Friday, November 28, 2008

Third Frivolous Tax Argument: Filing a Zero Return

One of the popular contentions going around is advising taxpayers to file a zero return regardless of their income, in order to reduce their Federal Tax Liability. Adding insult to injury, some of these ill-advised taxpayers claim a refund in addition to filing zero income.

The lowdown: There is nothing in tax law that allows an individual with taxable income to file a zero income return. Taxable income includes but is not limited to: wages, salary, tips, interest, dividends, rental income , retirement plans, pensions, annuities, social security, royalties, unemployment, bribes (yes bribes), alimony, jury duty, prizes and awards, Pulitzer prize, Nobel prize, stolen property (yes, if you steal property you must reported as income) and even bartering.

Of course there are qualifiers and under some circumstances some of this income is not taxable i.e. Social Security. However, if you derive income from any of these sources you must reported on your return and cannot claim zero.

This would apply to the "nunc pro tunc" argument, a similar argument made with the purpose of reducing the tax responsibilities of individuals.

For further information the IRS has written extensively in the document covering the majority of these positions in their Internal Revenue Bulletin 2006-15 (IRB:2006-15).

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