IRS Cautions on Frivolous Filings

March 15, 2007 ( - The Internal Revenue Service has issued guidance identifying dozens of frivolous positions that taxpayers should avoid when filing their tax returns.

Why?   If these or other frivolous positions are contained in a tax return, taxpayers could face a $5,000 penalty – 10 times the previous maximum, according to the IRS, which notes that the guidance lists 40 positions which have “no basis for validity in existing law or which have been deemed frivolous by the United States Tax Court or other federal court.”

IRS Notice 2007-30  contains a list of frivolous positions that will trigger the increased penalty amount, while four revenue rulings issued in conjunction with the notice address specific frivolous claims often made to the IRS. The revenue rulings center on:

  • False arguments that compensation received in exchange for personal services is not taxable income ( Rev. Rul. 2007-19  )
  • The notion that filing returns and paying taxes are voluntary ( Rev. Rul. 2007-20 ).
  • Assertions that the IRS must provide taxpayers with a summary record of assessment made on a Form 23C,    “Assessment Certificate-Summary Record of Assessments”, before overdue taxes may be collected ( Rev. Rul. 2007-21 )   
  • A belief that income is not subject to taxation when the taxpayer declares that he is not a United States citizen because he is a citizen of an individual State or claims he is not a person as defined by the Internal Revenue Code (see  Rev. Rul. 2007-22 ).

“The Truth About Frivolous Arguments” is a 64-page document updated in December 2006 that addresses false arguments about the legality of not paying taxes or filing returns.   The document includes citations from numerous cases decided by the courts and responds to 40 frivolous contentions.      

“People should remember they are ultimately responsible for what is on their tax return even if some unscrupulous preparers have steered them in the wrong direction,” said IRS Commissioner Mark W. Everson. “The truth about these frivolous arguments is simple: They don’t work.”