Every year, the United States Internal Revenue Service faces a litany of claims from taxpayers wanting to avoid paying taxes. Occasionally, those claims have merit.

But, as a document called The Truth About Frivolous Tax Arguments demonstrates, a large number have no basis in fact, and may even lead the claimant to a hefty fine and/or prison.

In what may be the single instance of an IRS document being an entertaining read, the piece outlines a long line of tax protester ploys to find the magic loophole that would get them out of having to pay taxes.

Waitresses beware: Tips are taxable. Sure, it’s hard for Johnny Law to deduce exactly what that table of seniors left after their early bird special, but according to the IRS, “All compensation for personal services, no mpayment, must be included in gross income.” This includes goods and gifts, so if that gentleman at the end of the bar does come through on his promise to buy you a small automobile…

According to the document, a large number of tax preparers have been banned from the industry for advising clients wages aren’t considered income, or that only income from foreign sources are defined as income. Said clients would be forgiven for telling those tax preparers their tax preparation fees shouldn’t be considered income either.

Folks claiming they have rejected United States citizenship so they can be state citizens instead are also in for a rough time.

“In April 2005, a federal district court in Georgia permanently barred Jonathan D. Luman blocking him from selling his Tax Buster program that was based on the false theory that customers can avoid paying tax by renouncing their Social Security numbers and becoming sovereign citizens,” says the document.

Luman may not have been altogether too sharp, continuing his tax scheme even after it became apparent he was under IRS investigation. By the time his court case had ended, he had been order to give the IRS the names, addresses, phone numbers, email addresses and social security numbers of all his clients. Helloooo audit.

Glory be to the loophole-searchers, for they provide endless amusement. See ‘federal taxes constitute a taking of property without due process of law.’ Funny thing: The due process of law says that’s bunk.

The theory that taxpayers don’t have to file returns because of the U.S. constitutional right against self-incrimination is a novel effort. Even more novel, the 9th circuit court found that unless you can prove there’s something to incriminate, you can’t claim you would be incriminated.

You can imagine the scene: “I can’t tell you how much I earn because then I’d be exposing the fact that I’m a drugdealer. And here are my drugs to prove it.”

Some smart folks claim the sixteenth amendment of the US constitution, which gives Congress the power to collect taxes, was never properly ratified because Ohio sat that one out, so all taxes are null and void. Slight problem with that one – Ohio did in fact ratify the amendment, and over three quarters of states did likewise, which makes it ratified as all get out.

The prize for the most imaginative claim to get out of paying taxes must go to ‘The Internal Revenue Service is not an agency of the United States.’ These folks claim, because the IRS wasn’t created by an act of Congress, it’s just some company out to fleece the good people. You know, like most Canadian cellphone providers.

The ‘African-Americans can claim special tax credit as reparations for slavery’ theory would make sense if anyone trying to use it seemed to have the slightest belief that it’s real.

The IRS says it’s so sick of this one that anyone trying it on in future will cop a $500 fine, a change that comes in the wake of a case (United States vs Foster) involving a $500,000 tax refund that was erroneously paid by the IRS before someone at the tax office said, “What a second, what ‘black tax credit’ is this guy talking about, exactly?”

Some anti-tax schemes almost seem to be little more than urban legend. Take the ‘taxpayers are entitled to a refund of the Social Security taxed paid over their lifetime’ scheme, in which claimants waive all rights to social security payments in the future, expecting a refund for anything they’ve contributed.

I tried this at my local Blockbuster, telling them I’ve forgotten the plot of every crappy movie I’ve rented from them. Still waiting for a cheque.

This one can be classified under the “but I don’t have kids of school age – why should I have to pay taxes for education?” line: Apparently a large number of Americans claim, since they didn’t purchase fuel for an off-highway business, they can claim the US Fuels Tax credit.

IRS says, ‘Go buy some fuel, smart guy.’

One of the more entertaining aspects of the IRS document on frivolous claims is the list of penalties charged to those who insist on claiming them, even in the face of overwhelming evidence that they’re bunk.

For example, in Madge vs Commissioner, the courts said, “after having warned the taxpayer that continuing with his frivolous arguments – that he was not a taxpayer, that his income was not taxable, and that only foreign income was taxable – would likely result in a penalty, the court imposed the maximum $25,000 penalty.”

Well played, sir.

In Wetzel vs Commission, “the court imposed a $15,000 penalty against Wetzel, a professional tax return preparer, for making frivolous arguments because he knew or should have known the arguments were frivolous.” Translated: “Stop being stupid or we’re going to… oh, heck with it. Eat this, whizkid.”

Occasionally the courts get right to the point when faced with frivolous tax claims, as happened in Davich vs Commissioner, where, “the court imposed a $5,000 penalty against the taxpayer case, stating “it is clear that [the taxpayer] regards this proceeding as nothing but a vehicle to protest the tax laws of this country and to espouse his own misguided views, which we regard as frivolous and groundless.”

The full document can be found at http://www.irs.gov/pub/irs-utl/friv_tax.pdf