Arguments Related to the Internal Revenue Code
These false arguments claim that:

• There is no Internal Revenue Code that imposes taxes;
• Only "individuals" are required to pay taxes;
• Code Section 861 limits taxable income to certain sources which do not apply to most U.S. citizens; or
• The government can assess taxes only against people who file returns.

The tax law is found in Title 26 of the United States Code.

• Section 6012 of the Code makes clear that only people whose income falls below a certain minimum level do not have to file returns.
• Sections 861 through 865 determine whether income is from a U.S. or foreign source - they do not in any way exclude income from taxation for a U.S. citizen or resident.
• Section 6201 of the Code states that the Secretary of the Treasury is required to make assessments "of all taxes imposed by this title".

Constitution-Related Arguments

1. First Amendment
   These arguments focus on using the Freedom of Religion clause of the First Amendment to reduce income tax liability. A common scheme calls for individual taxpayers to obtain minister's credentials and a church or religious order charter by mail for a fee. The individuals set up a new organization that purports to be a church, religious order, or other religious organization. They then take a "vow of poverty" and assign their assets and income to the new organization. However, filtering money through a purported church to fraudulently claim charitable contribution deductions is illegal. The tax law affords benefits to churches and other religious organizations and to those who make gifts or contributions to these organizations. The law requires, however, that such organizations actually be operated for religious purposes and not for the private benefit of individuals.
2. Fourth and Fifth Amendments
   These arguments claim that filing an income tax return violates the Fourth Amendment right to privacy or the Fifth Amendment right against self-incrimination. However, the courts have consistently held that disclosure of routine financial information required on a tax return does not incriminate an individual or violate the right to privacy.
3. Sixteenth Amendment
   These arguments claim that the constitutional amendment establishing the basis for income tax was never properly ratified. However, the courts have held that none of the points presented undermine the fact that the Sixteenth Amendment was indeed ratified in 1913.

IRS Steps Against Noncompliance

The Internal Revenue Service has focused its efforts against noncompliance by adopting a multi-functional compliance approach:

• Helping otherwise innocent taxpayers, who have been misled by others, to rejoin the system; and
• Vigorously pursuing enforcement actions against those who continue to promote schemes or entice others to violate the law.

Regardless of the arguments used, they have two things in common:

• The arguments are consistently rejected by the courts; and
• The participants may face IRS enforcement.

The IRS has one of the highest conviction rates in federal law enforcement. In addition to serving substantial prison sentences imposed by the courts, those convicted must also pay fines, taxes, civil penalties, and, frequently, court costs.

 The Voluntary Nature of the Federal Income Tax System

A. Contention: The filing of a tax return is voluntary.

Some assert that they are not required to file federal tax returns because the filing of a tax return is voluntary. Proponents point to the fact that the IRS itself tells taxpayers in the Form 1040 instruction book that the tax system is voluntary. Additionally, the Supreme Court's opinion in Flora v. United States, 362 U.S. 145, 176 (1960), is often quoted for the proposition that "our system of taxation is based upon voluntary assessment and payment, not upon distraint."

The Law: The word "voluntary," as used in Flora and in IRS publications, refers to our system of allowing taxpayers to determine the correct amount of tax and complete the appropriate returns, rather than have the government determine tax for them. The requirement to file an income tax return is not voluntary and is clearly set forth in Internal Revenue Code §§  6011(a) ,  6012(a) , et seq., and 6072(a). See also Treas. Reg. § 1.6011-1(a).

Any taxpayer who has received more than a statutorily determined amount of gross income is obligated to file a return. Failure to file a tax return could subject the noncomplying individual to criminal penalties, including fines and imprisonment, as well as civil penalties. In United States v. Tedder, 787 F.2d 540, 542 (10 th Cir. 1986), the court clearly states, "although Treasury regulations establish voluntary compliance as the general method of income tax collection, Congress gave the Secretary of the Treasury the power to enforce the income tax laws through involuntary collection . . . . The IRS ' efforts to obtain compliance with the tax laws are entirely proper."

