Yes, so-called state nationals pay federal income taxes. Every U.S. citizen and resident who earns income owes federal tax on it, and no procedure exists to opt out by declaring yourself a citizen of a single state. The IRS has formally identified this argument as frivolous, and acting on it triggers a $5,000 penalty per filing before any tax, interest, or criminal exposure is added on top.
Who the Tax Code Actually Reaches
The Sixteenth Amendment gives Congress the power to tax income “from whatever source derived.”1Congress.gov. Constitution of the United States – Sixteenth Amendment Congress used that power to impose income tax on the taxable income of three groups of individuals:
- U.S. citizens, taxed on worldwide income regardless of where they live.
- U.S. nationals who are not citizens, taxed the same way as citizens.
- Resident aliens meeting the green card or substantial presence test, also taxed on worldwide income.2Internal Revenue Service. Determining an Individual’s Tax Residency Status
If you were born or naturalized in the United States and live in one of the 50 states, you fall into the first category. The Fourteenth Amendment makes anyone born or naturalized in the United States a citizen of both the United States and the state where they reside at the same time. There is no mechanism to hold state citizenship without federal citizenship, and calling yourself a “state national” does not remove you from the taxable categories above.
What “National of the United States” Really Means
Federal law does contain a category called “national of the United States,” but it is not an opt-out from taxation. Under 8 U.S.C. § 1101(a)(22), the phrase covers U.S. citizens plus a narrow group of people who owe permanent allegiance to the United States without holding citizenship.3Office of the Law Revision Counsel. 8 USC 1101 – Definitions That non-citizen national category is limited to people born in U.S. outlying possessions like American Samoa and Swains Island, and certain children of non-citizen nationals born abroad.4Office of the Law Revision Counsel. 8 USC 1408 – Nationals but Not Citizens of the United States at Birth
These non-citizen nationals owe allegiance to the United States, are subject to its laws, and pay federal income tax exactly like citizens. The version of “state national” promoted in tax-protest circles has no relationship to this statute.
Why the IRS and Courts Reject the Opt-Out Theory
The IRS lists the state national argument by name in Notice 2010-33 among the positions it treats as frivolous. The notice flags any claim that “a taxpayer’s income is excluded from taxation when the taxpayer rejects or renounces United States citizenship because the taxpayer is a citizen exclusively of a State.”5Internal Revenue Service. Notice 2010-33 – Frivolous Positions Every return or submission built on that argument triggers the frivolous-filing penalty automatically.
The courts have been just as blunt. In United States v. Ward, the Eleventh Circuit called the claim that federal jurisdiction stops at Washington, D.C. and federal enclaves a “twisted conclusion” and upheld a tax evasion conviction. The Eighth Circuit sanctioned taxpayers in United States v. Gerads who argued they were “Free Citizens of the Republic of Minnesota.” The Tax Court in Solomon v. Commissioner called the notion that Illinois is not part of the United States “an absurd proposition.”6Internal Revenue Service. Anti-Tax Law Evasion Schemes – Law and Arguments Section III The IRS’s own summary of these cases notes that courts have “uniformly rejected” the claim that a person can hold state citizenship without being subject to federal jurisdiction.7Internal Revenue Service. The Truth About Frivolous Tax Arguments
The Penalties Stack Up Fast
The $5,000 Frivolous Filing Penalty
Under 26 U.S.C. § 6702, any return or submission that relies on a position the IRS has identified as frivolous triggers an automatic $5,000 penalty.8Office of the Law Revision Counsel. 26 USC 6702 – Frivolous Tax Submissions It applies to frivolous returns and to non-return submissions like letters asserting you are not a taxpayer. For non-return submissions, the IRS must give 30 days’ notice and a chance to withdraw. For returns, no grace period applies. The penalty is per filing, so several years of frivolous returns means several $5,000 hits.
Failure-to-File and Failure-to-Pay Penalties
Stop filing altogether and the failure-to-file penalty runs at 5% of the unpaid tax per month, up to 25%.9Office of the Law Revision Counsel. 26 USC 6651 – Failure to File Tax Return or to Pay Tax A separate failure-to-pay penalty of 0.5% per month accrues on any unpaid balance, also capped at 25%. Returns filed more than 60 days late carry a minimum failure-to-file penalty of $525 or the full tax owed, whichever is less.10Internal Revenue Service. Failure to File Penalty Interest compounds on all of it. A few years of nonfiling routinely produces a balance larger than the original tax.
Criminal Prosecution
Willful tax evasion is a felony under 26 U.S.C. § 7201, punishable by up to $100,000 in fines and up to five years in prison.11Office of the Law Revision Counsel. 26 USC 7201 – Attempt to Evade or Defeat Tax Willfulness is the pivot point. Filing a return that invokes state national theories shows on its face that you knew about the filing obligation and tried to sidestep it, which is the opposite of an honest mistake. The IRS can also place liens on property and levy bank accounts and wages to collect unpaid tax without a court judgment.
Payroll Taxes and False W-4s
Federal tax reaches wages too. Employers withhold Social Security tax at 6.2% and Medicare tax at 1.45% and pay a matching amount.12GovInfo. 26 USC 3101 – Rate of Tax An additional 0.9% Medicare tax applies to wages above $200,000, or $250,000 for joint filers. These taxes fall on “every individual” who earns wages, and no self-declared status changes the statute.
Some people acting on state national theories try to shut off withholding by filing a W-4 claiming exempt or inflating allowances. Claiming exempt is legal only if you had no federal tax liability last year and expect none this year. A false withholding certificate carries a $500 civil penalty per form under 26 U.S.C. § 6682, on top of the tax you actually owe.13Office of the Law Revision Counsel. 26 USC 6682 – False Information With Respect to Withholding If the IRS ties the false W-4 to a broader evasion scheme, criminal charges can follow.
If You Have Already Filed on This Theory
If past returns invoked state national arguments, or if you stopped filing on that basis, the situation is serious but not beyond repair. The IRS operates a Voluntary Disclosure Practice for taxpayers who come forward before a criminal investigation begins. You submit Form 14457, identify every year of noncompliance, and describe the willful failure to comply. The disclosure period generally covers the most recent six years of delinquent or amended returns.14Internal Revenue Service. IRS Seeks Public Comment on Voluntary Disclosure Practice Proposal
Once the IRS conditionally accepts a disclosure, you have three months to file corrected returns, pay all taxes, penalties, and interest in full, and sign a closing agreement. Complete every step and the IRS will not recommend criminal prosecution. Start and stop and the agreement can be rescinded, with the full range of civil and criminal penalties back on the table. Given the stakes and the paperwork, talk to a tax attorney or enrolled agent before making the disclosure.