Tax Protester FAQ | Hacker News Reader

Tax Protester FAQ

evans-legal.com

62 pointsdcminter33 comments

A situation not covered in this FAQ: pay your employees in US gold coins, but withhold taxes (and report income) based on the face value of the coins instead of on their market value. Shock and amazement: That isn't legal either.

Some press about the case: https://www.reviewjournal.com/news/employers-gold-silver-pay...

Ruling by an appeals court: https://caselaw.findlaw.com/us-9th-circuit/1651531.html

I knew a tax protestor many years ago. It caught up with him eventually. And was very amusing to me at the time as he was a federal employee (so, by the numbers, his income came from the taxes he believed were unconstitutional).

Probably wasn’t amusing to his family when they lost their home though.

My favorites were the gold fringe flag folks.

He was in that camp too. Again, federal employee. I’ve met many of them (federal employee tax protestors and sovereign citizen types) over the years, it surprised me at the time but not anymore. Now it just confuses me.

Yeah, federal employee doesn't usually mean "integral and knowledgeable part of governmental power structures", often enough it's just an average person who wants stability and not a lot of challenge.

True. The part that really confuses me is that they’re perhaps the clearest example of cognitive dissonance. They’ll literally say taxes are evil (common word they use) and still go work for the government. Only one person, when I presented them with this conflict, chose to leave federal employment. The rest have just looked at me like I was an alien and kept talking.

I don't think it's quite as surprising as you might expect.

The underlying logic of the tax protester arguments, to the degree that one exists, is that the law is a magic system where you can do what you want if you just find the precise words to invoke the legal magic. If you're a functionary whose job is to reject applications because line 17b was filled out incorrectly, your work isn't going to disabuse you of this notion.

Another parallel instance to think about: how many paid software developers are pro-open source and against paying for software? I can count at least one anecdotally, namely myself. :-)

I imagine it catches up to most of them, eventually. After all, they are protesting their "right" to illegally not pay taxes.

This FAQ is... a lot more detailed than I expected. Actually a pretty interesting read even if you don't care about tax protestors per se. Digs into everything from history of federal taxation powers to how individual laws are codified into the United States Code.

My favorite of the particularly frivolous arguments: the IRS code refers to "taxpayers", and if you refuse to pay tax, you are literally not a tax payer, and therefore the code doesn't apply to you.

Unlike most conspiracy theories, this one can actually get you in a lot of trouble.

There are a couple or so that I didn't see listed (although I could have easily missed them, as that FAQ is very extensive).

1. Citing completely non-existent cases, sometimes from completely non-existent courts.

2. Citing quotes from real cases, but the quotes were not from the court. I remember looking at one where they cited a real Supreme Court case, and the quote was very favorable to the tax protester's claim. Unfortunately, it was not from the opinion of the court. It was from one of the briefs filed by the losing side which the court completely rejected.

3. Citing cases that were subsequently overturned on appeal.

4. Arguing that Soandso (usually someone selling a book or offering a seminar on getting out of taxes) has not gone to jail or even been sued by the IRS and so his methods must work.

The flaw in that is that you have no proof that he is actually using the methods from his books and seminars. It is quite possible he's not in trouble because he actually pays his taxes.

You know, I would honestly like to know where and how the whole "tax protestor" / "sovereign citizen" meme originated. Anybody know?

The city of Ur? (Joking)

Does a US citizen - who lives overseas and refuses to pay their federal income tax - count as a tax protestor? I didn't see that reason in the lists.

You typically have to exceed the foreign earned income exclusion (adjusted annually for inflation: $103,900 for 2018, $105,900 for 2019, and $107,600 for 2020) [1] (for taxes you pay to your country of residency) before you owe US federal income tax while living overseas. If you have seriously delinquent tax debt [2], the IRS can request the State Department prevent the renewal and/or revoke your passport (which, in many cases, will terminate your visa or prevent renewal in the foreign country you reside, as your passport is no longer in good standing; you will be granted a limited passport for return to the US by the State Department if this occurs [3]).

[1] https://www.irs.gov/individuals/international-taxpayers/fore...

[2] https://www.irs.gov/businesses/small-businesses-self-employe...

[3] https://travel.state.gov/content/travel/en/News/passports/pa...

The $105k-ish number is just the amount of foreign income that is exempted (hence, upon which one would owe no taxes). Technically, anyone subject to US tax law is supposed to file a return every year, even if no tax is owed and no refund due. I could easily see IRS going after someone living abroad who had committed no real crime other than not filing a return.

And can’t forget about filing the FBAR to the Treasury Department.

That, too, of course. There's a reason every time I've seen an American abroad ask a question about filing taxes that the answer is literally always "You need to find yourself a specialist accountant to help you with this."

One reason for that global reporting req is to account for capital gains in domestic trading accounts, or other transfers of property. This is not unique to the US, but other countries don't necessarily piggy-back this in your standard income tax filing.

There are provisions to prevent double-taxing beyond the foreign income threshold because of treaties between the US and other countries. I'd speak to a professional at least the first time you file internationally.

What is unique to the USA is: charging citizens tax on money they earn when they live overseas and forcing overseas banks to hand over details, in some cases of non USA citizens, to USA IRS

To be a bit more specific, it's charging citizens tax on money they earn from overseas when they live overseas i.e. nothing to do with the US at all. Your comment could be interpreted to mean just taxing income from US investments while living abroad, for example (which would be more reasonable, but still over-reaching). Taxing worldwide income is also done by a few other countries but only the IRS has the bizarre extra reach into overseas banking data (that I know of, at least).

