In Notice 2008-14 , the IRS points out that an individual or group may not avoid paying their fair share of taxes by making “frivolous” legal arguments. The notice lists positions identified as frivolous for purposes of the penalty under section 6702 of the federal tax code for filing a frivolous tax return or submitting to the IRS a frivolous request for a collection due process hearing or application for an installment agreement, offer-in-compromise, or Taxpayer Assistance Order.
The four new frivolous claims pertain to the following:
- Misinterpretation of the 9th Amendment to the U.S. Constitution regarding objections to military spending.
- Erroneous claims that taxes are owed only by persons with a fiduciary relationship to the United States or the IRS.
- A nonexistent “Mariner’s Tax Deduction” (or the like) related to invalid deductions for meals.
- Certain instances of misuse or excessive use of the section 6421 fuels credit.
Note that in 2006, Congress increased the penalty for frivolous tax returns from $500 to $5,000. The increased penalty amount applies when a person submits a tax return or other specified submission, and any portion of the submission is based on a position the IRS identifies as frivolous. Notice 2008-14 will be published in the Internal Revenue Bulletin 2008-4 dated January 28.
The IRS recently published “The Truth about Frivolous Tax Arguments”, a 74-page document that it publishes, as it attempts to keep up with the “ingenuity” of some elements of the American public (see Too Good To Be True? ).