What Triggers an IRS Audit? The Allentown Morning Call The IRS is singling out more returns for extra scrutiny.
Volunteers Take on Alaska Tax Prep Forbes What do you do when the nearest tax professional is 300 miles across the Bering Sea?
Five Tax Survival Tips MSNBC Enjoy your stimulus payment, and keep those receipts.
U.S. to Turn Up Heat on Tax Protesters Bloomberg News The IRS is getting serious with tax protestors.
April 15, 2008
If death and taxes are the two great inevitables of life, then trying to pull an end run around both is almost as hard-wired into human nature. As we prepare to submit this year's installment of our ongoing serial, "Things I Did While Pursuing Legitimate Business Needs," to the IRS, we pause to reflect on the enormity of the whole effort and the heroic measures some citizens have employed to not participate in it.
(Spoiler alert: None of them worked. Zilch. So finish writing that check.)
Some background: Congress passed special revenue acts at various times during the 1800s to cover extraordinary expenses, such as the Civil War. But the income tax didn't become a permanent fixture of American life until passage in 1913 of the 16th Amendment, which gave Congress, beset by Spanish-American War debts, the right to "lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."
The new system began with a nominal tax rate of 1% for individuals earning $3,000 a year or less and a top rate of 7% for incomes above $500,000. The government took in about $67 million in individual income taxes in 1916, the first year for which complete records are available. The first version of our beloved Form 1040 came with a single page of instructions, which devoted the largest detail to telling farmers how to account for slaughtered vs. live animals.
The ballooning of the federal government, continued efforts to make the tax code more "progressive," and sundry other factors have piled complexity upon complexity ever since. Tax rates for the lowest bracket have swung from a low of 0.375% (1929) to a high of 22.2% (1952-53). On the high end, aging plutocrats no doubt recall with horror the early years of the 1950s, when they had to pay rates of more than 90%. The IRS now has hundreds of forms and accompanying instructional tomes, including the intriguingly titled Pub. 2193: "Too Good To Be True Trusts."
The tax preparation industry employs more than 300,000 people in the U.S., and one firm alone, category leader H&R Block, earned more than $1.8 billion in the first quarter of last year. The IRS collected some $2.5 trillion in 2006, with almost $2 trillion coming from individual payments and withholding.
And good luck if you try to opt out of the system. Tax protestors (as opposed to tax "resisters," who withhold all or part of the taxes as a form of political protest) have employed a bewildering array of arguments to escape their tax burden, all to little or no avail.
One of the most common arguments is to claim the 16th Amendment was never properly ratified, because of minute differences in punctuation and spelling between the versions of the amendment approved by state legislatures or Congress' failure to properly recognize Ohio as a state until 1953.
Another school of protest, most notably preached by Eddie Ray Kahn, advisor to the recently convicted Wesley Snipes, misread a part of Sec. 861 of the tax code to argue that only income earned outside the U.S. is subject to taxes.
Hankering for something more creative? How about arguing that mandatory tax payments are a form of slavery and thus a violation of the 13th Amendment? Or that putting false or misleading information in a tax return is a form of constitutionally protected free speech?
But for novelty, we think it's hard to beat the line of thinking that notes A) The presence of a gold-fringed flag in most federal courtrooms and B) The archaic naval custom that a gold-fringed flag is a banner of war. Conclusion? Tax courts are subject to maritime law, which includes no income tax provision.
How do these theories play out when the IRS gets wind of them? Well, you recall that Snipes was convicted on multiple counts of tax evasion. The Dept. of Justice publication that describes the fallowing avoidance schemes cites myriad cases when they were employed in court, universally without success. And the IRS, feeling a bit bolder after the Snipes case, has vowed to crack down on what it deems "frivolous" arguments against paying taxes.
The clincher? Application of any of the above robs you of one of the few useful and unique protections in federal tax code, claiming that you honestly didn't know the law. Nope, if you're going to try to slide by the taxman, you're much better off using the Steve Martin tactic: "I forgot!"
