Frivolous Return Tax Penalty

The frivolous tax penalty can significantly increase your tax bill. Here are the basics of the frivolous return tax penalty and how it works.

Frivolous Return Tax Penalty

The frivolous return tax penalty is a penalty that is sometimes issued whenever an individual files their taxes based on unsubstantiated legal arguments. If the IRS determines that your tax return is frivolous, you could be charged a fine of $5000. This is a substantial increase from when it was only $500 in the past.

Frivolous Arguments

There are various arguments that could be considered frivolous in the eyes of the IRS. For example, if you say that filing taxes is completely voluntary, that is considered frivolous. Some people try to say that if you reject US citizenship, you can get out of paying taxes, which is also frivolous. You also cannot try to avoid paying taxes by putting money into a trust or foreign bank account.

What to Do

If you receive a letter from the IRS that says you have been charged a frivolous return tax penalty, you need to contact them immediately. You will have to pay the fine, and then you can appeal the ruling if you have just cause.