Relevant Case Law:
Helvering v. Mitchell, 303 U.S. 391, 399 (1938) - The U.S. Supreme Court stated, "[i]n assessing income taxes, the Government relies primarily upon the disclosure by the taxpayer of the relevant facts . . . in his annual return. To ensure full and honest disclosure, to discourage fraudulent attempts to evade the tax, Congress imposes [either criminal or civil] sanctions."

United States v. Tedder, 787 F.2d 540, 542 (10 th Cir. 1986) - The court upheld a conviction for willfully failing to file a return, stating that the premise "that the tax system is somehow 'voluntary' . . . is incorrect."

United States v. Richards, 723 F.2d 646, 648 (8 th Cir. 1983) - The court upheld conviction and fines imposed for willfully failing to file tax returns, stating that the claim that filing a tax return is voluntary "was rejected in United States v. Drefke, 707 F.2d 978, 981 (8 th Cir. 1983), wherein the court described appellant's argument as "an imaginative argument, but totally without arguable merit."

Woods v. Commissioner, 91 T.C. 88, 90 (1988) - The court rejected the claim that reporting income taxes is strictly voluntary, referring to it as a "tax protester type" argument, and found Woods liable for the penalty for failure to file a return.

Johnson v. Commissioner, T.C. Memo. 1999-312, 78 T.C.M. ( CCH ) 468, 471 (1999) - The court found Johnson liable for the failure to file penalty and rejected his argument "that the tax system is voluntary so that he cannot be forced to comply" as "frivolous."

B. Contention: Payment of tax is voluntary.

In a similar vein, some argue that they are not required to pay federal taxes because the payment of federal taxes is voluntary. Proponents of this position argue that our system of taxation is based upon voluntary assessment and payment.

The Law: The requirement to pay taxes is not voluntary and is clearly set forth in section 1 of the Internal Revenue Code, which imposes a tax on the taxable income of individuals, estates, and trusts as determined by the tables set forth in that section. (Section 11 imposes a tax on the taxable income of corporations.) Furthermore, the obligation to pay tax is described in  section 6151 , which requires taxpayers to submit payment with their tax returns. Failure to pay taxes could subject the noncomplying individual to criminal penalties, including fines and imprisonment, as well as civil penalties.

In discussing section 6151, the Eighth Circuit Court of Appeals stated "when a tax return is required to be filed, the person so required 'shall' pay such taxes to the internal revenue officer with whom the return is filed at the fixed time and place. The sections of the Internal Revenue Code imposed a duty on Drefke to file tax returns and pay the . . . tax, a duty which he chose to ignore." United States v. Drefke, 707 F.2d 978, 981 (8 th Cir. 1983).

Relevant Case Law:
United States v. Bressler, 772 F.2d 287, 291 (7 th Cir. 1985) - The court upheld Bressler's conviction for tax evasion, noting, "[he] has refused to file income tax returns and pay the amounts due not because he misunderstands the law, but because he disagrees with it . . . . [O]ne who refuses to file income tax returns and pay the tax owing is subject to prosecution, even though the tax protester believes the laws requiring the filing of income tax returns and the payment of income tax are unconstitutional."

Schiff v. United States, 919 F.2d 830, 833 (2d Cir. 1990), cert. denied, 501 U.S. 1238 (1991) - The court rejected Schiff's arguments as meritless and upheld imposition of the civil fraud penalty, stating "[t]he frivolous nature of this appeal is perhaps best illustrated by our conclusion that Schiff is precisely the sort of taxpayer upon whom a fraud penalty for failure to pay income taxes should be imposed."

Packard v. United States, 7 F. Supp. 2d 143, 145 (D. Conn. 1998) - The court dismissed Packard's refund suit for recovery of penalties for failure to pay income tax and failure to pay estimated taxes where the taxpayer contested the obligation to pay taxes on religious grounds, noting that "the ability of the Government to function could be impaired if persons could refuse to pay taxes because they disagreed with the Government's use of tax revenues."

