Why Pay Taxes? The Truth About Frivolous Tax Arguments

The Internal Revenue Service today released an updated document discussing and rebutting many of the more common frivolous arguments made by individuals and groups that oppose compliance with federal tax laws.Anyone who contemplates arguing on legal grounds against paying their fair share of taxes should read this document first.

This 74-page document, The Truth about Frivolous Tax Arguments, is updated at least once a year by the IRS and is designed to help individuals and groups fully understand their responsibilities and not violate the law.

The document explains many of the common frivolous arguments made in recent years and it describes the legal responses that refute these claims. This document is available on IRS.gov and will help taxpayers avoid wasting their time with frivolous arguments and incurring penalties.

In 2006, Congress increased the amount of the penalty for frivolous tax returns from $500 to $5,000. The increased 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.

“Too good to be true schemes are exactly that–too good to be true,” said IRS Chief Counsel Donald L. Korb. “Taxpayers should be careful in making frivolous arguments since courts have routinely rejected them.”

A section of this document responds to some of the more common frivolous arguments made in collection due process cases brought pursuant to sections 6320 or 6330.

Another section explains the penalties that the courts may impose on those who pursue tax cases on frivolous grounds. It should be noted that the cases cited as relevant legal authority are illustrative and are not intended to provide an all-inclusive list relating to frivolous tax arguments.

IRS Has $110 Million in Refund Checks Looking for a Home

The Internal Revenue Service is looking for 115,478 taxpayers who are due refund checks worth about $110 million after the checks were returned as undeliverable.The refund checks, averaging about $953, can be claimed as soon as taxpayers update their addresses with the IRS. Some taxpayers have more than one check waiting.

“Taxpayers should not miss out on getting their money back,” said Richard Morgante, commissioner of the IRS Wage and Investment Division. ”The IRS makes it as easy as possible for taxpayers to update their addresses and claim their refunds.”

The “ Where’s My Refund?” tool on IRS.gov enables taxpayers to check the status of their refunds. A taxpayer must submit his or her social security number, filing status and amount of refund shown on their 2006 return. The tool will provide the status of their refund and in some cases provide instructions on how to resolve delivery problems.

Taxpayers can access a telephone version of “Where’s My Refund?” by calling 1-800-829-1954.

Most Refunds

The number of undeliverable refunds each year is a relatively small portion of all refunds returned to taxpayers. So far in 2007, the IRS has processed nearly 105 million refunds, totaling about $240 billion, either by mail or direct deposit.

In fact, undeliverable refunds account for less than one-tenth of one percent of all refunds, or about one in a thousand.

A refund check is normally returned as undeliverable when a taxpayer moves without updating his or her address with either the U.S. Postal Service or the IRS.

Telephone Tax Refund

The list of taxpayers due undeliverable refunds this year rose about 21 percent from 95,746 last year. The sharp increase is due in part to the Telephone Excise Tax Refund. The refund is a one-time payment available on 2006 federal income tax returns. It was designed to return to taxpayers previously collected long-distance telephone taxes. Individuals, businesses and tax-exempt organizations are eligible to request it.

Updating Your Address

Refund checks are mailed to a taxpayer’s last known address. Checks are returned to the IRS if a taxpayer moves without notifying the IRS or the U.S. Postal Service.
Taxpayers can update their addresses with the IRS on the “ Where’s My Refund?” feature. Also, taxpayers checking on a refund will be prompted to provide an updated address if there is an undelivered check outstanding within the last 12 months. Taxpayers checking on a refund over the phone will be given instructions on how to update their addresses.

A taxpayer can also ensure the IRS has his or her correct address by filing Form 8822, Change of Address. Download the form or request it by calling 1-800-TAX-FORM (1-800-829-3676).

Those who do not have access to the Internet and think they may be missing a refund should first check their records or contact their tax preparer, then call the IRS toll-free assistance line at 1-800-829-1040 to update their address.

Direct Deposit Can Stop Lost Refunds

Signing up for Direct Deposit can put an end to undelivered refunds, as well lost or stolen refund checks. Taxpayers can receive refunds directly into personal checking or savings accounts. Direct Deposit is available for filers of both paper and electronic returns. Taxpayers can sign up for direct deposit on their tax form.

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What Comes After the Holiday Season? Tax Season!

Now is the time to take a look at your business and see if there is anything you can do to save money on your taxes for 2007. Once January 1st hits it may be too late for many of these tax saving ideas.Get Your Books In Order
Set up an appointment with your accountant and make sure everything is together. If you wait until the last minute you may forget something and potentially lose the deduction forever.

Defer Your Income
Put off as much as you can until 2008. Give your clients a Christmas present, and another 30 days before you send the bill. Next year the tax rates will be indexed for inflation and you will pay less tax.

Accelerate Your Expenses
Use credit cards to get the expense deduction while making the payment in 2008. Pay your bills early, and see if there are any large purchases you need to make.

Look at Your Investments
Did you sell stock this year and make a profit? Now is the time to see if you need to sell a few losers. You can write off all of your capital gains plus up to another $3,000 in ordinary expenses with capital losses. Just don’t buy back the same stock within 30 days.

Set Up and Contribute to Your Retirement Account
You’re not losing anything, you are just putting it away until later. You probably won’t miss it anyway, so max out your retirement account.

Make Full Use of the 179 Deduction
This year small businesses can take an immediate $112,000 deduction for purchases of equipment and software that would otherwise need to be depreciated. Whatever you don’t use this year is gone forever.

Keep Track of your Mileage
And finally, if you have a vehicle that you use part for business and part for personal, you need to keep track of your mileage. Make it a new family tradition, on New Year’s Eve, when the clock strikes twelve and the shiny ball drops, kiss your honey and then go run out and get the odometer reading off of your car. Your going to need it for next year!

Happy Holidays and a Prosperous New Year!

Tax Quotes

Did you ever notice that when you put the words “The” and “IRS” together, it spells “THEIRS?” ~Author Unknown

Intaxication: Euphoria at getting a refund from the IRS, which lasts until you realize it was your money to start with. ~Author unknown, from a Washington Post word contest

Unquestionably, there is progress. The average American now pays out twice as much in taxes as he formerly got in wages. ~H.L. Mencken

Why does a slight tax increase cost you two hundred dollars and a substantial tax cut save you thirty cents? ~Peg Bracken

Taxation withrepresentation ain’t so hot either. ~Gerald Barzan

Over and over again Courts have said there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich and poor, and all do right, for nobody owes any public duty to pay more than the law demands. Taxes are enforced exactions, not voluntary contributions. to demand more in the name of morals is mere cant.
~Honorable Learned Hand, US Appeals Court Justice

“Worried about an IRS audit? Avoid what’s called a red flag. That’s something the IRS always looks for. For example, say you have some money left in your bank account after paying taxes. That’s a red flag.” ~Jay Leno

Don’t you long for the good old days when Uncle Sam lived within his income and without most of yours?