The Internal Revenue Service (IRS) yesterday finished its 2016 “Dirty Dozen” tax scams list by warning taxpayers against using frivolous tax arguments to avoid paying taxes. Every year the IRS puts together its “Dirty Dozen” list of common scams that taxpayers are most likely to currently encounter as they search the internet or as they hire someone to help with their taxes.
Scam #12 – Frivolous Tax Arguments
“The IRS and the courts hear many outlandish arguments from people trying to avoid their legal filing and tax obligations,” said IRS Commissioner John Koskinen. “Taxpayers should avoid unscrupulous promoters of false tax-avoidance arguments because taxpayers end up paying what they owe plus potential penalties and interest mandated by law.” Examples include claims that taxpayers can refuse to pay taxes on religious grounds or by invoking the First Amendment.
Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. These arguments are wrong and have been thrown out of court. While taxpayers have the right to contest their legitimate tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes.
You’ll End Up Paying More Than You Wanted
The penalty for filing a frivolous tax return is $5,000. The penalty applies to anyone who submits a purported tax return or other specified submission, if any portion of the submission is based on a position the IRS identified as frivolous in Notice 2010-33, 2010-17 I.R.B. 609, or reflects a desire to delay or impede administration of the tax laws.
Taxpayers who rely on frivolous arguments and schemes may also face criminal prosecution for attempting to evade or defeat tax. Similarly, taxpayers may be convicted of a felony for willfully making and signing under penalties of perjury any return, statement, or other document that the person does not believe to be true and correct as to every material matter.
The IRS yesterday updated its official publication of “The Truth about Frivolous Tax Arguments”, which describes and responds to some of the common frivolous tax arguments made by those who oppose compliance with federal tax laws. The cases cited demonstrate how frivolous arguments are treated by the IRS and the courts. The 2016 version includes numerous recently-decided cases that demonstrate that the courts continue to regard such arguments as illegitimate.
2016’s IRS Dirty Dozen Tax Scam List
Here is this year’s complete list of the Dirty Dozen Tax Scams:
- Identity Theft
- Phone Scams
- Return Preparer Fraud
- Hiding Money or Income Offshore
- Inflated Refund Claims
- Fake Charities
- Falsely Padding Deductions
- Excessive Claims for Business Credits
- Falsifying Income to Claim Tax Credits
- Abusive Tax Shelters
- Frivolous Tax Arguments