The IRS has released Revenue Ruling 2005-20, which “emphasizes to taxpayers and to promoters and return preparers that liability for federal taxes does not depend on whether the taxpayer agrees with the government programs or policies that are funded with tax receipts.”
How you can resist funding the government → about the IRS and U.S. tax law/policy → how the government deals with tax resisters → IRS policy on conscientious tax resistance
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.
Tax resisters resist from many motives, sometimes more than one at once. For instance, some war tax resisters resist as a form of conscientious objection — they’re unwilling to participate in war financing. Others resist as a form of protest — they want to resist taxes as a way of emphasizing their opposition to the government’s policies or to call their opposition to the attention of the powers that be through civil disobedience. Many war tax resisters share both of these motives.
For those that have protest as a motive, simply refusing to write a check to the IRS when they file their returns in April often doesn’t seem enough. How will the government distinguish their refusal to pay as a protest from someone else’s refusal to pay for other motives? For this reason, such war tax resisters will often include a letter of explanation along with their tax filing that explains their motives.
But lately, the IRS has been interpreting these letters of explanation as part of the tax filing itself, and has been threatening resisters with a $5,000 penalty for “asserting a frivolous position” in their filing.
, Mike Palecek at Pacific Free Press shares his experience with one of these “frivolous filing penalty” threats. The last two years, he has accompanied “crossed-out” tax returns with letters of explanation of the following sort:
Hello. Enclosed is my tax form for this year.
It is crossed-out because I do not wish to cooperate with the government of George W. Bush.
President Bush has chosen to spend our tax dollars on war and killing while cutting spending on social programs.
As a Christian, I cannot go along with this.
I must protest.
Note that the letter is not taking any legal positions whatsoever — frivolous or not. Palecek is merely saying that he is not paying because he does not want to cooperate with the government, and indicating how the government has lost his support.
Is that enough to trigger a frivolous filing penalty? Or, legally, should it simply be a failure-to-file or failure-to-pay penalty? The IRS sent Palecek a letter saying they considered his filing to be frivolous, and threatening him with a $5,000 penalty if he doesn’t refile properly.
The law that covers this is Subtitle F, chapter 68, Subchapter B, part Ⅰ, section 6702 of the U.S. Tax Code (the fine has been raised from $500 to $5,000 and some of the wording has changed since the version of law that’s posted at the link above). It says that the frivolous filing penalty can be assessed on someone who “files what purports to be a [tax] return … but which — (A) does not contain information on which the substantial correctness of the self-assessment may be judged, or (B) contains information that on its face indicates that the self-assessment is substantially incorrect; and [this]… — (A) is based on a position which [is] frivolous…, or (B) reflects a desire to delay or impede the administration of Federal income tax laws.”
In support of this section, the IRS periodically publishes a list of positions it considers frivolous. Conscientious tax resistance is one such position:
The question then is whether a letter like Palecek’s can be reasonably interpreted as a “claim that [he] may reduce [his] federal tax liability based on [his] objections” or whether it is best understood simply as an explanation of his decision to disobey the law without any intention of making legal claims as to what he believes he may or may not do within the law.
Practically a question like this one will be answered by some level of the government bureaucracy, and so the rules of logic and language and such are at best an imperfect guide. I could see it going either way.
Of note, the IRS policy states that people “who file a purported return of tax… based on one or more of these [frivolous] positions are subject to a penalty… if the purported return of tax does not contain information on which the substantial correctness of the self-assessed determination of tax may be judged or contains information that on its face indicates the self-assessed determination of tax is substantially incorrect” [emphasis mine]. It seems to me that this means if you file a correct and accurate return, only refusing to enclose a check, the IRS policy is to not consider this a frivolous filing even if you accompany your filing with a letter explaining your conscientious objection. (Palecek’s letter accompanied a “crossed-out” return, which probably did not “contain information on which the substantial correctness” of the return could be determined.)
There is, however, another section of this preamble that says “The penalty may also be applied if the purported return… reflects a desire to delay or impede the administration of Federal tax laws” — perhaps this would apply.
Myself, I think the best policy here is to simply refrain from poking the hornets’ nest. If you resist your taxes and you feel the need to make some noise about it, don’t make your noise in the direction of the IRS, but start a blog, or send a letter-to-the-editor, or write your congressperson, or send an email to your friends and family.
If you do get a “frivolous filing” warning letter, don’t panic — according to the letter, if you re-file in a non-frivolous fashion within 30 days of getting the letter, they say they’ll forget all about it.
NWTRCC has also prepared a “What to do if you receive a ‘Frivolous’ warning letter” guide.
In , the U.S. Congress’s Joint Committee on Internal Revenue Taxation issued a report called “Investigation of the Special Service Staff of the Internal Revenue Service.”
