Unlearning the Income Tax: Another Journey to Frivolity

About once a year I decide to post about the newest Bozo scheme to get out of the income tax. It’s that time again: Today, we learn about the Institute for Unlearning.

Yes, that’s a real website and its proprietor, one Patrick Mooney, espouses that, “[A] private sector worker’s earnings are not legally subject to the federal tax on income. They never have been, and as long as we still have a Constitution, they never will be.” Mr. Mooney was highly confident in his beliefs, so he filed a 2005 tax return with all zeroes, and claimed a refund of $2,647.48, the amount he had withheld in federal tax during the year.

The IRS didn’t appreciate Mr. Mooney; after he submitted his tax return they denied his refund and wrote him a letter warning him that he was submitting a frivolous tax return. Even the IRS sending him documents warning about why you have to file tax returns didn’t dissuade the intrepid Mr. Mooney. He continued, and sent a letter protesting the IRS’ decision to deny his claim. The IRS assessed a $500 penalty for filing a frivolous return, and eventually sent him a Notice of Deficiency.

The dispute ended up in Tax Court. This was not the first time Mr. Mooney ended up in Tax Court; he similarly petitioned the Court regarding his 2004 tax return. As you might guess, he lost and also had to pay a $1,000 Tax Court Penalty for filing a frivolous case. You probably know where today’s case is heading….

Do yourself a favor if you’re ever even thinking of petitioning the Tax Court and telling a Tax Court judge that there’s no income tax because [the reason is irrelevant; none will work]. Just don’t do it.

Petitioner’s assertion that the payments he received in 2005 were not taxable income within the meaning of the law are frivolous. We do not address petitioner’s frivolous and groundless arguments with “somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable merit.”

Things got worse for the petitioner. The IRS won, of course, on the tax due, the failure to file penalty, and the failure to pay penalty. But the IRS decided to also assert the fraud penalty.

The instant case involves many badges of fraud. Petitioner is intelligent and well educated and properly filed and paid taxes for a number of years before he recently began to claim, on the basis of various tax-protester arguments, that his income is not subject to Federal income taxation. Petitioner wrote on his Web site about his efforts to avoid paying income taxes, characterizing his plan as a “‘get out of income taxes free’ Monopoly card”. Pursuant to the strategy described on his Web site, he failed to report any income on his 2005 Form 1040; yet he acknowledged at trial that he did receive income during 2005. Petitioner received and has read Internal Revenue Service publications discussing tax-protester arguments like the ones he has employed and explaining why such arguments fail. Despite petitioner’s being fully informed by respondent about the frivolous nature of his arguments, petitioner’s correspondence with respondent has been filled with tax-protester arguments and has not addressed the factual accuracy of respondent’s determination. Petitioner has also previously attempted to use similar arguments to dispute his tax liability before this Court, and he is aware that we consider such arguments frivolous and groundless.

The Court also wasn’t in the mood for his frivolity.

Apparently, the $1,000 penalty did not deter petitioner from making frivolous and groundless arguments before this Court. Accordingly, we shall impose a $2,000 penalty on petitioner pursuant to section 6673. If petitioner persists in raising frivolous arguments before this Court, wasting time and resources that should be devoted to taxpayers with genuine controversies, and continues to refuse to shoulder his fair share of the tax burden, we will not hesitate in the future to impose a significantly higher penalty.

As expected, arguing that there is no income tax is just not going to work. It doesn’t matter if you’re arguing with the IRS, the Tax Court, or your state tax agency. Just don’t do it! If someone approaches you with a tax protester argument, look at this list of reasons why they are all wrong. Or you can be like the petitioner today, who wants us all to unlearn a basic reality: Yes, Virginia, there is an income tax and you do have to pay it.

Case: Mooney v. Commissioner, T.C. Memo 2011-35


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