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Independent Referral Services
"Putting You In Touch With The Right People ...
We're The Honest IRS!"
12 Carroll Street, Suite 1441
Westminster, MD 21157-4843
- presents -
"How To Stop Tax
Withholding And
Take Home 100% Of Your Next Paycheck"
"Considering that senior officials at the Internal Revenue Service are fully aware of
the fact that there is no law currently in existence making a U.S. citizen liable for or
required to pay either the income tax or the social security employment tax, only a truly
generous citizen would, upon discovering this, continue to voluntarily donate these taxes
to the government by allowing them to be withheld from his paycheck on a voluntary W-4
withholding agreement. But then again, the IRS would be dead in the water without the
"voluntary (and docile) compliance" of employers and employees and has said so
all along." -- William Cash, IRS Senior Manager
- Table of Contents -
WHAT THIS PRESENTATION WILL COVER - This presentation will provide valuable information about the unique advantages of Non-Covered Employee Contracting. Under this increasingly popular and totally legal working arrangement, both employer and employee benefit greatly:
* The Employer is relieved of the burden of payroll
administration while at the same time saving thousands of dollars on each worker each
year;
* The Worker takes home 100% of his paycheck and can take care of his own
retirement and other benefits at far lower cost.
Please note: while this web site DOES contain the verbatim text from our
104-page printed report of the same name, it does NOT include the dozens of exhibits
referenced in brackets and bold text below since the load time would be prohibitive.
ORDERING OUR FULL "INFO-PAK" - If you wish to order the full report which
DOES include all bracketed and referenced exhibits below, please mail a donation of 20
Federal Reserve Notes (cash or totally blank postal money order only) to us at the address
above.
FREE REFERRAL - If after reviewing the information we present, you wish to engage the
services of a reliable and reputable non-covered employee contracting firm, please write
to us for a free referral.
NEW REPORT NOW AVAILABLE!
"Industrial Strength Asset Protection (Not Taught In Law School)"
Do you still confuse the use and enjoyment of property with "pride of ownership"? You won't after reading this. Totally forget everything your lawyer ever told you about wills and "living trusts". They're less than useless if you want BULLET PROOF, INDUSTRIAL STRENGTH asset protection. So bolt on your socks and discover the secrets the wealthy use to own absolutely nothing titled in their own name while enjoying it all, 100% LEGALLY! Just think, you could pay your very own land-shark TEN$ OF THOUSAND$ to totally screw up the information in this easy-to-understand report. When you're ready, we'll put you in touch with real, in-the-trenches experts in asset protection and judgment proofing ... who actually know what they're doing! And with thousands of satisfied clients as living proof. Remember this simple concept: something cannot be stolen from him who does not own it. So the next time a visitor to your mansion spills coffee in his lap and decides he'd like to live there permanently, show him this report! You'll discover the well-hidden secrets to living a "normal" life in plain view, while enjoying the use of personal and real property. You'll sleep peacefully with the deep satisfaction that - somewhere out there, hunched over a computer terminal - an IRS agent, parasitic land-shark or other litigious opportunist is gnashing his teeth over his inability to get his hands on your house, business, car, RV, summer home ... you name it. Guaranteed to send your attorney straight to the library to finish learning what they didn't teach him in law school. Not for the faint of heart.
*** Fulfilled for a donation of 20 FRN's (*). Includes Priority Mail postage. Send to the address below. ***
[START OF FULL PRINTED REPORT]
"How To Stop Tax Withholding And Take Home 100% Of Your Next Paycheck"
Please note that there is no copyright on this material and we welcome you to copy and share it with your friends and coworkers. Please also note that the information contained within is offered for educational purposes only. It is not intended to give you legal, tax or financial advice, nor is it intended to lead you into any particular course of action. Since ignorance of the Law is no excuse, the responsibility of each citizen is to know and understand the Law for himself. Any actions you may take as a result of discoveries obtained from this presentation will be understood to be of your own volition. If after reviewing this information, you still have questions or would like to be put in contact with one of the reputable firms nationwide which offer non-covered employee contracting services, please don't hesitate to contact us. Please understand, however, that it has proved impossible for us to reply to the volume of voice, fax and e-mail inquiries we receive daily since we began making this information available to the public, therefore we request that you please write to us as the address above and we will reply by return mail within 72 hours.