The focus of the report was on the Nixon administration’s use of the IRS to go after political opponents, though the “Special Service Staff” project itself dated to the Kennedy administration and was ostensibly designed to gather information on “extremist” groups and individuals and “Ideological Organizations.”
Because of this focus, in addition to going after people on Nixon’s “enemies list,” the Special Service Staff also targeted war tax resisters — under its mandate to “coordinate activities in all Compliance Divisions involving ideological, militant, subversive, radical, and similar type organizations.” The group would come to track 8,585 individuals and 2,873 organizations — and about 800 of these involved war tax resisters.
In , as the Watergate and related scandals were kicking up dirt, the IRS commissioner said that the Special Service Staff would stop investigating subversives in general, and the IRS would stick to investigating only those groups and people that promoted or practiced tax resistance. According to the Joint Committee report, after this point:
…except for 230 cases relating primarily to war tax resisters, no field referrals were made from SSS files after .
The IRS focus on war tax resisters as such did not begin until , according to the Joint Committee report:
Field referrals on war tax resisters
In the SSS began to take account of what it called “war tax resisters.” A “war tax resister” generally was defined as an individual or organization that refused to pay Federal income or excise taxes as a protest against the United States’ participation in the Vietnam war or who encouraged others to refuse to pay taxes. (However, the staff reviewed several cases included by the SSS in the war tax resister group of cases where noncompliance occurred because of a tax protest that was not directed toward the Vietnam war.)
The SSS classified approximately 800 files as “war tax resisters,” and it referred to the field 550 of these cases. These referrals occurred in two groups, the first a group of 320 cases during , and the second a group of 230 cases during December 1973, after the SSS had been terminated. Unlike the other field referrals… where the SSS recommended that the field take specific action, the tax resister referrals were sent out for the information of the field offices and for whatever action they “deemed appropriate.”
The Joint Committee staff examined about 10% of the war tax resister case files in the course of its investigation. Here is what it found:
Origins of SSS Activity on War Tax Resisters
Information in the SSS files indicates that SSS employees first began to take account of the war tax resistance movement early in ,1 when the SSS began receiving FBI reports on this activity. However, it appears that the SSS began to focus on war tax resisters around mid-. On , members of a war tax resistance organization held a demonstration at the National Office of the IRS in Washington, D.C. According to an SSS report, the SSS acquired copies of a tax resistance publication shortly after this demonstration and by mid-, the SSS had used this publication to establish a list of 192 individuals and organizations active in the war tax resistance movement. An SSS report also states that during , the SSS received from the FBI a list of underground newspapers in the United States and a list of the editors of these papers.2
During , the SSS received additional FBI reports on tax resistance organizations and individuals, and publications the SSS received had begun to carry more articles on this topic. The SSS files also contain information indicating that some IRS offices were having additional problems with tax resistance. (However, it is not clear whether the SSS became aware of these problems during .)
At the end of , the Washington Post carried an article on war tax resisters. memoranda in the SSS files indicate that this article came to the attention of Commissioner Johnnie M. Walters. These memoranda also indicate that Mr. Walters was concerned about tax resisters, and his concern was communicated to the IRS employees charged with tax compliance. Memoranda in the SSS files indicate that the SSS participated in drafting a report on tax resisters (dated ) to the Commissioner from the Acting Assistant Commissioner (Compliance) John F. Hanlon. Mr. Walters returned this report with comments directing increased IRS action in this area. Thereafter, the SSS apparently intensified its activity dealing with war tax resisters.
Sources of War Tax Resister Files
The names for the SSS tax resister files were derived from several sources. One major source was publications, such as tax resistance newspapers and underground newspapers received by the SSS. These publications contained lists of individuals or organizations active in tax resistance. They also contained signed letters to the editor and articles on tax resistance activities. (As noted above, the names of a number of newspapers were provided to the SSS by the FBI.)
The SSS also received names of tax resisters from other units in the IRS. IRS Service Centers sent the SSS the names of tax protesters who had come to their attention because of information on returns filed with the Service Centers or letters of tax protest received by the Service Centers. Additional names and information were referred to the SSS by other IRS offices (including letters from the public complaining about the attitudes and activities of the tax resisters).
A third major source was FBI reports. As noted above, the SSS received a number of FBI reports on tax resistance individuals and organizations, and also received a list of underground newspapers.