Can You Stop an IRS Audit? IRS Problem Solver Blog Short answer: Probably not.
IRS Issues 70-Page Memo on Tax Protesters TaxProf Blog No. 4: The IRS is under no obligation to file a tax return for you.
Escape the AMT Trap U.S. News & World Report The insidious thing about the AMT is that traditional tax planning — maximizing deductions, deferring income and so on—only increases your odds of getting hit.
The Benefits of Tax Havens RedState If you live in a developed country, your taxes are probably much lower today than they were 30 years ago, thanks in part to tax havens.
Mr. Peterman,
I'm sorry for not staying on topic, but the discussion about death, and our rece...
— La Donna
April 15, 2008 2:06 PM
What are you expecting from the IRS this year?
39% 22% 6% 33%
At least in "Death" there will be no taxes. Or will there be taxes?
Thank you Mr. Peterman and La Donna for your kind comments to my post on "A Night at the Theater"
Mr. Peterman,
I'm sorry for not staying on topic, but the discussion about death, and our recent topic about Castro, I just have to bring this up.....
Today In The News.....Cubans go cellular (Maybe Castro Is Dead)
For the first time ever, Cuban citizens may own cellular telephones – and are lining up for the chance. State-owned phone offices began selling the devices on Monday morning, the cheapest of which sell for more than nine months worth of state wages. Opening up cellular communication is one of the many ways that Raul Castro has eased government restrictions on citizens since he became president of Cuba. Cubans may now own DVD players, computers, microwaves, and more.
more on the honor rollExPat......only for those left behind.
La Donna......Cuba is going to very interesting to follow. Maybe no one will be able to afford a cell phone, and that's the way it was planned. However, I would not be surprised to see big sales on cell phones. No body knows how much money someone else really has. Central planning has never worked in the past, so I see no reason to belive it's going to work now.
"God bless all you business men cause you'll be broke in May, come April 15th we'll come and take it all a way." A lovely change to the Chirstmas song "comfort and joy." Before I came to the job I am in now, I worked for a CPA doing nothing but taxes, payroll taxes (Bi-weekly, monthly, quarterly), Corporate returns (those poor people), Individual returns and I knew from midnight of January 1st to midnight on April 15th... I had no life and the IRS owned me for those few but horrible months. Working for a CPA gives you great respect for the IRS and the reasons why we are all taxed and what the tax money should, or hopefully, goes to benefit our lives. Now of course the IRS has its moments of being a vicious money collecting machine and know one wants to give up their hard earned money to the government. But hopefully most of us see the positive side of taxes ( I can't believe I just said that). So get out those W-2's, list of deductions, charitable contributions, receipts, interests statements, 1099's and head to your local tax preparer cause today is the day... Oh don't forget your kids (their worth a lot) and politely hand your soul over to the IRS, sadly though... thats not tax deductible. Happy tax day!
Mr. Peterman,
Who knew there was a positive side to being dead. Since today is Tax Day it certainly makes "death" something to look forward to.....but I'd like to wait a little longer (hopefully, a lot longer).
Thanks, as always, for your insights.
ExPat
Shannon said...
Besides the fact that taxes are due today, April 15th gives me pause for another reason, Mr. Peterman ~ as you surely know it is the day the RMS Titanic sank (if you'll forgive me for going deliberately off-topic).
This year is the 96th anniversary of the dark night when Mother Nature reminded gilded men of the dangers in fealty to money, and penniless men paid the price.
I can still remember your collection of costumes reproduced from the Titanic film many years ago, has it been a decade? I dreamed of ordering everything in the catalog...
Noted, and there was interesting reportage today on a new theory that cheap rivets may have been responsible for the disaster:
http://www.independent.co.uk/news/world/americas/cheap-rivets-blamed-for-massive-loss-of-life-as-titanic-sank-809622.html
Hey, just be glad you don't get all the government you pay for!