Claiming You’re Not a U.S. Citizen (so you don't have to pay Federal Taxes) and other bad ideas

David ("The Gifted One") Selig

Some individuals argue that they have rejected citizenship in the United States in favor of state citizenship; therefore, they are relieved of their federal income tax obligations. A variation of this argument is that a person is a free born citizen of a particular state and thus was never a citizen of the United States. The underlying theme of these arguments is the same: the person is not a United States citizen and is not subject to federal tax laws because only United States citizens are subject to these laws.

The Law: The Fourteenth Amendment to the United States Constitution defines the basis for United States citizenship, stating that “[a]ll persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside.” The Fourteenth Amendment therefore establishes simultaneous state and federal citizenship. Claims that individuals are not citizens of the United States but are solely citizens of a sovereign state and not subject to federal taxation have been uniformly rejected by the courts. The IRS has warned taxpayers of the consequences of making this frivolous argument. Rev. Rul. 2007-22, 2007-1 C.B. 866; Notice 2010-33, 2010-17 I.R.B. 609.

In a variation of this argument, taxpayers argue that although they are citizens of the United States, for the purposes of the Internal Revenue Code they are non-resident aliens and are subject to taxation only on income that is connected with the conduct of a trade or business. The 11th Circuit rejected this contention as frivolous.

Relevant Case Law:

Taliaferro v. Freeman, 595 F.App’x 961, 962-63 (11th Cir. 2014) – the 11th Circuit upheld the lower court’s dismissal of Mr. Taliaferro’s complaint seeking to enjoin the IRS from collecting taxes assessed against him. The court rejected as meritless his argument that, despite his U.S. citizenship, he is, for purposes of the tax code, a nonresident alien who is subject to taxation only on income that is connected with the conduct of a trade or business.

United States v. Bowden, 402 F. App’x 967 (5th Cir. 2010) – in denying an appeal of a sentence for tax evasion, the 5th Circuit rejected the taxpayer’s argument that he was a sovereign and not subject to the laws of the United States.

United States v. Drachenberg, 623 F.3d 122 (2d Cir. 2010) – the 2nd Circuit affirmed Drachenberg’s conviction for tax evasion and conspiracy to defraud the United States and rejected his argument that the federal courts lacked jurisdiction because he was not a citizen of the United States.

United States v. Hilgeford, 7 F.3d 1340, 1342 (7th Cir. 1993) – the 7th Circuit rejected "shop worn" argument that defendant is a citizen of the "Indiana State Republic" and therefore an alien beyond the jurisdictional reach of the federal courts.

United States v. Gerads, 999 F.2d 1255, 1256 (8th Cir. 1993) – the 8th Circuit rejected the Gerads’ contention that they were “not citizens of the United States, but rather ‘Free Citizens of the Republic of Minnesota’ and, consequently, not subject to taxation” and imposed sanctions “for bringing this frivolous appeal based on discredited, tax-protester arguments.”

United States v. Sloan, 939 F.2d 499, 500 (7th Cir. 1991) – the 7th Circuit affirmed a tax evasion conviction and rejected Sloan’s argument that the federal tax laws did not apply to him because he was a “freeborn, natural individual, a citizen of the State of Indiana, and a ‘master’ – not ‘servant’ – of his government.”

United States v. Ward, 833 F.2d 1538, 1539 (11th Cir. 1987) – the 11th Circuit found Ward’s contention that he was not an “individual” located within the jurisdiction of the United States to be “utterly without merit” and affirmed his conviction for tax evasion.

Waltner v. Commissioner, T.C. Memo. 2014-35, 107 T.C.M. (CCH) 1189 (2014) – the court dismissed the possibility of being a citizen of a state but not the United States as “nonsensical” and “backwards; one cannot be a citizen of a State without also being a citizen of the United States. Indeed, citizenship in the United States is “paramount and dominant” over State citizenship.”

Kay v. Commissioner, T.C. Memo. 2010-59, 99 T.C.M. (CCH) 1236 (2010) – the court imposed a $500 penalty under section 6673(a) against James Kay for raising frivolous arguments in the proceeding, including that he “was not born a [U.S.] taxpayer” and that the United States may not tax him because “the United States is a corporation” to which he holds no “allegiance.”  

Other Cases: United States v. Sileven, 985 F.2d 962 (8th Cir. 1993); Nevius v. Tomlinson, 113 A.F.T.R.2d 2014-1872 (W.D. Miss. 2014); O'Driscoll v. IRS, 1991 U.S. Dist. LEXIS 9829 (E.D. Pa. Jul. 16, 1991); Bruhwiler v. Commissioner, T.C. Memo. 2016-18, 111 T.C.M. (CCH) 1071 (2016); Carlson v. Commissioner, T.C. Memo. 2012-76, 103 T.C.M. (CCH) 1408 (2012); Callahan v. Commissioner, T.C. Memo. 2010-201, 100 T.C.M. (CCH) 225 (2010); Rice v. Commissioner, T.C. Memo. 2009-169, 98 T.C.M. (CCH) 40 (2009); Knittel v. Commissioner, T.C. Memo. 2009-149, 97 T.C.M. (CCH) 1837 (2009); BlandBarclay v. Commissioner, T.C. Memo. 2002-20, 83 T.C.M. (CCH) 1119, 1121 (2002); Marsh v. Commissioner, T.C. Memo 2000-11, 79 T.C.M. (CCH) 1327 (2000); Solomon v. Commissioner, T.C. Memo. 1993-509, 66 T.C.M. (CCH) 1201, 1202-03 (1993).

