By Mark Grossmann, Illinois Attorney
1 August 2013
With all the allegations of IRS misconduct, the agency is becoming a particular focus of public dissatisfaction. Not that the IRS wasn’t, well, less than popular already. Sadly, just this kind of situation is often an invitation to con artists. So, you might hear some amazing claims. These particular claims are anything but new. A little over 10 years ago, several self-styled “experts” were touring the United States speaking to groups and appearing on radio and TV talk-shows asserting that Americans didn’t have to pay their income taxes. The amazing claim was that, somehow, it’s legal to ignore your IRS tax obligation.
It isn’t. This is a reminder of that simple fact.
Generally, these “experts” rely on one or more of these four false assertions. (1) The power to tax incomes isn’t in the Constitution. (2) Our income tax system is “voluntary.” So, no one actually has to pay income tax. (3) Our paper currency isn’t real money. So we have no real income on which to base an income tax obligation. (4) The speaker/author has followed his or her own advice, and not paid income taxes for several years, without any consequences.
(1) The United States income tax is both legal and, certainly, constitutional. How do we know? It’s written in the Constitution. The authors of our income tax legislation took no chances. They proposed and amended the Constitution to assure the legality of an income tax. The 16th Amendment specifically authorizes the U.S. Government to levy an income tax: “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.”
(2) Our income tax system is voluntary. In most nations of the world, government inspectors determine how much tax a citizen owes. Then, government collectors “collect” those taxes. This is an involuntary system. In the United States, however, the government allows citizens to calculate their own yearly taxes and submit a “return,” together with their payment before a certain date: April 15th of the following year. Therefore, our system of income taxation is voluntary.
Generally, the IRS takes a taxpayer’s word for the amounts of the taxpayer’s income, deductions, and tax owed. Actual audits are rare with very few spot checks. Notwithstanding the recent admitted misconduct of some IRS officials and the resulting scandal, appropriate audits are most often undertaken when evidence suggests that a taxpayer’s return is inaccurate. Of course, if the taxpayer does not voluntarily submit a return or fails to fully pay their tax obligation, by the April 15th deadline, the IRS will take steps to forcibly collect the tax owed with considerable penalties and a rather high rate of interest. So, our system is voluntary, but only if you volunteer–in time.
(3) Our paper currency is real money. The last actual connection between U.S. currency and our physical gold and silver reserves ended in the mid 1960’s with the government only ending the regulation of the price of gold (“pegging” our currency to gold) in 1973. Federal Reserve Notes are “legal tender (real money) for all debts public and private.” How do we know? It’s written on every Federal Reserve Note. A refusal to accept Federal Reserve Notes as legal tender (money) in the United States is a crime.
(4) Sometimes, the tax-defying “expert” will point out that they, themselves, haven’t paid their income tax in one, two, or three years without incident. To underline their defiance, a few claim to have submitted a return filled out in some colorful or creative way including a written assertion that they legally do not have to pay income tax. Again, a few claim to have done this for as many as three years, but never four. Why? One statute of limitation on prosecution for income tax evasion is four years. The IRS waits out the limitation period to allow these promoters to rack-up the maximum number of prosecutable federal offenses and, then, . . . prosecution followed by a stay in the slammer.
It’s one thing to make an honest, even foolish, mistake calculating one’s income tax. That isn’t even a crime. The taxpayer is just asked to pay any unpaid tax obligation with interest and penalties. However, it’s another thing when the potential tax payer knows they should pay and refuses. And yet an altogether worse thing when a person who knows they should pay, refuses, brags about it, and encourages others to do the same. Again, this brings a stay in the slammer.
In the future, do yourself a favor and don’t fall for the assurances of any scammer who asserts that they have found some previously undiscovered loophole that allows them, or anyone else, not to pay the federal tax on income. Likewise, advise your friends and acquaintances that these scammers, at best, are wrong and, at worst, “aren’t playing with a full deck.”