Some taxpayers 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 “[o]ur 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 initially to determine the correct amount of tax and complete the appropriate returns, rather than have the government determine tax for them from the outset.  The requirement to file an income tax return is not voluntary and is clearly set forth in sections 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 non-complying individual to criminal penalties, including fines and imprisonment, as well as civil penalties.  In United States v. Tedder, 787 F.2d 540, 542 (10th 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.”  The IRS issued Revenue Ruling 2007-20, 2007-14 I.R.B. 863, warning taxpayers of the consequences of making this frivolous argument.

In August 2005, the Justice Department announced that Royal Lamarr Hardy was sentenced to a 156-month prison term for, among other things, selling a tax evasion scheme called the “Reliance Defense” that incorrectly asserted the income tax laws were voluntary (i.e., the laws imposed no legal obligation to pay tax or file a return).  Hardy was also ordered to pay costs of prosecution in the amount of $59,267.88, and restitution to the IRS for $197,555.  See 2005 TNT 169-12 (Aug. 31, 2005).

In August 2007, a U.S. District Court permanently barred Robert Schulz and his organizations, We the People Congress and We the People Foundation, from promoting a tax scheme that helped employers and employees improperly stop tax withholding from wages on the false premise that federal income taxation is voluntary.  The court concluded that the First Amendment did not protect the two organizations that operate the website, or their founder, because the site incited criminal conduct.  The court also ordered that the web site that sold the materials stating that individuals can legally stop paying taxes be terminated.  See http://www.usdoj.gov/tax/txdv07214.htm, and http://www.usdoj.gov/tax/txdv07595.htm.  The result in this case was affirmed on appeal and certiorari was denied.  United States v. Schulz, 529 F. Supp. 2d 341 (N.D.N.Y. 2007), aff’d, 517 F.3d 606 (2d Cir. 2008), cert. denied, 129 S.Ct. 435 (2008).

The filing of a tax return is voluntary?

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