Tax Tips |
Tax Tip
Overview
- The requirement to pay taxes isn't optional and is clearly set forth in section 1 of the Internal Revenue Code.
- If you fail to pay taxes, you'll face criminal penalties, including fines and imprisonment, as well as civil penalties.
- The IRS rejects many common frivolous arguments that are used to avoid taxes.
The IRS reminds taxpayers to steer clear of frivolous tax arguments and schemes designed to avoid paying your taxes. The penalty for frivolous tax returns is $5,000. The penalty amount applies when a person submits a tax return or other specified submission, and any portion of the submission is based on a position the IRS identifies as frivolous.
The IRS rejects these common frivolous arguments:
None of these or any of the other arguments on the IRS's full list of frivolous arguments will excuse you from paying your taxes.
The IRS rejects these common frivolous arguments:
- Filing a tax return is voluntary.
- Only federal employees and persons living in Washington, D.C., are subject to federal income tax.
- Native Americans can avoid federal income tax because of a "Native American Treaty."
- Taxpayers can validate invalid returns or other invalid tax positions or documents by writing or stamping the phrase "nunc pro tunc" on the face of the return.
- Income and expenses can be attributed to a purported trust to avoid federal income tax liability.
- Taxpayers are not required to file an income tax return because of the Paperwork Reduction Act of 1980.
- Taxes are only owed on foreign income under tax code Section 861.
- Taxpayers have basis in their labor equal to the fair market value of their wages, and therefore have no taxable gain.
- Taxpayers who reside in the U.S. are not citizens or persons within the meaning of the tax code.
- U.S. residents living abroad who can exclude U.S. taxable income under tax code Section 911 are in fact residents of a foreign country.
- Taxpayers can buy or sell the right to claim a child for purposes of the Earned Income Credit.
- Taxpayers can deduct all of their nonbusiness-related household expenses if they establish home businesses.
- Employer withholding of employment taxes is voluntary.
- The 9th Amendment exempts those with religious or other objections to military spending from paying taxes to the extent the taxes will be used for military spending.
- Only fiduciaries (a person to whom property or power is entrusted for the benefit of another) are obligated to pay taxes, and the U.S. must prove the fiduciary status or relationship.
- A taxpayer who is employed on board a ship that provides meals at no cost to the taxpayer as part of the employment may claim a so-called "Mariner's Tax Deduction," allowing the taxpayer to deduct from gross income the cost of the meals as an employee business expense.
- A taxpayer may claim the section 6421 Fuels Tax Credit even though the taxpayer didn't purchase and use gasoline during the taxable period for which the credit is claimed.
None of these or any of the other arguments on the IRS's full list of frivolous arguments will excuse you from paying your taxes.
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Frequently Asked Questions
Question: I started working out of the country in September 2007 and will be out of the country for the next 3 years. What are the laws on taxable income earned outside of the U.S.? Will it matter the company I'll be working for is in California while I'm in Japan?
Answer: You'll need to file your tax return, reporting all income as you always have. It makes no difference where your employer is located. However, because you are living and working out of the country, you'll probably qualify to claim an exclusion of earned income (up to $85,700 for 2007) plus certain living costs. Because you were not out of the country for all of 2007, the maximum exclusion will be prorated. Contact an H&R Block tax professional for more information about your situation. You may even want to find an H&R Block office in Japan.
Question: In addition to my job, I do a little carpentry work on the side. Last year, I made about $1,000 doing odd jobs for neighbors. I know it's taxable, but I'm not sure where to report it. Do I count it as wages?
Answer: No. It's self-employment income and should be reported on a Schedule C. On the plus side, that will also permit you to deduct the cost of any materials you used. If your net profit was $433 or more, you'll also have to file a Schedule SE and pay Social Security and/or Medicare taxes on the income.
Question: What, if anything, can I do about having never filed any tax returns? I'm 21, and I've been working since I was 15.
Answer: Go to your local H&R Block office. It's very important to find out what returns are required. It may not be as bad as it seems because you may not have been required to file for each of those years, and tax withheld from your wages may exceed any tax due. You can't collect any refund due you for a year before 2003. To get any refund you have coming for your 2004 return, you must file it by April 15, 2008.
More Returns FAQs
Answer: You'll need to file your tax return, reporting all income as you always have. It makes no difference where your employer is located. However, because you are living and working out of the country, you'll probably qualify to claim an exclusion of earned income (up to $85,700 for 2007) plus certain living costs. Because you were not out of the country for all of 2007, the maximum exclusion will be prorated. Contact an H&R Block tax professional for more information about your situation. You may even want to find an H&R Block office in Japan.
Question: In addition to my job, I do a little carpentry work on the side. Last year, I made about $1,000 doing odd jobs for neighbors. I know it's taxable, but I'm not sure where to report it. Do I count it as wages?
Answer: No. It's self-employment income and should be reported on a Schedule C. On the plus side, that will also permit you to deduct the cost of any materials you used. If your net profit was $433 or more, you'll also have to file a Schedule SE and pay Social Security and/or Medicare taxes on the income.
Question: What, if anything, can I do about having never filed any tax returns? I'm 21, and I've been working since I was 15.
Answer: Go to your local H&R Block office. It's very important to find out what returns are required. It may not be as bad as it seems because you may not have been required to file for each of those years, and tax withheld from your wages may exceed any tax due. You can't collect any refund due you for a year before 2003. To get any refund you have coming for your 2004 return, you must file it by April 15, 2008.
More Returns FAQs
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