You may have obtained what you are now reading from a friend who made photocopies or faxed or e-mailed it to you. Our complete "Info-Pak" includes a copy of this report, plus numerous copies of the written Law and other materials, including letters from government employees and officials. The "Info-Pak" will be mailed to anyone who sends a CASH donation of twenty (20) Federal Reserve Notes. Please note: we do NOT accept checks of any kind and will return them, so please send cash only. We know of no one who has ever lost such a small amount of money when wrapped securely and sent through the mail. We will send your Info-Pak within 7-10 days of receipt of your donation.
We should forewarn you that, whether you are a worker, employer, or tax professional, if you are unfamiliar with what the law really says with regard to internal taxation and the withholding of taxes in the workplace, you may find the information in this presentation astonishing to say the least. In fact, it may represent the exact opposite of what you've been led to believe. Nothing you will be told, however, will be based upon opinion, conjecture or theory.
Rather, we will review property rights under the provisions of the United States Constitution; we'll examine the Laws covering the imposition of and liability for income and employment taxes with regard to the citizen living and working within the 50 States of the Union under the provisions of Subtitles A and C of Title 26 - Internal Revenue Code - and it's implementing regulations; we'll examine the provisions within the Law to withhold these taxes as well the procedures to stop withholding with all necessary legal cites provided to facilitate your own follow-up research; we'll explain the many disadvantages to business owner and worker alike of both conventional, covered employment and employee leasing, and finally; we'll introduce you to Non-Covered Employee Contracting which provides many financial advantages to both business owner and worker alike.
In short, this could be the single most comprehensive resource currently available on the subject. We believe you will find the facts to follow highly informative and eye-opening. If you are a worker or a business owner, they could have a major impact on your wallet.
Keep A Skeptical But Fully Open Mind
As a final comment before we begin, we would ask you to bear in
mind that anyone being presented with new and unfamiliar information always has two
options open to him: He can reject the new information out of hand on the basis that, if
it were true, he would certainly know it already and so would everyone else, or, he can
proceed with an open mind that is guarded by a healthy degree of skepticism. Remember
that, when in doubt, personal research will either rebut new information as false or
confirm it as true, therefore we urge you to verify all of the information provided in
this presentation.
We will provide all necessary legal cites and references so you can easily look up the law and read it for yourself. If you obtained this presentation as part of our complete information package, then you already have many photocopies of the law in your hand. If not, you may want to write and order the complete "Info-Pak" as explained above. Either way, go look up the law! Seeing with your own eyes is believing.
Today, smart business people are becoming increasingly aware of the many cost-effective advantages of contracting out, not just services that are needed for their business, but for workers as well. This working arrangement, although still unfamiliar to most Americans, is becoming increasingly popular.
When a business owner contracts for workers through a third-party such as an "employee leasing" or "temp" agency, he immediately eliminates all payroll hassles and headaches. He simply writes one check for all of his contracted workers and the contracting firm takes care of the rest. Plus, provided that the proper paperwork is submitted to the contracting company under the taxing regulations as will be explained shortly, the contracted worker will take home 100% of his weekly paycheck and can take care of his own retirement and "benefits" at far less cost.
Payroll preparation is a time consuming task that is not only an administrative challenge, but a deterrent to profit-making activities. Additionally, time spent in generating management and government reports, calculating payroll and unemployment taxes, and creating W-2's and other forms, could be used in more productive endeavors to increase profitability. By contracting out for workers as opposed to hiring them directly, the business owner totally avoids all of the headaches of payroll administration.
