Dealing with the increasing number of "tax deniers"
From the December 2008 issue of Ceridian Connection
Recent press reports in the New York Times and other newspapers have drawn attention to the dramatic increase in the number of tax protesters who choose either to file no return or file what the IRS and the courts have defined as "frivolous tax returns." In July 2008, the office of the Treasury Department's Inspector General for Tax Administration reported that the number of federal criminal tax investigations referred by the IRS to the Justice Department is at an eight-year high.
According to the report, in fiscal year 2007 there were 4,600 investigations. The increase is nearly 50 percent from fiscal year 2002 to year 2007. The report also concluded that federal criminal tax convictions increased by 6.7percent from fiscal year 2006 to fiscal year 2007 with 2,155 individuals convicted in 2007.
The Criminal Investigation (CI) division of the IRS investigates reports of violations of the federal criminal tax statutes and refers cases to the Tax Division of the U.S. Department of Justice for prosecution.
Updating the "tax protester" moniker
In 1789, Benjamin Franklin said, "Nothing is certain but death and taxes." By reading the IRS reports, it appears that the number of nonbelievers -- at least in the tax portion of that statement -- is growing.
Some tax protesters purposely challenge the right of the IRS to collect taxes. Other protestors challenge the constitutional or statutory right of the government to impose an income tax. However, the courts have consistently found no legal basis for these arguments. The taxpayers are most often found guilty and required to pay taxes owed, including penalties and interest. They may also face jail time.
Interestingly, many tax protesters have objected to the "tax protester" label. They claim that the IRS has improperly applied the label "illegal tax protester" to citizens who have simply expressed a disagreement with the tax laws. They also claim not to be "protesting" the tax laws, but only arguing that the laws do not apply to them or their income. For these and other reasons, some protesters prefer to be called a "tax denier."
"Whether the term tax protester or tax denier is used, the actions of these individuals have a direct impact on businesses that are required to stay in compliance with payroll regulations," says Richard Green, Ceridian senior manager of tax compliance.
Claims to penalties
Organized tax resister groups and individual tax protesters often make both statutory and constitutional arguments against the income tax and the legal right of the IRS to collect taxes.
The IRS has issued a list of positions considered to be legally frivolous. These include the following:
In the United States, protesting federal income taxes is not, in and of itself, a criminal offense. The U.S. Congress has, however, enacted Internal Revenue Code section 6702 "in an effort to deter tax protesters from filing frivolous returns." The penalty is $500 for positions taken on or before March 15, 2007, and currently stands at $5,000.
Congress has also enacted Internal Revenue Code section 6673 that imposes civil monetary penalties for making frivolous arguments in proceedings before the U.S. Tax Court. The law provides that frivolous arguments may result in a penalty of up to $25,000.
Most returns filed by tax protesters are identified and handled as frivolous returns by the IRS. Shauna Henline is the senior technical adviser of the Frivolous Return Program at the IRS. She has testified that each year the IRS receives approximately 20,000 to 30,000 frivolous tax returns and 100,000 related letters and other documents.
Employer options
"While there have been people throughout history who challenged the assessment of taxes as beyond the power of the government, the modern tax protester movement began after World War II," says Green. "One way for employers to avoid costly penalties, litigation and ensure improved compliance is to work with an experienced payroll service provider."
Some tax protesters who knowingly fail to file returns or file frivolous returns may do so due to inaccurate information. Tax law and the tax code are complex. The risks of noncompliance are too high to leave interpretation or filing decisions to non-experts. Qualified experts maintain regular contact with more than 8,500 federal, state and local tax jurisdictions to, carefully monitor and influence changes that could affect businesses.
"In these challenging economic times, the last thing that a business needs is a surprise tax penalty assessment or tax audit," says Green.
Visit www.irs.gov for information about revenue codes, frivolous tax positions and more.
Ceridian's tax service handles the entire process from collecting payroll tax liability through reconciling and disbursing funds. It documents all work performed to support audit requirements and assumes responsibility for the accuracy of your returns and the timely deposit of funds. As tax forms and regulations change, you know your company is in compliance. We also offer several options for providing W-2 information to your employees. These include printed W-2 forms and online access to W-2 information through our SeeMyW2 service.
Whether fully integrated with your Ceridian HR/payroll solution, or as a standalone service using payroll data from your inhouse or third-party system, Ceridian's tax service provides you with comprehensive and reliable services that offer you peace of mind.