United States v. Gerads, 999 F.2d 1255, 1256 (8 th Cir. 1993) - The court stated that "[taxpayers'] claim that payment of federal income tax is voluntary clearly lacks substance" and imposed sanctions in the amount of $1,500 "for bringing this frivolous appeal based on discredited, tax-protestor arguments."

The Meaning of Income: Taxable Income and Gross Income

A. Contention: Wages, tips, and other compensation received for personal services are not income.

This argument asserts that wages, tips, and other compensation received for personal services are not income, because there is allegedly no taxable gain when a person "exchanges" labor for money. Under this theory, wages are not taxable income because people have basis in their labor equal to the fair market value of the wages they receive; thus, there is no gain to be taxed. Some take a different approach and argue that the Sixteenth Amendment to the United States Constitution did not authorize a tax on wages and salaries, but only on gain or profit.

The Law: For federal income tax purposes, "gross income" means all income from whatever source derived and includes compensation for services. I.R.C. § 61. Any income, from whatever source, is presumed to be income under section 61, unless the taxpayer can establish that it is specifically exempted or excluded. In Reese v. United States , 24 F.3d 228, 231 (Fed. Cir. 1994), the court stated, "an abiding principle of federal tax law is that, absent an enumerated exception, gross income means all income from whatever source derived."

All compensation for personal services, no matter what the form of payment, must be included in gross income. This includes salary or wages paid in cash, as well as the value of property and other economic benefits received because of services performed, or to be performed in the future. Furthermore, criminal and civil penalties have been imposed against individuals relying upon this frivolous argument.

Relevant Case Law:
Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 429-30 (1955) - Referring to the statute's words "income derived from any source whatever," the Supreme Court stated, "this language was used by Congress to exert in this field 'the full measure of its taxing power.' . . . And the Court has given a liberal construction to this broad phraseology in recognition of the intention of Congress to tax all gains except those specifically exempted."

Commissioner v. Kowalski, 434 U.S. 77 (1977) - The Supreme Court found that payments are considered income where the payments are undeniably accessions to wealth, clearly realized, and over which a taxpayer has complete dominion.

United States v. Connor, 898 F.2d 942, 943-44 (3d Cir.), cert. denied, 497 U.S. 1029 (1990) - The court stated, "[e]very court which has ever considered the issue has unequivocally rejected the argument that wages are not income."

Lonsdale v. Commissioner, 661 F.2d 71, 72 (5 th Cir. 1981) - The court rejected as "meritless" the taxpayer's contention that the "exchange of services for money is a zero-sum transaction . . . ." Reading v. Commissioner, 70 T.C. 730 (1978), aff'd, 614 F.2d 159 (8 th Cir. 980) - The court said the entire amount received from the sale of one's services constitutes income within the meaning of the Sixteenth Amendment. United States v. Richards, 723 F.2d 646, 648 (8 th Cir. 1983) - The court upheld conviction and fines imposed for willfully failing to file tax returns, stating that the taxpayer's contention that wages and salaries are not income within the meaning of the Sixteenth Amendment is "totally lacking in merit."

United States v. Romero, 640 F.2d 1014, 1016 (9 th Cir. 1981) - The court affirmed Romero's conviction for willfully failing to file tax returns, finding, in part, that "[t]he trial judge properly instructed the jury on the meaning of ['income' and 'person']. Romero's proclaimed belief that he was not a 'person' and that the wages he earned as a carpenter were not 'income' is fatuous as well as obviously incorrect." Abrams v. Commissioner, 82 T.C. 403, 413 (1984) - The court rejected the argument that wages are not income, sustained the failure to file penalty, and awarded damages of $5,000 for pursuing a position that was "frivolous and groundless . . . and maintained primarily for delay."

Cullinane v. Commissioner, T.C. Memo. 1999-2, 77 T.C.M. ( CCH ) 1192, 1193 (1999) - Noting that "[c]ourts have consistently held that compensation for services rendered constitutes taxable income and that taxpayers have no tax basis in their labor," the court found Cullinane liable for the failure to file penalty, stating, "[his] argument that he is not required to pay tax on compensation for services does not constitute reasonable cause."