An employee leasing company, let's call it ABC Leasing, hires all or a portion of the current workforce and in turn leases them back to the business owner. All of the participating employees are entered into ABC's database and computer payroll system which maintains all of the monetary requirements such as tax withholding, medical payments, union dues, 401k deductions, direct deposits, credit union, and so forth. ABC is then the employer of record, responsible for the administration of payroll. The "transfer" can take place quickly and smoothly - during even a single pay period - and with virtually no disruptions or changes in the daily operation, except for the name on the paycheck. The business owner still maintains full control and supervision over his workers.
The difference is that the business owner simply writes one check to ABC for his workers per pay cycle which includes everything - payroll, benefits, worker's compensation, etc. - and ABC takes care of the rest. At the end of the year he can leave all of his former tax responsibilities to ABC because they, not he, are the employer of record. That means no more accountant bills, filing 941's, W-2's, etc. Therefore he can afford to free up more time to concentrate on building his business, and less time on having to maintain human resources.
Since the cost of contracting out for workers is normally offset by reduced workers compensation costs, reduced healthcare costs and lower administrative costs, employee contracting pays for itself. In fact, most companies realize sizeable savings through a contracting program. A business owner can convert all or part of his existing workforce, such as salaried, hourly or unionized labor to contracted workers.
The advantages to the contracted worker are that he can negotiate his own hourly pay which may or may not include the costs of Workers' Compensation, 50% matching co-FICA, health and medical coverage, 401(k) retirement accounts, paid "sick days", vacations and maternity leave, automobile allowances and other typical benefits of covered employment. Although the contracting firm is likely to offer fewer benefits than would the employer directly, they are likely to receive a higher hourly rate of pay in compensation for reduced benefits.
The types of working arrangements most familiar to most Americans today are "employment" and "self-employ-ment", also known as subcontracting. A prospective worker applying for a job is presented an IRS Form W-4 to sign. [see accompanying IRS Form W-4 "Employee Withholding Allowance Certificate"] If he refuses to do so, he will be turned away by most employers and will not be hired. If he enters his name, address and SSN on the W-4 and signs and returns it to the employer, he will have taxes withheld and will be treated as a covered employee, building credits towards vestment in government welfare programs.
The benefits to the covered employee may include health and medical insurance, vacation and sick pay, a retirement program, worker's compensation, maternity leave, and other "perks" of employment. Of course, all of these "perks" are nothing more than window dressing since each bears a finite annual cost to the covered employer, which, if divided by the total hours actually worked over the course of the year by the covered employee, would merely raise the net hourly wage paid to him.
For example, if the covered employee's agreed upon hourly wage is $10 and the additional value of employment benefits provided by the covered employer amounts to $4 per hour, then the net hourly wage paid to the covered employee actually amounts to $14. Were the covered employee to receive the full $14 per hour as a common law employee, he could simply make his own arrangements to procure health insurance, worker's compensation coverage and so forth and to budget for his own vacations and retirement.
The covered employer must match each covered employee's own F.I.C.A. contribution, currently 7.65% of his wage. If the employee is earning $30,000 annually, this 50% co-matching amounts to nearly $2,300 which the employer must pay out of his own pocket. Multiplied by 5 workers in a typical small business, this amounts to an extra $11,500 out of the employer's pocket each year. Of course, if his employees choose not to be covered for social security purposes Medicare or other voluntary government welfare entitlement programs, the employer could spend this $11,500 on advertising, on seeking new markets or in generally expanding his business.
The covered employer must also estimate in advance his payroll for the year ahead and pay Worker's Compensation on the entire amount. For example, if his 5 employees each work 2,000 hours per year, or 10,000 hours total at an average pay rate of $10 per hour each, his annual payroll will be $100,000. If his Worker's Compensation tax is assessed at a rate of 5.1% (for example, a small machine shop), he must then pay $5,100 at the beginning of the year. If, in order to save money up front, he deliberately underestimates his annual payroll, upon audit at years' end he must immediately pay the difference. If his employees actually each worked 15,000 total hours for the year, those extra 5,000 hours will result in the employer having to pay an extra $1,700 at year's end, then add those extra 5,000 hours to the next year's estimated payroll and pay an additional $1,700 as well.
