Why Do I Have to 

Pay Taxes?

Income

Individual Income Tax

Social Insurance and

Retirement

Corporate Income Tax

Deficit

Miscellaneous

Customs Duties

Excise Tax

Outlays

Social Security National Defense Medicare

Health Income Security Net Interest

Veteran's Benefits Education Transportation

Other

Income

Individual Income Tax

Social Insurance and

Retirement

Corporate Income Tax

Deficit

Miscellaneous

Customs Duties

Excise Tax

Outlays

Social Security National Defense Medicare

Health Income Security Net Interest

Veteran's Benefits Education Transportation

Other

Publication 2105 (Rev. 5-2023) Catalog Number 23871N Department of the Treasury Internal Revenue Service www.irs.gov

Taxes Benefit Everyone

How are your tax dollars used to benefit the citizens of the 

United States? Which of these have you or your family 

used lately or will use in the future?

Income and Outlays: These pie charts show the relative 

size of the major categories of the federal income and 

outlays through Fiscal Year Feb. 2020.

Know the Law

There have always been individuals who argue 

taxes are illegal. They use false, misleading, 

or unorthodox tax advice to gain followers. The 

courts have repeatedly rejected their arguments 

as frivolous and routinely impose penalties for 

raising such frivolous arguments. Make sure you 

“Know the Law:”

The United States Constitution, Article 1, 

Section 8, Clause 1, states, “The Congress shall 

have the Power to lay and collect Taxes, Duties, 

Imposts and Excises to pay the Debts and 

provide for the common Defense and general 

Welfare of the United States.“

The Sixteenth Amendment to the 

Constitution, ratified on February 3, 1913, 

states, “The Congress shall have the power to 

lay and collect taxes on income, from whatever 

source derived, without apportionment among 

the several States, and without regard to any 

census or enumeration.”

Congress used the power granted by the 

Constitution and Sixteenth Amendment, and 

made laws requiring all individuals to pay tax.

Congress has delegated to the IRS the 

responsibility of administering the tax laws 

known as the Internal Revenue Code (the Code) 

and found in Title 26 of the United States Code. 

Congress enacts these tax laws, and the IRS 

enforces them.

Sources of taxable income are identified in the 

Code under Section 61, Gross Income Defined. 

The list of sources under this section is not all 

inclusive.

Section 6702 of the Code authorizes the IRS 

to impose a $5000 penalty against persons who 

submit frivolous tax returns or other documents.
Don’t Fall For These Arguments

While taxpayers have the right to contest their tax 

liabilities in the courts, taxpayers do not have the 

right to violate and disobey tax laws. Unscrupulous 

individuals and promoters advocating willful 

noncompliance with the tax laws have used a variety 

of false or misleading arguments for not filing and 

paying taxes. Here are some of the most common 

arguments:

Constitutional Myths: Filing a Form 1040 violates 

the Fifth Amendment right against self-incrimination 

or the Fourth Amendment right to privacy. Filing also 

violates the Thirteenth Amendment right against 

involuntary servitude and First Amendment rights 

based on moral or religious beliefs.

Truth: The courts have consistently held that 

disclosure of the type of routine financial information 

required on a tax return does not incriminate an 

individual or violate the right to privacy. Also, courts 

have consistently found that the First and Thirteenth 

Amendments do not provide rights to refuse to comply 

with federal tax laws.

Internal Revenue Code Myths: The filing and paying 

of tax is voluntary, or the Code doesn’t apply to me 

because I am neither a government employee nor a 

resident of a sovereign state.

Truth: The term voluntary compliance means that 

each of us is responsible for filing a tax return when 

required and for determining and paying the correct 

amount of tax. The tax law is found in Title 26 of the 

United States Code. Section 6012 of the Code makes 

clear that only individuals whose income falls below 

a specified level do not have to file returns. While 

our tax system is based on self-assessment and 

reporting, compliance with tax laws is mandatory. 

State citizenship does not negate the applicability of 

the Code on individuals working and residing in the 

United States.

Frivolous Credit Myths: African and Native 

Americans can claim a special tax credit as 

reparations for slavery and other oppressive 

treatment.

Truth: There is no provision in the Code that 

allows taxpayers to claim reparation credits. Unless 

specifically provided for in the Code, no deduction or 

credit will be allowed.

Compensation Myths: Wages, tips, and other 

compensation received for personal services are 

not income because there is no taxable gain when a 

person “exchanges” labor for money.

Truth: This argument has been consistently 

dismissed by the courts. Sources of taxable income 

are identified in the Code under Section 61, Gross 

Income Defined. Congress has determined that all 

income is taxable unless specifically excluded by 

some part of the Code. The list of sources under this 

section is not all inclusive.

Fictional Legal Basis Myths: Taxpayers are not 

required to file a federal income tax return because 

the instructions and regulations associated with the 

Form 1040 do not display an OMB control number as 

required by the Paperwork Reduction Act.

Truth: The courts have uniformly rejected this 

argument on different grounds. Some courts have 

simply noted that the PRA applies to the forms 

themselves, not to the instruction booklets, and 

because the Form 1040 does have a control number, 

there is no PRA violation.

Trusts Myths: Forming a business trust to hold your 

income and assets will avoid taxes. A family estate 

trust will allow you to reduce or eliminate your tax 

liability.

Truth: Establishing a trust, foreign or domestic, for the 

sole purpose of hiding your income and assets from 

taxation is illegal and will not absolve you of your tax 

liability.

What does the IRS do to address 

willful noncompliance with U.S. 

tax laws?

1. Encourage taxpayers to self-correct their returns 

and comply with their tax obligations.

2. Vigorously apply both civil and criminal sanctions, 

including prosecution and prison sentence against 

those who persist in violating the tax laws.

Report individuals or companies not complying 

with the tax laws to the IRS. For instructions, 

visit www.IRS.gov, and at the bottom of the 

page, click on “Tax Fraud”, then click on “Tax 

Scams — How to Report Them.”