B. Contention: Only foreign-source income is taxable.

Some maintain that there is no federal statute imposing a tax on income derived from sources within the United States by citizens or residents of the United States . They argue instead that federal income taxes are excise taxes imposed only on nonresident aliens and foreign corporations for the privilege of receiving income from sources within the United States . The premise for this argument is a misreading of sections 861, et seq., and 911, et seq., as well as the regulations under those sections.

The Law: As stated above, for federal income tax purposes, "gross income" means all income from whatever source derived and includes compensation for services.  I.R.C. § 61. Further, Treasury Regulation § 1.1-1(b) provides, "[i]n general, all citizens of the United States, wherever resident, and all resident alien individuals are liable to the income taxes imposed by the Code whether the income is received from sources within or without the United States." I.R.C. sections 861 and 911 define the sources of income (U.S. versus non-U.S. source income) for such purposes as the prevention of double taxation of income that is subject to tax by more than one country. These sections neither specify whether income is taxable, nor do they determine or define gross income. Further, these frivolous assertions are clearly contrary to well-established legal precedent.  "Recently the IRS explained its position on the I.R.C. 861 argument in Rev. Rul. 2004-30 and on the I.R.C. 911 argument in Rev. Rul. 2004-28."

Relevant Case Law:
Williams v. Commissioner, 114 T.C. 136, 138 (2000) - The court rejected the taxpayer's argument that his income was not from any of the sources listed in Treas. Reg. § 1.861-8(a), characterizing it as "reminiscent of tax-protester rhetoric that has been universally rejected by this and other courts."

Aiello v. Commissioner, T.C. Memo. 1995-40, 69 T.C.M. ( CCH ) 1765 (1995) - The court rejected the taxpayer's argument that the only sources of income for purposes of section 61 are listed in section 861.

Madge v. Commissioner, T.C. Memo. 2000-370, 80 T.C.M. ( CCH ) 804 (2000) - The court labeled as "frivolous" the position that only foreign income is taxable.

Solomon v. Commissioner, T.C. Memo. 1993-509, 66 T.C.M. ( CCH ) 1201, 1202 (1993) - The court rejected the taxpayer's argument that his income was exempt from tax by operation of sections 861 and 911, noting that he had no foreign income and that section 861 provides that "compensation for labor or personal services performed in the United States . . . are items of gross income."

C. Contention: Federal Reserve Notes are not income.

Some assert that Federal Reserve Notes currently used in the United States are not valid currency and cannot be taxed, because Federal Reserve Notes are not gold or silver and may not be exchanged for gold or silver. This argument misinterprets Article I, Section 10 of the United States Constitution.

The Law: Congress is empowered "[t]o coin Money, regulate the value thereof, and of foreign coin, and fix the Standard of weights and measures." U.S. Const. Art. I, § 8, cl. 5. Article I, Section 10 of the Constitution prohibits the states from declaring as legal tender anything other than gold or silver, but does not limit Congress' power to declare the form of legal tender. See 31 U.S.C. § 5103; 12 U.S.C. § 411. In United States v. Rifen, 577 F.2d 1111 (8 th Cir. 1978), the court affirmed a conviction for willfully failing to file a return, rejecting the argument that Federal Reserve Notes are not subject to taxation. "Congress has declared Federal Reserve notes legal tender . . . and federal reserve notes are taxable dollars." Id. at 1112. The courts have rejected this argument on numerous occasions. 

Relevant Case Law:
United States v. Rickman, 638 F.2d 182, 184 (10 th Cir. 1980) - The court affirmed the conviction for willfully failing to file a return and rejected the taxpayer's argument that "the Federal Reserve Notes in which he was paid were not lawful money within the meaning of Art. 1, § 8, United States Constitution."

United States v. Condo, 741 F.2d 238, 239 (9 th Cir. 1984) - The court upheld the taxpayer's criminal conviction, rejecting as "frivolous" the argument that Federal Reserve Notes are not valid currency, cannot be taxed, and are merely "debts."

