay does not constitute income.
Some twist the meaning of certain terms used in the Internal Revenue code to avoid punishment for non-compliance. For example, the taxpayer is not a “citizen” of the United States, and is, therefore, not subject to the federal income tax laws.
Frivolous arguments also include using constitutional amendment claims, such as arguing that the federal income tax laws are unconstitutional because the sixteenth amendment was not properly ratified. Legal claims that have no basis in fact and are purely fictitious are also dismissed as frivolous.
Arguing questionable tax positions in court is dangerous, as the court can impose a penalty of up to $25,000 if it concludes that your position is frivolous. Regardless of any inaccurate tax information you’re given, you are ultimately held responsible for non-payment of taxes.