Home Page
Income Tax Page

Income Tax

"It’s not a crime not to pay income taxes, so long as you truly believe you don't have to."

Well, actually, this one turns out to be true. In the aptly-named case of Cheek v. United States, 498 U.S. 192 (1991), the Supreme Court noted that the statute making it a crime to fail to pay federal income taxes provides that the crime is committed only by someone who “willfully” fails to pay. The Supreme Court held that someone who truly believes that the law does not require him to pay taxes has not committed the crime of willfully failing to pay, even though his belief is wrong.

So you might think that the whole thing is simple—just believe that you don’t have to pay any taxes, and—voila!—you don’t. But be warned! Here are some details:

First of all, the belief that you don’t have to pay taxes does not relieve you of your obligation to pay. At most, it means that failure to pay will not be a crime. If you owe taxes, you owe them, regardless of any erroneous beliefs you may have. So if you truly believe that you don’t owe taxes, you might not end up in jail, but the IRS will still be able to come after you for the amounts you owe, and they can add on interest and civil penalties, which can add a considerable sum to your tax bill. There is, for example, a penalty of 20% for substantially understating the tax that you owe—and it can be 75% if the understatement is due to fraud. (See 26 U.S.C. §§ 6662(a), 6663.) Moreover, lately, the courts have started tacking on their own penalties for making frivolous arguments about not owing taxes. Some courts routinely sock tax protestors for an extra $2000 or more for taking a frivolous appeal from IRS rulings. So your beliefs can end up being very expensive. [2009 update: Some courts have recently been imposing sanctions of $8000 for frivolous tax protestor arguments. E.g., Smith v. U.S., 2008 WL 5069783 (5th Cir. 2008); Cuartero v. U.S. Atty. Gen., 295 Fed. Appx. 378 (2d Cir. 2008).]

Second, the Supreme Court placed some limits on the sources of permissible good faith beliefs that one doesn’t owe taxes. The Court held that it is not a defense to a charge of willfully failing to file that one believed the income tax laws were unconstitutional. So if the reason you think you don’t owe taxes is that you believe the tax laws are unconstitutional, that’s not a defense.

Third, Congress or the courts could always change this detail of tax law. Last time I checked (July 2016), Cheek was still apparently good law. See, e.g., United States v. West, 2016 WL 3947815 (8th Cir. 2016) (relying on Cheek); United States v. Tuka, 2016 WL 3254040 (3d Cir. 2016) (same). But I can't guarantee that it hasn't changed it since.

Finally, and perhaps most important, if you get criminally prosecuted, your mere statement that you truly believed that you didn’t owe any taxes is not automatically believed. It will be up to you to convince the jury of what your beliefs were, and it will be up to the jury to make the ultimate determination of whether you did or did not truly believe that you didn’t owe any taxes. After all, you could be lying. You might know very well that you owe taxes, but be lying strategically in an effort to avoid prison. Since your inner beliefs are not subject to conclusive demonstration, it will be up to the jury to figure out what you really believed.

So a lot will depend on what type of jury you get. Perhaps you’re hoping that you’ll get a jury of tax skeptics, or just a foolish jury that you can try to persuade. Well, you might. Every now and then a tax protestor type manages to convince a jury that he really believed all this guff about not owing taxes, and the jury acquits. But you could also end up with a sensible jury, which can see through self-interested lies about a person’s beliefs. You might also get an angry jury, made up of citizens who pay their taxes regularly and responsibly, and who don’t have any patience with absurd arguments about how no one owes taxes.

Also, the judge will be giving the jury some instructions about how it should determine what your beliefs really are. One instruction that some judges give is that the more farfetched an alleged belief is, the less likely it is that someone really believes it. So if the jury recognizes that the claim that no one owes taxes is absurd, which it is, the jury may be more ready to infer that the defendant is lying when he claims to believe it. The jury may be more ready to conclude that the defendant knew perfectly well that he owed taxes, and was only adopting a pretense of believing that he didn’t, in an effort to avoid paying.

Another instruction that some judges give is that the requirement of willfulness exists to protect taxpayers who make innocent mistakes caused by the complexity of the tax code. This instruction, which has been upheld by the federal courts of appeals, might suggest to the jury that it is inappropriate to find a lack of willfulness for a defendant who holds typical tax protestor beliefs.

So while it is true that a genuine belief that you don’t owe taxes means that failure to pay is not a crime, and while it is true that a tax protestor gets acquitted on this ground every now and again, if you adopt this strategy, you’re putting your freedom at considerable risk. You’re banking on what some jury is likely to conclude about your beliefs. If the jury finds that you believed you owed taxes and deliberately did not pay, you’ll be heading for jail.