United States v. Daly, 481 F.2d 28, 30 (8 th Cir.), cert. denied, 414 U.S. 1064 (1973) - The court rejected as "clearly frivolous" the assertion "that the only 'Legal Tender Dollars' are those which contain a mixture of gold and silver and that only those dollars may be constitutionally taxed" and affirmed Daly's conviction for willfully failing to file a return.

Jones v. Commissioner, 688 F.2d 17 (6 th Cir. 1982) - The court found the taxpayer's claim that his wages were paid in "depreciated bank notes" as clearly without merit and affirmed the Tax Court's imposition of an addition to tax for negligence or intentional disregard of rules and regulations.

The Meaning of Certain Terms Used in the Internal Revenue Code

A. Contention: Taxpayer is not a "citizen" of the United States, thus not subject to the federal income tax laws.

Some individuals argue that they have rejected citizenship in the United States in favor of state citizenship; therefore, they are relieved of their federal income tax obligations. A variation of this argument is that a person is a freeborn citizen of a particular state and thus was never a citizen of the United States . The underlying theme of these arguments is the same: the person is not a United States citizen and is not subject to federal tax laws because only United States citizens are subject to these laws.

The Law: The Fourteenth Amendment to the United States Constitution defines the basis for United States citizenship, stating, "[a]ll persons born or naturalized in the United States , and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside." The Fourteenth Amendment therefore establishes simultaneous state and federal citizenship. Claims that individuals are not citizens of the United States but are solely citizens of a sovereign state and not subject to federal taxation have been uniformly rejected by the courts.

Relevant Case Law:
O'Driscoll v. I.R.S., 1991 U.S. Dist. LEXIS 9829, at *5-6 (E.D. Pa. 1991) - The court stated, "despite [taxpayer's] linguistic gymnastics, he is a citizen of both the United States and Pennsylvania , and liable for federal taxes."

United States v. Sloan, 939 F.2d 499, 500 (7 th Cir. 1991), cert. denied, 502 U.S. 1060, reh'g denied, 503 U.S. 953 (1992) - The court affirmed a tax evasion conviction and rejected Sloan's argument that the federal tax laws did not apply to him because he was a "freeborn, natural individual, a citizen of the State of Indiana, and a 'master' - not 'servant' - of his government."

United States v. Ward, 833 F.2d 1538, 1539 (11 th Cir. 1987), cert. denied, 485 U.S. 1022 (1988) - The court found Ward's contention that he was not an "individual" located within the jurisdiction of the United States to be "utterly without merit" and affirmed his conviction for tax evasion.

United States v. Sileven, 985 F.2d 962 (8 th Cir. 1993) - The court rejected the argument that the district court lacked jurisdiction because the taxpayer was not a federal citizen as "plainly frivolous."

United States v. Gerads, 999 F.2d 1255, 1256 (8 th Cir. 1993) - The court rejected the Gerads' contention that they were "not citizens of the United States , but rather 'Free Citizens of the Republic of Minnesota ' and, consequently, not subject to taxation" and imposed sanctions "for bringing this frivolous appeal based on discredited, tax-protestor arguments."

Solomon v. Commissioner, T.C. Memo. 1993-509, 66 T.C.M. ( CCH ) 1201, 1202-03 (1993) - The court rejected Solomon's argument that as an Illinois resident his income was from outside the United States, stating "[he] attempts to argue an absurd proposition, essentially that the State of Illinois is not part of the United States . His hope is that he will find some semantic technicality which will render him exempt from Federal income tax, which applies generally to all U.S. citizens and residents. [His] arguments are no more than stale tax protester contentions long dismissed summarily by this Court and all other courts which have heard such contentions."

B. Contention: The " United States " consists only of the District of Columbia , federal territories, and federal enclaves.

Some argue that the United States consists only of the District of Columbia , federal territories (e.g., Puerto Rico, Guam , etc.), and federal enclaves (e.g., American Indian reservations, military bases, etc.) and does not include the "sovereign" states. According to this argument, if a taxpayer does not live within the " United States ," as so defined, he is not subject to the federal tax laws.