Another disadvantage to the covered employer is the many legal landmines he may encounter if he fails to adhere to a myriad of state and federal regulations. These increasingly draconian "rules" dictate what he may or may not do or say to his employees without becoming the target of a Lawsuit over sexual harassment, discrimination in the workplace, compliance with OSHA guidelines and a mess of other "red tape". For many a small businessperson with just a few covered employees, having to take on these financial burdens has meant the end of the business, regulated to death and taxed out of existence. And the completion of all the associated and onerous paperwork has often meant the difference between burning the midnight oil and having a family life.
With all this in mind, it's not difficult to understand why many American business owners have begun taking taken an active role in teaching their employees the Law! Certainly, with the increasingly widespread awareness of non-covered employment contracting, that number may soon vastly expand.
The covered employer withholds taxes from the weekly paycheck of his covered employees and pays them over to various agencies of the government, although neither employer nor employees usually have any idea whatsoever of what types of taxes are actually being paid under the Law. For most Americans, income taxes, social security taxes, employment taxes and F.I.C.A. taxes are all simply lumped together as "payroll taxes" and referred to overall as "tax withholding". The truth is, most Americans have no idea what is actually being withheld - they simply go along with it and never ask questions. Those who do are instructed by tax professionals who have never read the law and backed up IRS officials with a vested interest in ignoring the law in the interest of maximizing tax revenues. It's quite a system!
The other working arrangement familiar to most Americans is the subcontractor relationship, also known as covered "self-employment". This arrangement usually just involves an individual or company performing a particular service, either on its own premises or on the premises of the business owner, working unsupervised using its own tools and materials and billing the business owner who then simply writes out a check to the billing subcontractor. Over recent years the IRS has made every effort to attack as many subcontractor relationships as possible and to redefine them as actual covered employment in disguise. [see accompanying IRS Form SS-8 "Determination of Employee Work Status for Purposes of Federal Employment Taxes and Income tax Withholding"]
To this end, the IRS has forms that the prospective subcontractor is told he must fill out, bearing numerous check boxes which must be ticked off, proving that a covered employment arrangement does not exist. Of course, it's always difficult to "prove a negative". The rationale behind this strategy from the government's point of view is simple - the payroll tax withholding scheme has become a giant "cash cow" for Congress, a giant hose pumping hundreds of millions of dollars weekly right into the legislature.
This waterfall of weekly revenue does not depend upon the subcontractor volunteering to file a tax return each April 15th and assessing himself a year's worth of tax all at once. From Washington's perspective, weekly is better! Since, according to the IRS' own figures, at least 20 million Americans have already stopped filing tax returns, the pressure has been turned up to get everyone to be an employee, milked (some would say, bilked) weekly of taxes before he can spend them or forget to pay them to Uncle Sam.
Of course, there does exist within the Law the provision for the self-employed to volunteer to file quarterly estimated taxes. I say "volunteer" since Internal Revenue Code section 6654(h)(3) which covers exceptions to the requirement to pay estimate tax specifically excludes the citizen who was, quote: "... a citizen or resident of the United States throughout the preceding taxable year." [see accompanying Internal Revenue Code section 6654(h)(3)] The penalty for reliance upon an inadequately educated tax professional may mean volunteering to pay quarterly estimated taxes.
Employee Leasing -- A Partial Solution
As a work-around to the above situation, employee leasing has become extremely popular in recent years. Indeed, employee leasing is now so prevalent that many such companies can be found advertising on the Internet. Employee leasing solves some, but not all of the above problems. Essentially, a leased employee is paid for by the hour, as if he were a computer or a delivery van.