How you use the exclusion (and the credit, if necessary) isn't the point. The point is protesting the idea of of being subject to US tax when you do not have any US income.

Sorry mate.

That may be strictly true. But you must file tax returns. I met a women here in Aotearoa who had not stepped foot in the USA for thirty years and never thought about the taxes.

Facing extradition or loosing every single thing she owns. Or both.

You too can go to prison, just like Wesley Snipes! https://www.reuters.com/article/us-snipes-sentence/wesley-sn...

Huh, so it turns out Zeitgeist wasn't telling the truth 100% after all: https://youtu.be/iGLQF3Aiw4M?t=5266

No income, no taxes.

Or if you are rich, money laundering works well to avoid paying taxes.

Oh, okay. So, just don't be poor, right?

More seriously, money laundering happens in some insane ways when you start talking about seriously rich people and avoiding taxes. Take a look at the modern art market these days. There's a lot of "Buy $WORK for $PRICE; donate $WORK to $MUSEUM for $TAX_WRITEOFF," where $TAX_WRITEOFF >>> $PRICE. There's a bit more to it, but that's the gist of how it works.

> Oh, okay. So, just don't be poor, right?

> More seriously, money laundering happens in some insane ways when you start talking about seriously rich people and avoiding taxes. Take a look at the modern art market these days. There's a lot of "Buy $WORK for $PRICE; donate $WORK to $MUSEUM for $TAX_WRITEOFF," where $TAX_WRITEOFF >>> $PRICE. There's a bit more to it, but that's the gist of how it works.

I hear this a lot but when I've looked it seems the IRS is particularly aware of this type of fraud [0]. Do you have anything more I can read about this?

[0]: https://www.washingtonpost.com/lifestyle/magazine/the-secret...

Tax protesters, not to be confused with tax resisters.

Tax resisters refuse to pay taxes based on the personal belief that the current government is unethical and accept consequences of their actions. It included many respected figures in history from various political camps, such as anarchists, abolitionists, or pacifists. On the other hand, "tax protesters" are an uniquely American concept - it rejects taxation not from an ethical or ideological point of view, but from a legal point of view. There are various versions of this type of conspiracy theory, they basically claim that...

1. Within the political system of the current government, the government has no power to collect taxes, paying taxes is not mandatory, a personal income tax is unconstitutional, etc.

2. It's also possible to force the government to acknowledge this fact by using the court system for judicial review.

Of course, their so-called evidences are numerous references to misunderstood legal code - reinterpreted with no regards of its correct context. This line of thinking is totally absurd, tax protesters are basically libertarians who believe the existence of magic. While I might respect an authentic libertarian who refuses taxes from an ideological perspective, I have no respect for "tax protesters".

There also exists "Sovereign Citizen", "Freeman on the Land", etc, which are basically more extreme versions of the same pseudolegal conspiracy theorists. The RationWiki (which is a biased source, but totally adequate to explain this topic) has a good summary [0][1]. The core beliefs are the same - that the power of the State is illegal according to the State's own laws, and that you can actually challenge the State by using its own legal system. However, in the Sovereign Citizen's theory, the story is the following:

1. The contract laws are the most powerful laws and even the power of the State comes under it, because its power is derived from the Anglo-Saxon Common Law system.

2. Thus, being governed by the State is actually established by a voluntary contract.

3. However, in order to rule you, the State keeps tricking you to accept its evil contracts without your knowledge - a court order, a driver's license, a passport, a parking ticket, etc, are actually disguised contracts that put you under the power of State.

It's claimed that by knowing these "truths", you can free yourself from these contracts, thus also free yourself from the power of the State. For example, by not getting a driver's license and refusing to accept a court order (which brings serious troubles to you). And finally, by learning some pseudolegal terminologies (basically magic spells), you can make the court to acknowledge it and officially free yourself from the State. Yeah, the Sovereign Citizen legal theory is almost like the plot from Faust or its magical-girl anime adoption, but even better, with the possibility of opting out from the contract later on! No need to say more...

BTW, this is only one of the possible legal conspiracy theories used by them, there are more. Another one claims that the State has power over you, only because it secretly created a corporate identity for all human citizens, and most laws only have power over the corporate identity (written in all caps), not your personal identity. By knowing some pseudolegal magic spells (e.g. writing your name as "Flesh and Blood Human, John Random, from the family of Hacker" with a bloody fingerprint [2]), you can distinguish the two identities in legal documents, enabling you to detach yourself from the corporate identity at court, thus nullifying your crimes, your debts, or most laws in existence.

[0] https://rationalwiki.org/wiki/Pseudolaw

[1] https://rationalwiki.org/wiki/Sovereign_citizen

[2] Which is believed to be the highest form of ID, owned by a human being, not a legal corporate identity.

Just to give an example of a famous resister with convincing arguments: Henry David Thoreau, author of Walden

Henry David Thoreau is probably one of the most well-known figures in history associated with tax resistance. I have a copy of his work on my bookshelf right now - I should reread it someday...

tax protestors are loonies.

tax resisters are sometimes also loonies, but very much more respectably so as a general rule, and not prone to legal cosplay.

“i don’t have to pay taxes because that flag has tassels” is much, much less charming than “i keep my net worth well below the poverty line by choice because i don’t want to fund your horrid wars”.

I respect the latter.

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