The IRS and Treasury have issued notices warning taxpayers that if returns are filed under the theory that U.S. citizens and residents aren't subject to tax on their wages and other income earned or derived within the United States, they may be subject to penalties. This argument is known as the "zero tax theory" and is possibly known by other names. Despite all the warnings about this and other frivolous arguments, some taxpayers insist on presenting frivolous arguments in court. The law allows the courts to impose a penalty of up to $25,000 when the court comes to any of three conclusions:

• a taxpayer instituted a proceeding primarily for delay,
• a position is frivolous or groundless, or
• a taxpayer unreasonably failed to pursue administrative remedies.

On December 21, 2007, the IRS issued a press release titled, "IRS Debunks Frivolous Tax Arguments."  The release announces that the IRS has updated a document discussing and rebutting many of the more common frivolous arguments made by individuals and groups that oppose compliance with federal tax laws.  The document titled, "The Truth About Frivolous Tax Arguments" dated February 1, 2009, responds to some of the more common frivolous “legal arguments” made by individuals and groups who oppose compliance with the federal tax laws.  This past year, the courts have not only rebuked these arguments numerous times, but also have imposed thousands of dollars in fines on taxpayers or their attorneys for pursuing frivolous cases.

How Do You Report Suspected Tax Fraud Activity?
If you have information about an individual or company you suspect is not complying with the tax law, report this activity.

Table of Contents - Nonfiler Enforcement

Criminal Investigation (CI)

Tax Fraud Alerts