NFIB

Hefty Fines and Penalties for Those Ensnared in Tax Scam Traps
03/ 12/ 2003

Reprinted courtesy of the California Society of Enrolled Agents

As we head into tax season, Enrolled Agents are again warning taxpayers not to fall for ruses, false promises or scams that could land the unwary into trouble--or prison.

"Some of these anti-tax schemes sound intriguing, especially for folks who are paying off holiday bills or trying to recover from debt," says Connie Lorz, EA, President of the California Society of Enrolled Agents. "But the old adage, 'If it sounds too good to be true, it is' certainly applies here."

Article 1, Section 8, Clause 1 of the U.S. Constitution states, "The Congress shall have the power to lay and collect taxes, duties, imposts and excises to pay the debts and provide for the common defense and general welfare of the United States." The Internal Revenue Service (IRS) was established on July 1, 1862, by an act of Congress, to help the nation raise funds to pay Civil War expenses. The Sixteenth Amendment was ratified in 1913, and it states, "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."

Over the years, U.S. courts have held that there are no Constitutional or legal grounds for failure to file tax returns or failure to pay taxes. Despite these facts, some unscrupulous individuals still claim that the tax laws are "unconstitutional" or that it's possible to "untax" yourself--for a fee, of course.

Some of these tax scam arguments:

Compliance with IRS regulations is voluntary. Don't file, and they can't get you.

The truth is that "voluntary compliance" means individuals -- not the government--are responsible for determining and paying the correct amount of tax. It does not mean that the filing of an accurate tax return is voluntary.

Filing a Form 1040 violates the Fourth Amendment right to privacy or the Fifth Amendment right against self-incrimination.

Courts have consistently held that disclosure of financial information on a tax return does not incriminate an individual or violate the right to privacy.

Wages, tips and other compensation received for personal services are not income, because there is no taxable gain when a person simply "exchanges" labor for money.

The Internal Revenue Code clearly defines gross income as "income from whatever source Derived" and includes compensation for services.

There is no specific section of the Internal Revenue Code that imposes taxes on individuals.

Oh, really? The tax law is in Title 26 of the United States Code. The requirement to file an income tax return can be found in the Internal Revenue Code (IRC) Sections 6011(a), 6012(a), et seq., and 6072(a).

There are many other scams being sold to the unwary. Lorz offers advice you can count on: "Tax evasion is a serious crime punishable by imprisonment, fines and the imposition of civil penalties. The outrageous claims by the "untax" crowd have been ruled against so many times, most Courts automatically consider them frivolous and routinely assess additional penalties for even bringing them up."

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Enrolled Agents are tax professionals licensed by the federal government to represent taxpayers and assist them with tax planning and tax return preparation. Taxpayers in California can locate an Enrolled Agent in their area by calling toll-free 800/TAXPRO-5 or online at www.csea.org. Outside California, the Enrolled Agent referral number is 800.424.4339.

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