The Law: The Internal Revenue Code imposes a federal income tax upon all United States citizens and residents, not just those who reside in the District of Columbia , federal territories, and federal enclaves. In United States v. Collins, 920 F.2d 619, 629 (10 th Cir. 1990), cert. denied, 500 U.S. 920 (1991), the court cited Brushaber v. Union Pac. R.R., 240 U.S. 1, 12-19 (1916), and noted the United States Supreme Court has recognized that the "Sixteenth Amendment authorizes a direct nonapportioned tax upon United States citizens throughout the nation, not just in federal enclaves. " The courts have uniformly rejected this frivolous contention.

Relevant Case Law:
In re Becraft, 885 F.2d 547, 549-50 (9 th Cir. 1989) - The court, observing that Becraft's claim that federal laws apply only to United States territories and the District of Columbia "has no semblance of merit," and noting that this attorney had previously litigated cases in the federal appeals courts that had "no reasonable possibility of success," imposed monetary damages and expressed the hope "that this assessment will deter Becraft from asking this and other federal courts to expend more time and resources on patently frivolous legal positions."

United States v. Ward, 833 F.2d 1538, 1539 (11 th Cir. 1987), cert. denied, 485 U.S. 1022 (1988) - The court rejected as a "twisted conclusion" the contention "that the United States has jurisdiction over only Washington, D.C., the federal enclaves within the states, and the territories and possessions of the United States," and affirmed a tax evasion conviction.

Barcroft v. Commissioner, T.C. Memo. 1997-5, 73 T.C.M. ( CCH ) 1666, 1667, appeal dismissed, 134 F.3d 369 (5 th Cir. 1997) - Noting that Barcroft's statements "contain protester-type contentions that have been rejected by the courts as groundless," the court sustained penalties for failure to file returns and failure to pay estimated income taxes.

C. Contention: Taxpayer is not a "person" as defined by the Internal Revenue Code, and thus is not subject to the federal income tax laws.

Some maintain that they are not a "person" as defined by the Internal Revenue Code, and thus not subject to the federal income tax laws. This argument is based on a tortured misreading of the Code.

The Law: The Internal Revenue Code clearly defines "person" and sets forth which persons are subject to federal taxes. Section 7701(a)(14)  defines "taxpayer" as any person subject to any internal revenue tax and section 7701(a)(1) defines "person" to include an individual, trust, estate, partnership, or corporation. Arguments that an individual is not a "person" within the meaning of the Internal Revenue Code have been uniformly rejected. A similar argument with respect to the term "individual" has also been rejected.

Relevant Case Law:
United States v. Karlin, 785 F.2d 90, 91 (3d Cir. 1986), cert. denied, 480 U.S. 907 (1987) - The court affirmed Karlin's conviction for failure to file income tax returns and rejected his contention that he was "not a 'person' within meaning of 26 U.S.C. § 7203" as "frivolous and requir[ing] no discussion."

United States v. Rhodes, 921 F. Supp. 261, 264 (M.D. Pa. 1996) - The court stated that "[a]n individual is a person under the Internal Revenue Code."

Biermann v. Commissioner, 769 F.2d 707, 708 (11 th Cir.), reh'g denied, 775 F.2d 304 (11 th Cir. 1985) - The court said the claim that Biermann was not "a person liable for taxes" was "patently frivolous" and, given the Tax Court's warning to Biermann that his positions would never be sustained in any court, awarded the government double costs, plus attorney's fees.

Smith v. Commissioner, T.C. Memo. 2000-290, 80 T.C.M. ( CCH ) 377, 378-89 (2000) - The court described the argument that Smith "is not a 'person liable' for tax" as frivolous, sustained failure to file penalties, and imposed a penalty for maintaining "frivolous and groundless positions."

United States v. Studley, 783 F.2d 934, 937 n.3 (9 th Cir. 1986) - The court affirmed a failure to file conviction, rejecting the taxpayer's contention that she was not subject to federal tax laws because she was "an absolute, freeborn, and natural individual" and went on to note that "this argument has been consistently and thoroughly rejected by every branch of the government for decades."

