Is There A Right To A Refund Of, Or A Deduction For, Social Security Taxes Paid Based On The Fact That A Taxpayer Has Waived The Right To Receive Social Security Benefits Or Has Donated Social Security Taxes Or Benefits To The Government?
As long as they are taxes, there will be taxpayers that consider any and all arguments, schemes, and angles to avoid paying them. The 21st century has seen a rise in situations where some taxpayers are filing claims for refund of their Social Security taxes using meritless arguments which have consistently failed in the past and which will consistently fail in the future.
These taxpayers are filing claims for refund of their Social Security taxes paid on wages pursuant to the Federal Insurance Contributions Act (FICA) on the basis that they have waived their right to receive Social Security benefits. Some taxpayers are attempting to reduce or eliminate their federal tax liability by taking similar positions regarding their return, including reporting as a charitable contribution deduction the amount of Social Security taxes paid, on the basis that they are donating these amounts to the government.
Be wary of anyone or any entity marketing kits or “how-to” packages which claim to show how taxpayers can obtain a refund or avoid paying income taxes based on these arguments. Simply put, such arguments are meritless and frivolous and will not succeed with the IRS as there is no right to a refund of, or a deduction for, Social Security taxes paid based upon these arguments.
For over eighty years it has been well-founded in tax law that to qualify for any type of tax refund, you must have overpaid your taxes. A refund claim must be based on a valid argument that the taxpayer has overpaid the tax that is lawfully due and owing. Lewis v. Reynolds,284 U.S. 281, 283 (1932) (“[T]he taxpayer is not entitled to a refund unless he has overpaid his tax.”).
The IRS has a Frivolous Return Program which demonstrates its commitment to identifying these taxpayers as well as its determination to vigorously enforce the tax law as to these taxpayers and those that assist them in taking such frivolous positions. Upon receipt of what it perceives as a frivolous return, the IRS will compute a frivolous filer’s correct amount of tax and interest due while determinng whether civil and criminal penalties should apply. The IRS may also determine if an injunction is appropriate to restrain or stop those persons or entities assisting taxpayers in taking such positions.
Social Security taxes are imposed on wages as defined in section 3121 of the Tax Code. Nowhere does the Code or any other applicable law grant the authority that supports the claim that taxpayers may waive their right to receive Social Security benefits and thereby receive a refund of any or all Social Security taxes that they pay. Similarly, there is no provision of law that would allow a taxpayer to claim a charitable contribution deduction as a result of the donation or gift to the government of the taxpayer’s right to receive Social Security benefits.
Civil penalties under the Internal Revenue Code include, but are not limited to the following: (1) an accuracy related penalty which is equal to 20 percent of the amount of taxes the taxpayer should have paid (§ 6662); (2) a penalty for civil fraud, which is equal to 75 percent of the amount of taxes the taxpayer should have paid (§ 6663); (3) a penalty of up to $25,000 if the taxpayer makes frivolous arguments in the United States Tax Court (§ 6673); and (4) a $500 penalty for filing a frivolous income tax return (§ 6702).
If you have questions about whether you are entitled to a refund of any taxes paid, or whether an expense or cost is a legal deduction under applicable federal tax law, contact your tax expert attorneys and CPAs at www.thorgoodlaw.com For a FREE consultation call 212-490-0704.