As a point of clarification, there is really no fundamental difference between employee leasing and Non-Covered Employee Contracting, except that non-covered employee contracting is not covered for social security purposes. If the average employee leasing firm understood the Law, accepted the statement of citizenship in lieu of a Form W-4 as will be explained shortly, did not withhold taxes and dishonored IRS Notices of Levy unless accompanied by a valid court order, there would be no real difference between the two. Since this is not the case with any employee leasing or "temp" agency we can find, there is obviously a world of difference.
As stated already, when an employee leasing firm such as ABC takes over the payroll for a business, it actually becomes the employer of record. Each employee will sign a Form W-4 with ABC, and they will then take the burden of payroll administration out of the employer's hands. Of course, the employer is still paying the costs of 50% matching co-FICA, workers compensation and other "perks" of covered employment - these costs are simply added into the check he pays to ABC each week, plus their service fees.
The disadvantage to the worker who wishes to take home 100% of his entire weekly paycheck, remains that he is expected to sign a Form W-4 with ABC and become their employee, with all of the usual "payroll" taxes withheld. For the worker who wishes to take full control of his paycheck, this is clearly not a solution, although the benefits to the employer are obvious.
Employment: The Law vs. The Common Practice
Now, let's look at what the law actually says with regard to employment, as opposed to the common practice in the workplace. After you learn and understand the difference between the two, you may be shocked. One thought that may occur to you is "How could my accountant or CPA possibly not have known this?"
Most Americans rely upon a variety of paid tax experts, including a tax preparer, C.P.A., accountant, tax attorney or financial planner. The reasoning of the average American goes something like this: "I cannot possibly understand the Internal Revenue Code and implementing regulations, therefore I need a licensed expert to explain it to me and tell me what my requirements are. "Since the government licenses paid professionals as competent to administer the laws it has written, it's a safe bet that these professionals know what they're doing."
The problem with this line of reasoning is that most paid tax professionals - 999 out of 1,000 in our experience - have never read the actual laws covering income and employment taxes. They don't even know where to find them. They attend IRS sponsored workshops which teach them the common practice of other professionals, but not the law itself. They learn in which little boxes on which forms to print which numbers without ever looking at or even questioning the authority behind those forms or the actual laws they implement.
One indication of this phenomenon is that, although the office libraries of most tax professionals are well stocked with IRS pamphlets and brochures - none of which are Law - most do not contain a single copy of the Internal Revenue Code or implementing tax regulations. To verify this fact, you might ask this of your own tax professional. One might ask how such "tax pros" can possibly understand the Law if they have never seen or read it? My Sunday school teacher used to call this "the blind leading the blind".
It is important to understand that IRS pamphlets and brochures are not - and can not be - Law. The Constitution doesn't authorize the IRS to make Law. The IRS is an administrative agency only, a part of the executive branch of our three-branch government and not a part of the legislative branch. Under the Constitution, only the legislature can pass laws for citizens within the States of the Union. As an executive branch agency, the IRS is empowered solely with the duty of carrying out the Laws that Congress writes and codifies as the Internal Revenue Code.
The reality is that the practice of the average tax professional is based upon a mindset, namely the belief that certain practices must be true, simply because "we've always done it this way". Such beliefs persist even though the professional has never actually read the Law for himself. One example of this mindset is the false belief that payroll tax withholding in the workplace is required by law.
Here, then, in capsule summary is the actual situation as it exists today with regard to business owners and workers in the American workplace. Remember to go look it up for yourself after we show you where to find it. Here are the facts:
1. There is no legal requirement for any American citizen to obtain, have or use a social security number for any purpose whatsoever, including employment.
2. The government cannot by law assign a SSN to a citizen or force him to use one; in order for a citizen to have a SSN assigned to him, either he or his parent or legal guardian must have applied for one and there is no legal requirement to apply.
3. There is no legal requirement for a business owner to submit a Form W-4 to a prospective worker.
4. There is no legal requirement for a business owner either to demand or to obtain a SSN from a citizen who wants to work for him.
5. There is no legal requirement for a citizen to sign a Form W-4 and have taxes withheld from his paycheck.
6. There is no legal requirement for a business owner to apply for, have, or use an employer identification number.
7. Both the SSN and the EIN are forms of taxpayer identification numbers and the only entity required by law to have and use a TIN is a nonresident alien, meaning a foreigner.
