Don't be fooled by avoidance schemes

In the sixth column of the season, Nicole M. Harrell answers questions on 'rescinded' Social Security numbers, local taxes and claiming adult children

April 11, 2005

Every Monday through April 18, local tax experts will answer selected questions this tax-filing season.

Chris Steiner, Perry Hall: I ran into a person recently who had "rescinded" their Social Security number and was no longer paying income tax. He said that others like him argue that there was never meant to be income taxes and that the wording in tax laws state that an individual should pay what they feel is a fair and reasonable amount. What do you know about this growing trend?

Harrell: I strongly suggest that you do not rescind your Social Security number. There have been several court cases dating back to 1916 that upheld the constitutionality of federal income tax, and taxpayers have unsuccessfully attempted to avoid paying income tax based upon this argument. On Feb. 28, 2005, the IRS issued announcement number IR-2005-19 that addresses this and 11 other tax avoidance schemes. Individuals who have been pulled into this scheme are subject to repayment of taxes plus interest and penalties.

Richard Worth, Arnold: I have lived in Anne Arundel County all my life, and I don't remember ever having to pay "local" income tax before, just state and federal. My place of residence has always been outside any local taxing district. This year, however, I got hit with an $800 local tax (I work in D.C. so no local tax is withheld). My question is, was there a change in local tax districts this year, such that it is no longer determined city-by-city, but rather county-wide?

Harrell: For several years there has been a local tax included in the calculation of your Maryland income tax return also referred to as a "piggyback tax." This is an additional tax separate from the Maryland state tax. You should review your prior returns to ensure that the local tax has been included in the calculation of the total Maryland and local taxes for that year. You should contact your payroll department to discuss additional taxes being withheld from your wages that would cover the local tax liability.

Susan, Pasadena: My daughter lived with me for more than nine months in 2004. She is unemployed. Can I claim her as an exemption?

Harrell:You can claim your daughter as a dependent and then receive the personal exemption if she is a U.S. citizen or resident and if you provided more than one half of the support for her during the tax year. By being your daughter, she satisfies the relationship test.