Come mid-April, every California taxpayer wants to pay as little tax as possible. This is the legitimate goal of detailed tax planning, and those who know their Internal Revenue Code can benefit significantly. It is important to note, however, that there are legal ways to minimize one's taxes and there are other ways, which, if attempted, could subject a person to substantial financial penalties and other consequences.
We have all heard the stories of people who engage in tax evasion by simply not reporting income or by falsifying figures. There is a perhaps lesser-known, but arguably more interesting, form of tax evasion which can still land a taxpayer in legal trouble with the government. Over the years, many inventive taxpayers have attempted to avoid paying taxes by presenting a variety of strange arguments to the Internal Revenue Service.
Some arguments are based on a legal discipline called statutory interpretation, which seeks to elucidate the occasionally unclear meaning of our laws. In analyzing the Code language that states who must pay taxes, some taxpayers have taken the position that the word "individual" does not include human beings or natural born persons. This argument is untenable, however, and has been repeatedly rejected by the courts.
Other taxpayers have homed in on the IRS's phrase "voluntary compliance" and have used it to argue that people can pay taxes at their discretion. This argument too, is unsupported. In this context, "voluntary" means only that the IRS allows people to do their own returns. It does not relieve people of their obligation to file returns or pay taxes when they are legally required to do so.
In our next post we will continue to discuss other unsuccessful arguments that have been advanced to avoid paying taxes.
Source: CNNMoney.com, "Strange tax evasion schemes," Blake Ellis, April 6, 2012.