D. Contention: The only "employees" subject to federal income tax are employees of the federal government.

Some argue that the federal government can tax only employees of the federal government; therefore, employees in the private sector are immune from federal income tax liability. This argument is based on an apparent misinterpretation of section 3401, which imposes responsibilities to withhold tax from "wages." That section establishes the general rule that "wages" include all remuneration for services performed by an employee for his employer. Section 3401(c) goes on to state that the term "employee" includes "an officer, employee, or elected official of the United States , a State, or any political subdivision thereof".

The Law: Section 3401(c) defines "employee" and states that the term "includes an officer, employee or elected official of the United States . ." This language does not address how other employees' wages are subject to withholding or taxation.  Section 7701(c) states that the use of the word "includes" "shall not be deemed to exclude other things otherwise within the meaning of the term defined." Thus, the word "includes" as used in the definition of "employee" is a term of enlargement, not of limitation. It clearly makes federal employees and officials a part of the definition of "employee", which generally includes private citizens.

Relevant Case Law:
United States v. Latham, 754 F.2d 747, 750 (7 th Cir. 1985) - Calling the instructions Latham wanted given to the jury "inane," the court said, "[the] instruction which indicated that under 26 U.S.C. § 3401(c) the category of 'employee' does not include privately employed wage earners is a preposterous reading of the statute. It is obvious within the context of [the law] the word 'includes' is a term of enlargement not of limitation, and the reference to certain entities or categories is not intended to exclude all others."

Sullivan v. United States, 788 F.2d 813, 815 (1 st Cir. 1986) - The court rejected Sullivan's attempt to recover a civil penalty for filing a frivolous return, stating "to the extent [he] argues that he received no 'wages' . . . because he was not an 'employee' within the meaning of 26 U.S.C. § 3401(c), that contention is meritless. . . . The statute does not purport to limit withholding to the persons listed therein." The court imposed sanctions on Sullivan for bringing a frivolous appeal.

Peth v. Breitzmann, 611 F. Supp. 50, 53 (E.D. Wis. 1985) - The court rejected the taxpayer's argument "that he is not an 'employee' under I.R.C. § 3401(c) because he is not a federal officer, employee, elected official, or corporate officer," stating, "[he] mistakenly assumes that this definition of 'employee' excludes all other wage earners."

Pabon v. Commissioner, T.C. Memo. 1994-476, 68 T.C.M. ( CCH ) 813, 816 (1994) - The court characterized Pabon's position - including that she was not subject to tax because she was not an employee of the federal or state governments - as "nothing but tax protester rhetoric and legalistic gibberish." The court imposed a penalty of $2,500 on Pabon for bringing a frivolous case, stating that she "regards this case as a vehicle to protest the tax laws of this country and espouse her own misguided views."

Q. What type of filings do zero or untaxing advocates submit?

A. Untaxing advocates submit returns claiming income is not taxable. Some report all of their income but take a deduction to reduce AGI to nothing. Some prepare returns with zeros entered in all lines. Some file returns with only names, TIN 's, addresses and message. Others are non-filers who are persons that do not alert IRS to their position.

Q. How do taxpayers get back into the system and file correctly?

A. If you believe you have incorrectly filed, you should file an amended return. If the amended return results in additional tax owed, you may also be subject to interest and penalties. However, amending your return may reduce the amount of penalties and interest that you eventually owe.

Q. What happens if I do not amend my return?

A. If your return is audited, the possible penalties, interest, and legal costs associated with an abusive tax promotion can be significant. Criminal penalties may also apply. This is in addition to the tax due and fees you paid for the promotion. You can contact the Internal Revenue Service at 1-800-829-1040 , if you have any questions.

Q. The information presented by the promoter sounded legitimate. Now I have concerns regarding this promotion. Who do I contact to report information on the promotion and promoter?

A. Contact the Internal Revenue Service at 1-866-775-7474 or e-mail the Tax Shelter Hotline at irs.tax.shelter.hotline@irs.gov.

Vew the following:  Publication 334, Tax Guide for Small Business

• Publication 17, Your Federal Income Tax for Individuals
• Pub 3995 (8-2003) Is It Too Good To Be True - Recognizing Illegal Tax Avoidance Schemes (PDF)