Now, those statements have no doubt left you surprised and skeptical, perhaps very skeptical. Remember, keep a fully open mind until you have looked up the Law for yourself.
To illustrate the above, let's consider the situations of a pair of modern if original Americans: Samuel and Thomas. Students of early American history will no doubt find these names familiar. Sam and Thom are both private, self-reliant individuals who ask for and expect nothing from government. They aren't interested in subsidized retirement under social security, in subsidized shelter in the form of government housing allowances, in subsidized eating in the form of government-issued food stamps, in subsidized health care in the form of medical subsidies, in subsidized debt in the form of veterans and small business loans or in any other benefits of government wealth redistribution.
Since governments inherently never have any money of their own, all so-called "government benefits" must be taxed from some and given to others who have applied for their "fair share" of such wealth redistribution. Sam and Thom simply want to be left alone by government to enjoy their right to keep their earnings - the fruits of their personal "Pursuit of Happiness". They choose as private citizens to care for themselves and their families without assistance from federal welfare handouts collected from unwitting fellow citizens such as social security.
Sam is a modern day business owner who wishes simply to hire others and pay them for the hours they work. He has no desire to be an unpaid bookkeeper and work for government for free. Today, we would call Sam a "common law employer". Thom chooses not to start his own business and prefers to go to work for Sam. Thom has no desire to receive government assistance of any kind and is prepared to take care of his family and of himself in retirement, just as generations of his ancestors did before him. Today, we would call Thom a "common law employee".
When asked whether it is possible for Sam and Thom simply to enter into a contractual agreement for Thom's services with no W-4 on file and no "payroll taxes" withheld, the average tax professional would likely say "no". When asked whether Sam, in order to hire Thom, is required by Law to obtain an EIN, the average tax professional would insist that he must. But what if Sam doesn't want an EIN?
No matter, his tax professional will say, he's required to apply for one, probably because one of the most common functions of accountants and C.P.A.'s is to hand new business owners an IRS Form SS-4 "Application For Employer Identification Number". [see accompanying IRS Form SS-4 "Application For Employer Identification Number"]
Unfortunately, due to the incomplete education of our nation's tax professionals combined with the unwillingness of officials of the IRS to show the public the facts, the truth has not been forthcoming. This presentation was written to overcome this deficiency. Let's look at the situation logically.
If the government is so eager to get Sam and every other every business owner to number themselves, why do they ask them to apply for a number? Why don't they just assign each one a number as soon as he goes into business? If Sam is required to present Thom a W-4 for him to sign, why is it titled "Employee's Withholding Allowance Certificate"? Why not "Employee's Withholding Requirement Certificate"? Could the W-4 just be some sore of private permission slip between Sam and Thom?
For his part, what if Thom doesn't have a SSN because neither he nor his parents ever applied for one? Many Americans never applied for a SSN and many more today are not applying for one for their children, having come to the realization that a truly free person can never be numbered. "After all", so their reasoning goes, "if my child wants to number himself, he can make that decision someday when he becomes an adult".
What if Thom was once assigned a SSN, but, as tens of thousands of Americans have already done, although unreported in the news, he has since revoked the application and no longer has a valid SSN to use? If he has no SSN assigned to him, then what does he enter in the box on the Form W-4 that asks for his number? He can't leave the box blank since that might be construed as an omission. The only thing he can honestly enter is "N-O-N-E", none!
What if Thom doesn't want Sam to "get in the middle" as an uncompensated bookkeeper for government. What if he just wants to stick all that he earns each week in his pocket and choose whether or not to "do business" with the IRS according to his own understanding of the Law, which is really none of Sam's business?
What if Sam likes this idea since he would then not have to "kick in" 50% matching co-FICA on Thom's wages or assume the other burdens of bookkeeping and tax withholding relating to Thom's working for him?
