H. Jacob Lager

Archive for the ‘Yes you must pay taxes’ Category

International tax law updates: Kansas and FATCA and whistleblowers, oh my!

In FATCA, U.S. Tax policies, Yes you must pay taxes on August 17, 2012 at 7:36 am

Although a “fly-over,” Kansas is indeed an actual state.  On August 15, the Tenth Circuit affirmed the Tax Court’s holdings denying an individual’s arguments that he was a “a citizen of Kansas that earned a living through activities occurring solely under the jurisdiction of Kansas” and therefore not a federal taxpayer; and that he did not receive taxable income.

Hmmmmm . . . This sounds familiar.  This kind of argument, with its hints of facial logic (“Citizen of California?  Makes sense to me!”) are very popular with the tax protest movement and very likely to get a proponent sanctioned.  In dismissing the taxpayer’s claim, the panel also mentioned the following similarly facetious anti-tax arguments:

  • “the authority of the United States is confined to the District of Columbia,”
  • “wages are not income,”
  • “the income tax is voluntary,”
  • “no statutory authority exists for imposing an income tax on individuals,” and
  • “individuals are not required to file tax returns fully reporting their income”

Quick rule of thumb for heavily-promoted tax dodges: if Mitt Romney isn’t doing it, it’s likely not legal. The full opinion can be found here.

More FATCA Forms Released  Yesterday, the IRS released a draft of the anticipated Form W-8IMY meant to accommodate impending FATCA regime. (For a brief recap of what FATCA check out this post.)

Chief among its new additions is a new enhanced “line 4” that features no less than 21 options for an entity to choose from when indicating its FATCA status designation and five extra pages relating to that choice.  Accompanying instructions and regulations have not yet been issued.

This is what we call “tax simplification.”

IRS Hails Whistleblowers  As part of an American Bar Association Section of Taxation webcast, IRS special trial attorney and division counsel John McDougal noted the utility of the Service’s whistleblower program.  According to McDougal, whistleblower data constitutes one of the most important sources of taxpayer information for enforcement efforts.  McDougal noted the IRS has just recently begun to distribute award payments to individuals who have supplied that information.  Because whistleblowers often present information on a particular financial institution or practice, the IRS is able to gain access to information outside the U.S. that is not otherwise easily available.  “It’s an incredibly valuable opportunity for us,” McDougal said.

Rat on your bank, a new “Occupy” strategy?

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EIGHTH CIRCUIT REMINDER: MINNESOTA NOT A FOREIGN COUNTRY

In Yes you must pay taxes on February 20, 2012 at 12:55 am

Despite a public education, I’m fairly certain that Minnesota is not its own sovereign nation.

And – whadayaknow?! – the Eighth Circuit agrees.

In an unpublished opinion released on January 31, the panel denied a taxpayer’s protest-based appeal, noting that the following arguments “have been repeatedly rejected by the courts as frivolous”:

“Taxpayers were not citizens of United States but rather were citizens of their home state (the ‘Republic of Minnesota’ who were not subject to income tax (United States v. Gerads, 999 F.2d 1255, 1256 (8th Cir. 1993)); and Income derived from sources within United States is non-taxable by the US government. (United States v. Clayton, 506 F.3d 405, 412 (5th Cir. 2007)).”

The panel further sanctioned the (reluctant) taxpayer $5,000 for bringing frivolous the appeal based on discredited, tax-protestor arguments.

I largely agree with the decision, but I do think some municipalities (*cough* Berkeley, California *cough*) might have a more persuasive argument on this point.

That’s a joke, Berkeleyites. Circular 230! “Do not rely!” Consult your own counsel (either tax or spiritual).