I have come across a number of clients who are actually unaware that filing your tax returns is required. They have the misconception that taxes are a “voluntary program”. Unfortunately, they are very wrong, and can find themselves in major trouble. To clear up any confusion that you may have about filing your taxes, it is a criminal offense not to file, punishable for up to 1 year for each year unfiled. In addition, un-filed tax returns quickly create quite a debt due to penalties and interests charged by the IRS.
Proponents of the U.S. tax system 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 word “voluntary,” as used in Flora and in IRS publications, refers to the IRS 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) of the IRM.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 federal court in New York permanently barred Robert L. Schulz of Queensbury, N.Y., 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 shut. See http://www.usdoj/tax/txdv07214.htm, and http://www.usdoj.gov/tax/txdv07595.htm
Any taxpayer who has received more than a set standard of gross income is required to file a tax return. Even if you have been a “tax protestor” before and now realize that you must file, find some professional assistance to ensure that your returns are done accurately and promptly before it is too late. It is always better to be proactive, rather than reactive, with the IRS!