Many Americans have been celebrating the ascendancy of the first American Pope, Leo XIV. However, that ascendancy highlights some problems with the Internal Revenue Code and brings to light an additional reason why we need to eliminate the federal income tax. In an article in Tax Notes, the following information was provided:
* Beyond saving souls, the new pope might need to save his receipts in the event of an IRS audit.
* A primary question arises over the treatment of his papal salary. We don’t know exactly how much the pope earns, although it’s rumored to be in the vicinity of $400,000 per year.
* It’s unclear whether the pontiff has chosen to accept or decline the salary or to accept and donate the funds to charity. For US tax purposes, a decision to decline salary may not be sufficient to prevent the earnings from being treated as gross income.
* Additional concerns involve the application of section 107 (rental value of parsonage), section 119 (meals and lodging furnished for the convenience of employees), section 170b (percentage limitations on charitable deductions), section 911 (the foreign earned income exclusion) and section 6039F (the duty to report gifts from non U.S. persons)
* Another batch of issues include compliance with the Foreign Account Tax Compliance Act, the Foreign Bank and Financial Accounts Report regime and Form 3520 (Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts).
* It matters little that the pope is a nonresident of the United States. That’s because he’s a citizen of the only country in the world that relies on citizenship-based taxation. Most of the rest of the world relies on residence-based taxation.
* What would transpired if people simply declined to file a U.S. tax return and neglected to file an FBAR (Report of Foreign Bank and Financial Accounts)?
* Would the IRS dare to issue a statutory notice of deficiency? Would it slap the pope with extensive FBAR penalties, claiming a willful violation because he is effective owner of the Vatican accounts?
Presently, if you are an American citizen living abroad earning $400,000 per year and controlling foreign bank accounts, you have an obligation to file a tax return, pay federal income tax and disclose information about those foreign bank accounts. If you don’t then you are subject to significant penalties. If the IRS is going to enforce the law equally, don’t they need to hold the pope to the same standard as any other American citizen?
The above information has most likely confused and angered you but it perhaps allows you to understand just how abominable and burdensome our income tax system has become. However, there is an alternative that eliminates the burden on individual citizens and reduces the burden on businesses by 90%. This alternative is the FAIRtax – a simple, transparent and efficient consumption tax on the retail purchases of new goods and services. It’s time to eliminate the federal income tax system and enact the FAIRtax.
For more information please go to FAIRtax.org
