Non-Filers and the Income Tax Laws
SFR Returns Filed for you by the IRS
Although there are minimum income filing limits, you should always file your tax return to invoke the 3 and 10 year statute of limitations and to avoid penalties and interest charges that can bankrupt you. If you do not file your income tax returns, and you have income above the filing threshold, the IRS may file a tax return (SFR) on your behalf or just do nothing. You may eventually get a tax bill that most likely will be twice the original debt. Additionally, the IRS places you in a category of tax protesters that are treated with contempt as a matter of policy. It's also a criminal offense not to file! and a criminal offense to file a false tax return!.
The substitute return (SFR) is not counted as a tax return, however, for a discharge in a bankruptcy, so you are better off, re filing the original returns with the IRS. It may be possible, however, to sign the SFR return if the IRS gives you a chance to approve the SFR with your signature. This action may allow the return to be considered as being filed by the bankruptcy judge, later if you try to discharge the tax debt in a bankruptcy proceeding. SFR returns are usually filed with just the standard deduction with no expenses, so your tax liability is usually higher with an SFR.
The Income Tax is Legal
There was a time in our history, prior to the sixteenth amendment, where income taxes
were prohibited by the Constitution. However, in 1913, passage of the sixteenth amendment,
eliminated the requirement of apportionment of taxes on incomes, and Congress gained the
power to tax income from individuals from “whatever source derived.”
Non filers and tax protesters are individuals that do not file tax returns for many reasons,
but mostly because they either do not have the money to pay the tax that will be due if they
file the returns, or they believe the act of taxation on citizens is illegal. The tax protester
movement is mostly based on frivolous arguments that are not upheld in the Federal Courts
Consequently, the Federal Courts are quick to punish taxpayers that waste time raising the
same frivolous arguments. The penalties for such acts can be very severe:IRC Sec 6702 penalty of $5,000 for filing a tax return based on a frivolous or substantially incorrect position; IRC Sec 6673(a) penalty of $25,000 for filing a petition with the tax court based on a frivolous legal position; and finally IRC Sec 6673(b) for filing frivolous claims in other Federal Courts. A sad consequence of this movement is that many people are
duped into paying thousands of dollars to learn how to beat the IRS in these seminars and
ultimately end up getting caught and paying a heavy price. For more information, read these
interesting cases: Irwin A Schiff v US and Schultz v US.
Do Not Use a Trust to Avoid Paying Income Taxes
Using a constitutional or other type of trust instrument is not going to give you a legal means whereby you can avoid paying income taxes. Trusts are taxed very much like individuals and the thought that you can earn income in a trust and not pay income taxes that are due is foolish scheme that will just get you into a lot of trouble.