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Income Tax Myths

"You don't have to pay income taxes because Form 1040 doesn't have a valid OMB control number."

The Paperwork Reduction Act Argument

Some tax protestors believe that you don't have to pay your income taxes because of the Paperwork Reduction Act. This may be the silliest tax protestor argument of all (although there are many arguments competing for this honor).

The Paperwork Reduction Act was passed to ensure that government agencies think carefully before imposing paperwork requirements. The general rule, under § 3507 of the Act, is that, before collecting information from the public, federal agencies have to get the approval of the Director of the Office of Management and Budget ("OMB"), who must create a "control number" to be displayed on the agency's information request. Moreover, the Act provides that "no person shall be subject to any penalty for failing to comply with a collection of information that is subject to this subchapter if . . . the collection of information does not display a valid control number assigned by the Director in accordance with this subchapter." 44 U.S.C. § 3512.

Based on this provision, protestors argue that because Form 1040 does not have a valid OMB control number, no one has to pay income taxes.

There are two answers to this absurd position:

1. Form 1040 has an OMB control number! It's right there in the upper right hand corner of Form 1040, which says "OMB No. 1545-0074."

Case closed, one would think. What's the problem?

Protestors imagine that this control number is somehow invalid. Protestors observe that § 3507(g) provides that the OMB Director's approval of an information request is good only for a limited period, which cannot exceed three years. The control number 1545-0074 has been on Form 1040 for longer than three years, so protestors claim it is invalid.

The simple answer to this point, as succinctly stated by the U.S. Court of Appeals for the Seventh Circuit in Chicago, is that "Section 3507 requires periodic review, not a periodic change in control numbers." U.S. v. Patridge, 507 F.3d 1092, 1095 (7th Cir. 2007). In other words, even assuming Form 1040 is the kind of information request to which the Paperwork Reduction Act applies, the act requires only that OMB review Form 1040 at least once every three years and assign it a control number. There is no requirement that the form receive a new control number every three years. It would be perfectly fine for OMB to reconsider and reapprove the existing control number.

It appears that that is exactly what IRS and OMB do. If you click here and select "Department of the Treasury" under "Select Agency," you will get all Treasury Department documents that have a currently valid OMB control number, and you will find control number 1545-0074 listed as currently valid for the IRS.

So Form 1040 has a valid OMB control number.

2. Moreover, there is considerable doubt whether the Paperwork Reduction Act could really save anyone from penalties for not paying income taxes. Numerous courts that have considered this point have held that § 3512 of the Paperwork Reduction Act applies to information collection requests created by administrative agencies. The requirement of filing a tax return was created by Congress itself. Therefore, the cases suggest, the Paperwork Reduction Act could not eliminate the penalties for failing to pay taxes or for failing to file a tax return. See, e.g., United States v. Hicks, 947 F.2d 1356, 1359-60 (9th Cir. 1991).

So wrapping up, (1) Form 1040 complies with the Paperwork Reduction Act, and (2) even if it didn't, that probably wouldn't save anyone from penalties for not paying taxes or not filing a return.