IRS’ New Weapons Make Protesting One’s Taxes an Exercise in Futility

Few people enjoy paying taxes.

After all, no one likes seeing his or her hard-earned money disappearing down a mail chute, destined to pay for some unconscionable government program (unconscionable, that is, because it may benefit someone else).

But after more than 70 years of income taxation, one thing should be clear: Neither the nation’s Constitution nor any federal law nor any biblical interpretation will keep the tax collector from your door. Other than the few deductions, exclusions and credits remaining after the passage of the Tax Reform Act of 1986, there is no way out. If you make enough money, you’re going to have to pay taxes.

A small number of die-hards, however, continue to fling themselves against the Internal Revenue Service and the Tax Court in hopes of escaping the inevitable. But no matter how mad you get about your tax bill, if you’re thinking of becoming one of these “tax protesters”--don’t.

In recent years, the IRS has acquired new weapons to use against such people, and, as some recent decisions indicate, the courts have no qualms about applying them.

Can Be Costly

According to IRS statistics, the government has brought criminal actions against about 300 tax protesters a year, obtaining convictions in the vast majority of cases. And you should be aware that prison terms are imposed in about 60% of the convictions.

But even if you don’t go to jail, the IRS can still make your protest costly. The Tax Court, which has been listening to what one judge called “the same old well-worn rhetoric that tax protesters have served up” for years, is ready, willing and able to uphold the service’s penalty assessments, and it can impose some of its own.

For example, an Oregon man who originally owed about $18,500 in taxes for two years was slapped with more than $6,200 in penalties by the IRS. In a decision in August, the Tax Court here tacked on an additional $5,000 in damages for bringing a “frivolous” case. His total tab: more than $29,700.

A Texas man, in the Tax Court’s words, “although apparently intellectually well equipped,” claimed he owed no tax because he had a “basis” in his labor and his wages were an even exchange. In effect, he argued that his services should be treated like a piece of property that is sold for the same price the owner originally paid for it.

No, the court said, this argument has been “addressed and rejected many times.” So the Texan, an airline flight service clerk, saw his original tax of $38,817 for three years balloon to $62,975--not including some additional interest penalties--as a result of his protest.

Not surprisingly, the message seems to be sinking in among the tax resisters.

The number of criminal cases brought by the IRS has been slowly but steadily decreasing during the past few years, and the number of people trying certain popular ploys has been dropping sharply.

“Alleged churches,” for instance, termed by an IRS spokesman “one of the classic protester schemes,” were attempted by 5,944 taxpayers in 1983 who wanted to shelter contributions to the “church.” That number slipped to 4,206 in 1984, to 2,178 in 1985, 1,847 in 1986 and 384 through June of last year.

Likewise, in 1983 some 10,812 taxpayers tried to claim that income taxes are unconstitutional. The following year the total was down to 7,856, then to 3,374, then 3,329, and through June of last year, just 890.

Quasi-Economic Arguments

The protesters occasionally win a battle, but they inevitably lose the war.

A Bremerton, Wash., man managed to get the Tax Court, in a decision in July, to invalidate the IRS’s method of calculating some of his penalties, but in doing so saved himself only about 5% of one of the penalties the IRS wanted him to pay.

Tax protest reached its crest in the 1970s and early 1980s, propelled at first by anti-war protests and later by inflation, which lifted many working-class taxpayers into brackets formerly reserved for the well-to-do.

Some of these efforts were encouraged by protest groups that claimed to have found holes in the Constitution or the law that enabled people to escape taxation. One constitutional argument holds that filing a tax return violates the ban on self-incrimination.

Another contention is that the 16th Amendment, which allows the government to tax incomes, was not properly ratified. Another is that the Tax Court’s reliance on judges rather than juries violates the taxpayer’s right to due process of law.

Other arguments are quasi-economic. The idea that labor is a kind of property and that wages represent an “equal exchange” for it--and thus are not taxable--is one of the more common.

Some might best be described as mythological. Somehow, word has gotten around to those eager to believe it that the whole tax system is strictly voluntary.

Deciding What’s Just

While the IRS is fond of describing our tax system as voluntary in that people calculate their own tax liability when filing their returns, the legal obligation to pay is all too real.

And finally, some are just complaints. A New York man cited his “God-given and constitutionally guaranteed right” to exist and sustain himself, and contended that “the exercise of such right cannot lawfully be subject to income tax.”

The Tax Court has plainly had enough of all this. When a Florida electrician and his wife “asked this court to award them such penalties as we (the court) find just,” the Tax Court in a June decision said: “We find it just not to award them any penalties. Instead we find it just to award damages to” the IRS.

Protesters may be amusing, but it is worthwhile to remember that dealing with them costs other taxpayers a bundle. Not only does the IRS have to devote time and effort to them, but their litigation gums up the judicial system.

As the Tax Court noted in the case of a San Diego man: “The long and short of the matter is that (he) is simply another ‘tax protester’ whose insistence in pursuing fruitless arguments imposes on the time and effort of (the IRS) and the courts which could otherwise be devoted to disposing of bona fide claims of taxpayers regarding factual and legal issues under the Internal Revenue Code.”