Field Referrals of War Tax Resister Cases
According to information supplied by the IRS, the SSS had compiled files on approximately 800 war tax resister individuals and organization. Of these 800 cases, 550 were were referred to the field. The referrals of war tax resister cases were transmitted to the field in two groups, the first, a group of 320 cases sent out during , and the second, a group of 230 cases sent out on (after the SSS had been formally terminated)… The 550 total field referrals of “war tax resisters” included 397 individuals and 153 organizations.3
First group of field referrals. — The first group of field referrals was transmitted by the SSS under a memorandum from the Assistant Commissioner (ACTS) to the District Directors. The SSS transmittal memorandum, entitled “War Tax Resisters,” contained a discussion of the war tax resistance movement and a number of exhibits designed to acquaint the District Director with the scope and activities of this movement. A list of the individuals and organizations located in the particular IRS district to which the memorandum was sent was attached to the transmittal letter, along with tax filing history for these individuals and organizations, where this information was available. Unlike the other field referrals… these referrals did not recommend that specific action be undertaken by the field offices, but said that the district should take action as it “deemed appropriate.” The transmittal also asked that a memorandum of any actions taken and results obtained by sent to Paul Wright. (The transmittal memoranda did not mention that the referrals came from the SSS.)
The staff examined a 10-percent random sample of the SSS files on this first group of war tax resister field referrals. The sample included 27 individuals and 6 organizations. The reports from the field included in the SSS files examined by the staff indicate that the referral resulted in field activity in a minority of the cases and that the field activity was by the Audit or Collection Divisions, with no indication that any Intelligence Division action occurred.
The staff examination indicates that some of these field referrals were made without previous analysis to see if there was likelihood of a tax violation. The SSS files on one of the cases referred to the field contained no evidence that the SSS had obtained and reviewed tax information (such as an Individual Master File printout) to determine whether the taxpayer may have failed to comply with the tax laws. In another case the Individual Master File printout showed that tax returns had been filed for all prior years with no balances owed; on this printout an SSS employee had noted that there was no basis for audit action. However, approximately one month later this case was referred to the field.
Not all of the cases in the first group of referrals involved “war” tax resisters. One organization referred to the field was a tax protest group generally classified as an “extremist White racist” group; there was no indication that this group was anti-war. Similarly, another case involved an individual who opposed the progressive income tax rate structure, and there was no indication this individual was anti-war.
Second group of field referrals. — The second group of field referrals was sent out on , using a different form of transmittal memorandum than was used with the first group. The transmittal memorandum for these referrals was entitled “Information Items” and the District Directors were advised that the attached materials were forwarded for their information and for whatever action they “deem appropriate.” The memorandum also advised that it was not necessary to report any action taken, as was required with the earlier group of referrals. (Apparently no reply was requested because the SSS had been terminated.) Finally, there was attached a list of the individuals and organizations with their tax filing history, if this information was available.
The staff also examined the SSS files of a 10-percent random sample of this group of field referrals. This sample included 22 individuals and one organization. Printouts from the Individual Master File were obtained by the SSS for all of the 22 individuals examined; a master file printout was requested by the SSS for the one organization (but none was found because the organization had never obtained an Employer Identification Number). In comparison with the first group of field referrals, the SSS files on these referrals contained considerably more information indicating possible noncompliance with the tax laws, to support the referral of these cases to the field. (According to the SSS files, two of the names in the staff sample did not involve tax resisters and two of the names were derived from the Justice Department’s “Inter-Divisional Information Unit” list…)
- IRS concern generally with the failure to pay Federal taxes as a war protest had developed much earlier. For example, the Internal Revenue Manual contained guidelines for the handling of war tax resistance cases as early as . The guidelines originally pertained to failures to pay Federal income taxes, but by they also included telephone and transportation excise taxes.
- According to a , memorandum from Paul Wright to the Director of the Collection Division, the SSS considered that underground newspapers were important to the examination of the war tax resister group because they acted as a “conduit for their movement,” and contained numerous articles on how to file false returns and otherwise confuse IRS operations. “Underground newspaper” was defined to include newspapers of anti-establishment orientation which advocated violent or subversive means to achieve their ends. According to the IRS, the SSS had files on 148 underground newspapers.
- The staff examination of administrative files and the other field referrals indicates that prior to , there were several referrals of cases which could be classified as war tax resisters. A number of underground newspapers were also referred to the field under regular field referral procedures. The SSS also several times sent information concerning war tax resisters to field offices on an informal basis.
The SSS was so tainted by Nixon’s use of it that the IRS Commissioner told Congress that after it completed its investigations, he would try to have its files destroyed. This also made it difficult for the IRS to use information gathered by the SSS in its ongoing actions against war tax resisters.
So some such actions were abandoned in mid-stream: Notably, the seizure and sale of Ernest and Marion Bromley’s home. In , after the IRS had already seized and auctioned off the house, the agency (under sustained pressure from the Peacemakers and their supporters) backed off, canceled the sale, and dropped its enforcement actions against the Bromleys and the Peacemaker movement (see The Picket Line ).
