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Section 7701.-Definitions
26 CFR 301.7701-6(a): Person.
(Also: §§ 6012, 7203, 7343, 26 CFR 1.6012-1(a).)
Frivolous tax returns; citizens of a state. This ruling discusses and refutes the frivolous position taken by some taxpayers that they are not subject to federal income tax, or that their income is excluded from taxation, because either (1) they claim to have rejected or renounced United States citizenship and are citizens exclusively of a state (sometimes characterized as a "natural-born citizen" of a "sovereign state"), or (2) they are not persons as identified by the Internal Revenue Code.
PURPOSE
The Internal Revenue Service (Service) is aware that some taxpayers are claiming that they are not subject to federal income tax, or that their income is excluded from taxation, because: 1) the taxpayers have declared that they have rejected or renounced United States citizenship because the taxpayers are citizens exclusively of a State (sometimes characterized as a "natural-born citizen" of a "sovereign state"); or 2) the taxpayers claim they are not persons as identified by the Internal Revenue Code. These taxpayers often furnish Forms W-4, Employee's Withholding Allowance Certificate, to their employers on which the taxpayers claim excessive withholding allowances or claim complete exemption from withholding. Based on these Forms W-4, federal income taxes are not withheld from wages paid. Alternatively, these taxpayers attempt to avoid their federal income tax liability by submitting a Form 4852, Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., to the Internal Revenue Service with a zero on the line for the amount of wages received. These taxpayers often either fail to file returns, or file returns showing no income and claiming a refund for any withheld income taxes. The Service is also aware that some promoters, including return preparers, market a book, package, kit, or other materials that claim to show taxpayers how they can avoid paying income taxes based on these and other meritless arguments.
This revenue ruling emphasizes to taxpayers, promoters and return preparers that all U.S. citizens and residents are subject to federal income tax. Any argument that a taxpayer's income is excluded from taxation because: 1) the taxpayer has rejected or renounced United States citizenship...