Recent press reports in the New York Times and other newspapers have drawn attention to the dramatic increase in the number of tax protesters who choose either to file no return or file what the IRS and the courts have defined as "frivolous tax returns." In July 2008, the office of the Treasury Department's Inspector General for Tax Administration reported that the number of federal criminal tax investigations referred by the IRS to the Justice Department is at an eight-year high.
According to the report, in fiscal year 2007 there were 4,600 investigations. The increase is nearly 50 percent from fiscal year 2002 to year 2007. The report also concluded that federal criminal tax convictions increased by 6.7percent from fiscal year 2006 to fiscal year 2007 with 2,155 individuals convicted in 2007.
The Criminal Investigation (CI) division of the IRS investigates reports of violations of the federal criminal tax statutes and refers cases to the Tax Division of the U.S. Department of Justice for prosecution.
Updating the "tax protester" moniker
In 1789, Benjamin Franklin said, "Nothing is certain but death and taxes." By reading the IRS reports, it appears that the number of nonbelievers -- at least in the tax portion of that statement -- is growing.
Some tax protesters purposely challenge the right of the IRS to collect taxes. Other protestors challenge the constitutional or statutory right of the government to impose an income tax. However, the courts have consistently found no legal basis for these arguments. The taxpayers are most often found guilty and required to pay taxes owed, including penalties and interest. They may also face jail time.
Interestingly, many tax protesters have objected to the "tax protester" label. They claim that the IRS has improperly applied the label "illegal tax protester" to citizens who have simply expressed a disagreement with the tax laws. They also claim not to be "protesting" the tax laws, but only arguing that the laws do not apply to them or their income. For these and other reasons, some protesters prefer to be called a "tax denier."
"Whether the term tax protester or tax denier is used, the actions of these individuals have a direct impact on businesses that are required to stay in compliance with payroll regulations," says Richard Green, Ceridian senior manager of tax compliance.
Claims to penalties
Organized tax resister groups and individual tax protesters often make both statutory and constitutional arguments against the income tax and the legal right of the IRS to collect taxes.
The IRS has issued a list of positions considered to be legally frivolous. These include the following:
- Filing of a tax return is voluntary.
- Payment of tax is voluntary.
- Taxpayers can reduce their federal income tax liability by filing a "zero return."
- Taxpayers can refuse to pay income taxes on religious or moral grounds by invoking the First Amendment.
- Taxpayers do not have to file returns or provide financial information because of the protection against self-incrimination in the Fifth Amendment.
- The Sixteenth Amendment was not properly ratified; thus the federal income tax laws are unconstitutional.
In the United States, protesting federal income taxes is not, in and of itself, a criminal offense. The U.S. Congress has, however, enacted Internal Revenue Code section 6702 "in an effort to deter tax protesters from filing frivolous returns." The penalty is $500 for positions taken on or before March 15, 2007, and currently stands at $5,000.
Congress has also enacted Internal Revenue Code section 6673 that imposes civil monetary penalties for making frivolous arguments in proceedings before the U.S. Tax Court. The law provides that frivolous arguments may result in a penalty of up to $25,000.
Most returns filed by tax protesters are identified and handled as frivolous returns by the IRS. Shauna Henline is the senior technical adviser of the Frivolous Return Program at the IRS. She has testified that each year the IRS receives approximately 20,000 to 30,000 frivolous tax returns and 100,000 related letters and other documents.
Employer options
"While there have been people throughout history who challenged the assessment of taxes as beyond the power of the government, the modern tax protester movement began after World War II," says Green. "One way for employers to avoid costly penalties, litigation and ensure improved compliance is to work with an experienced payroll service provider."
Some tax protesters who knowingly fail to file returns or file frivolous returns may do so due to inaccurate information. Tax law and the tax code are complex. The risks of noncompliance are too high to leave interpretation or filing decisions to non-experts. Qualified experts maintain regular contact with more than 8,500 federal, state and local tax jurisdictions to, carefully monitor and influence changes that could affect businesses.
"In these challenging economic times, the last thing that a business needs is a surprise tax penalty assessment or tax audit," says Green.
Visit www.irs.gov for information about revenue codes, frivolous tax positions and more.
Ceridian's tax service handles the entire process from collecting payroll tax liability through reconciling and disbursing funds. It documents all work performed to support audit requirements and assumes responsibility for the accuracy of your returns and the timely deposit of funds. As tax forms and regulations change, you know your company is in compliance. We also offer several options for providing W-2 information to your employees. These include printed W-2 forms and online access to W-2 information through our SeeMyW2 service.
Whether fully integrated with your Ceridian HR/payroll solution, or as a standalone service using payroll data from your inhouse or third-party system, Ceridian's tax service provides you with comprehensive and reliable services that offer you peace of mind.
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