There are many taxpayers with outrageous claims on why they shouldn’t have to pay taxes. Donald Trump, the current republican presidential candidate, utilized a 916-million-dollar business loss in 1995, which legally allowed him the right to not pay taxes for 18 years. However, the real estate billionaire did use a very legitimate loophole in our current tax code to avoid paying out of his pocket.
The Treasury Department’s Inspector General for Tax Administration recently reported that tens of thousands of individuals and businesses have used “frivolous tax arguments” or illegal claims to keep profits in their pocket, and avoid paying the taxes they’re obligated to pay, which led to taxpayers searching for IRS tax relief.
Tax filings from fiscal 2012 to 2014 were reviewed and showed 36,648 tax returns that avoided the IRS’ scrutiny due to the taxpayer using one, or more than fifty different arguments as to why they shouldn’t have to live up to their tax obligations. Of course, these shenanigans hit the IRS where it hurts. This caused the IRS to lose more than $27.2 million in false tax returns or tax credits to approximately 1,938 taxpayers in the year of 2014 alone.
The Inspector General Report also shows that the IRS has been rigorously working towards identifying these frivolous cases in the recent years. This is most likely due to congress cutting the IRS’ funds by 17% since the year 2010. With that being said, recovering money from false tax filings is the most logical step to make up for budget cuts. In the fiscal year 2013, the IRS dished out $77.2 million dollars in penalties against 15,448 tax filers. During the previous year, they assessed 25,546 penalties that equaled $127.7 million dollars.
The Inspector General came to the conclusion that more action is needed to identify and handle these frivolous claims being made.
Here are six of the most frivolous claims made by IRS scofflaws:
1. There are taxpayers who love to claim that paying their taxes is “voluntary” and that they refuse to pay. However, tax experts have explained over and over that paying your taxes is not voluntary, but the way in which you submit your taxes, is indeed voluntary. Although, the tax system is technically “voluntary”, there are still stiff penalties and harsh actions that will be taken against taxpayers who do not follow. These “slick” taxpayers end up needing tax relief services.
2. There are some individuals who take the semantics route when trying to avoid paying taxes. These filers argue that they’re not considered a “person” or “individual” which is stated in the tax code; therefore, they believe they should not be obligated to pay. However, unless you’re an alien from another universe (which is very unlikely), you have to pay taxes!
3. A dozen individuals have tried using the constitution to their benefit. These filers decided to plead the fifth and didn’t want to incriminate themselves by providing their income information to the IRS. Of course, the IRS didn’t fall for this and personally made sure these filers paid their fair share.
4. A tactic that dates back to the Vietnam war – Some taxpayers claim they are withholding tax payments as a protest against the action inaction of the government. During the war, objectors of the war or other government actions believed they were justified for not paying taxes. Of course, this is yet another argument that has fallen on deaf ears at the IRS.
5. There have been hundreds of people who claim to have paid way too much money in taxes in the social security system, and that they should receive a refund to compensate for those payments. These filers even went as far as requesting a “lifetime earnings statement” from the Social Security Administration to show the payroll taxes that were deducted from their checks. Of course, the IRS implied that this was a legal fiction claim.
6. Last but not least, over a 3-year period, there were a little over 1,200 filings from prisoners trying to claim refunds for hours worked in their prison using the current minimum wage. Instead of using a w-2 form, these prisoners used a form 4852 which allowed them to provide a “guestimate” on the amount of money that would’ve been withheld by an employer if they were working a minimum wage job out the prison. The IRS simply ignored this and considered it fantasy accounting.
The IRS are not letting taxpayer dollars’ slip through their fingers that easy anymore. Taxpayers are being hit with IRS back taxes on a daily basis. With that being said, don’t waste your time brainstorming ways you can avoid tax obligations. As you can see, it rarely ever works.