Honest Tax Advocates To schedule a FREE legally privileged consultation with a licensed Federal Tax Practitioner and Attorney call Selig & Associates directly (212) 974-3435

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Proven Results  We successfully resolve: Tax Crimes; Tax Evasion; Failure to File a Tax Return and Criminal Non-Filing; Filing False Tax Returns; Installment Agreements; Partial Payment Agreements; IRS Audits; Sales Tax Audits; Sales Tax Controversies; Wage Garnishments; Bank Levies; Seizure of Real Property; Innocent Spouse Relief; Trust Fund Recovery Penalty; Payroll Taxes; Workers Compensation Insurance Audits ("Workers Comp"); Statute of Limitations; Offer in Compromise ("OIC"); Administrative Appeals; Collection Due Process Hearings ("CDP") and most other tax matters. *To schedule a legally privileged consultation call Selig & Associates directly (212) 974-3435

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Successful Tax Representation Including Tax Crimes, Tax Evasion, Failure to File a Tax Return, Criminal Non-Filing, False Returns,  Installment Agreements, Partial Payment Agreements, Sales Tax Audits, Sales Tax Controversies, Wage Garnishments, Bank Levies, Seizure of Real Property, Innocent Spouse Relief, Trust Fund Recovery Penalty, Payroll Taxes, Statute of Limitations, Offer in Compromise, Administrative Appeals, Collection Due Process Hearings and most other tax matters. 

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North Carolina Man Sentenced for Tax Evasion and Possession of an Unregistered Firearm (he should have hired SELIG & Associates)

On December 16, 2016, in Charlotte, North Carolina, Reuben T. DeHaan, of Kings Mountain, was sentenced to 24 months in prison for tax evasion and possession of an unregistered firearm. DeHaan owned a holistic medicine business, which he operated out of his residence under the names Health Care Ministries International Inc. and Get Well Stay Well.  DeHaan admitted that, from 2008 through 2014, he earned more than $2.7 million in gross receipts, but failed to file income tax returns for those years and evaded the payment of approximately $678,000 in income tax. He did this with the help of Richard H. Campbell Jr. and others, by setting up straw companies and opening bank accounts in the name of the straw companies to hide his income and assets from the Internal Revenue Service. DeHaan also claimed he was exempt from the payment of taxes because he was an ordained “medicine man” whose earnings were exempt from taxation. In addition, DeHaan also admitted to the possession of unlicensed firearms.

Emergency, Evening and Early Morning Appointments Available 

For a Personal and Legally Privileged Consultation in our New York City Offices call (212) 974-3435 Payroll Taxes, Trust Fund Recovery Cases, Income and Sales Tax Controversies. We negotiate Payment Plans, compromise Tax Debts, and resolve all Civil and Criminal tax issues, including Innocent Spouse Relief and Separation of Liability. Selig & Associates provides the most aggressive Tax Representation allowed by law. 

Former Company President Sentenced for Wire Fraud and Income Tax Evasion (he should have hired SELIG & Associates)

On December 29, 2016, in Rockford, Illinois, Christopher A. Jansen, of St. Charles, was sentenced to 70 months in prison, three years of supervised release, and ordered to pay $269,978 in restitution. Jansen was President of Baytree Investors Inc., an Illinois corporation engaged in acquiring trucking companies.  In 2001 Jansen learned DFC Transportation was for sale, created a Delaware corporation, DFCTC Holding Inc., and arranged for DFCTC to purchase DFC with money Jansen borrowed using DFC receivables as collateral. Jansen arranged for other individuals to be the owners of DFCTC, some of whom were previous investors in failed Baytree business acquisitions. With appointment or authority, Jansen represented to others that he was the corporate secretary and controlled both DFCTC and DFC to avoid having shareholder or director meetings. Jansen then arranged for DFC to use its receivables to borrow from a bank and, without authorization, ordered employees to transfer money from DFC to DFCTC. Jansen then distributed the money to himself and others for their personal use and benefit. In addition, in 2002 Jansen used a bank account in the name of a dissolved corporation to receive his income and disburse his expenditures. He intentionally failed to have the dissolved corporation file informational forms with the IRS for taxable income distributed to him from the account.  Jansen also failed to have Baytree and DFCTC file informational forms with the IRS regarding distributions of taxable income to him. In addition, Jansen did not have a bank account in his name in order to avoid reporting any income to the IRS.

Emergency, Evening and Early Morning Appointments Available 

For a Personal and Legally Privileged Consultation in our New York City Offices call (212) 974-3435 Payroll Taxes, Trust Fund Recovery Cases, Income and Sales Tax Controversies. We negotiate Payment Plans, compromise Tax Debts, and resolve all Civil and Criminal tax issues, including Innocent Spouse Relief and Separation of Liability. Selig & Associates provides the most aggressive Tax Representation allowed by law.