Frivolous Position (Tax) Law and Legal Definition

Frivolous Position is a tax position that is knowingly advanced in bad faith and is patently improper.

In 2006, Congress increased the amount of the penalty for frivolous tax returns from $500 to $5,000. The increased penalty amount applies when a person submits a tax return, or other specified submission, and any portion of the submission is based on a position the IRS identifies as frivolous.

A list of frivolous positions that will trigger the increased penalty amount is as follows:

False arguments that wages are not taxable income.

Filing returns and paying taxes are voluntary.

The IRS must provide taxpayers with a summary record of assessment made on a Form 23C, “Assessment Certificate-Summary Record of Assessments”, before overdue taxes may be collected.

Income is not subject to taxation when the taxpayer declares that he is not a United States citizen because he is a citizen of an individual State or claims he is not a person as defined by the Internal Revenue Code.

The revenue rulings emphasize the adverse consequences to taxpayers who fail to file returns or fail to pay taxes based on an erroneous belief in any of these frivolous arguments.