The IRS and Its “Frivolous Filing” Penalty

In ’s last-minute tax bill, the “frivolous filing” penalty was increased from $500 to $5,000 and expanded to apply not only to “frivolous” arguments made when filing a tax return, but to arguments made at other times, such as when requesting a collection due process hearing, an application for an installment agreement, an offer-in-compromise, or a Taxpayer Assistance Order.

Mostly this is of concern to people making the various constitutionalist tax protester arguments, which the IRS pretty much universally considers to be frivolous.

However, occasionally conscientious tax resisters get caught up in this as well. A good policy to follow if you want to avoid this penalty is to keep your arguments about why you are not paying taxes or should not be required to pay all or some portion of your taxes separate from any official interaction with the IRS concerning your tax return or their attempt to collect from you. In other words, if you do not want to risk getting hit with a penalty, do not write a note on your 1040 form explaining why you’re not including a check and do not request a collection due process hearing to discuss the Nuremberg Principles or anything of that sort.

If you are eager to explain to anyone at the IRS why it is that you’re resisting taxes, why it should be legal to do so, or why you think it is legal to do so, make your arguments separately from any official correspondence concerning your tax returns and make your arguments general ones so that the IRS will not interpret them as legal positions you are taking regarding your particular return. That might not be enough to satisfy them, though, so be aware of the risks if you tilt at that particular windmill.

The IRS position, of course, is that conscientious tax resistance has no legal justification. They spelled this out most explicitly in Revenue Ruling 2005-20.

the IRS published a list of many of the arguments it considers “frivolous”. You’ll find most of the constitutionalist tax protester greatest hits listed there.