The Taxpayer Advocate Service, an independent watchdog arm of the IRS, said that a number of Texas residents have used this argument in order to avoid paying taxes. These residents contend that their state is separate from the rest of the nation and the IRS is unauthorized to impose taxes there.
But it doesn't just happen in Texas. A man from Indiana once claimed that "he is not a citizen of the United States, but rather, that he is a freeborn, natural individual, a citizen of the State of Indiana, and a `master' -- not a `servant' -- of this government," according to federal court documents.
Such claims are always rejected by the IRS. The 14th amendment of the Constitution states that anyone born or naturalized in the U.S. is a citizen of both the country and the state where they reside. And fines for making this argument can range as high as $25,000, depending on the severity of the case and the amount owed.
Worried about getting audited? Don't be a prime target. Here's what the IRS looks for and tips to help you avoid getting singled out.
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