Do Sam and Thom have these choices? The vast majority of fee-based tax professionals will insist that they do not, and they are all mistaken. The fact is that if Thom submits the proper paperwork to Sam to stop tax withholding under section 1.1441-5 of the Code of Federal Regulations for Title 26, Internal Revenue Code, and if Sam obeys the Law and stops withholding income taxes from Thom, then it will be Thom's sole responsibility to determine whether or not he in fact owes the income tax and has a requirement to file a return. We will see what the law says in this regard in a little while.
Form W-4 Not Required By Law
The reality is that accountants, C.P.A.'s and personnel department staff at virtually ever workplace in America are trained and conditioned to believe that the W-4 is a required return and so they hand one to each prospective worker to complete, sign and submit. The fact is that there is no code section or implementing Treasury regulation - none whatsoever - that requires a business owner to present a Form W-4 to a prospective worker, nor is there any legal requirement for the prospective worker to complete, sign and submit the Form W-4 to the business owner even if provided with one. It's simply done as a matter of common practice within the workplace and not as a matter of Law, although the prevailing mindset is that it's required. Indeed, it's a rare employer who understands the Law well enough to hire the worker who does not volunteer to submit a W-4.
The W-4 form is a "withholding allowance certificate", just as it's name says. Upon completion of the W-4 by the worker and its acceptance by the business owner, a voluntary withholding agreement is entered into by both parties under which employment taxes are withheld and paid into the Treasury by the employer, who by Law, becomes the actual taxpayer in the transaction since it is he who is holding the withheld funds.
Since Article 1, Section 2, Clause 3 and Article 1, Section 9, Clause 4 of the Constitution forbid direct taxation of a citizen, the only means of collecting the employment tax from a citizen is by way of a Form W-4, which, as we shall see, the law refers to a the "Voluntary Withholding Agreement". The W-4 form provides a space for the name and EIN of an employer but, of course, only of the employer who has volunteered to number himself. The W-4 also provides a space for the name and EIN of the worker, but again, only of the worker who has volunteered to number himself.
There is a mindset prevalent in America today that absolutely everyone must have a social security number, or "SSN", and must give it to whomever asks for it, including to an employer on a Form W-4. The fact is that there is not now nor has there ever been any law in existence which requires a citizen living and working within the 50 States of the Union to have or use a SSN for any purpose whatsoever, including to obtain employment. No doubt that statement may come as a great surprise to the accountants, CPA's and other tax professionals who may read or listen to this.
It would certainly appear as if the SSN is required of every citizen given that it's become the de facto personal identifier for every purpose from giving blood to renting a video. However, the surprising truth is that, if you write to the Social Security Administration and ask if you are required by law to have and use a SSN, they will respond: "The Social Security Act does not require an individual to have a social security number to live and work in the United States, nor does it require an SSN simply for the purpose of having one. However, if an individual works without an SSN, we cannot properly credit the earnings for the work performed." This is their standard response. You may wish to write to them yourself for your own copy. The fact is that this has always been true.
Here's what the law says with regard to the assignment of SSN's. All United States law is categorized into 50 "titles" of Law known as the United States Code, abbreviated as "USC", and covers a wide range of topics. [see accompanying "Titles Of United States Code"] These are the statutes passed into Law by the legislature. The law can re read at any law library, at many large city libraries, on CD-ROM from the Government Printing Office, and at many locations on the Internet's World Wide Web.
The Social Security Act is codified in Title 42 of the United States Code. [see accompanying Title 42, section 405] Section 405(c)(2)(B)(i) states under subparagraph (I) that the Secretary of the Social Security Administration will assign SSN's to aliens - meaning to foreigners - at the time of their lawful admission to the United States and, under subparagraph (II), to: "... any individual who is an applicant for or recipient of benefits under any program financed in whole or in part from Federal funds."
That's the Law, exactly as written, and we encourage you to go look it up and read it for yourself. Nonresident aliens, meaning foreigners, are assigned Social Security Numbers upon lawful entry into the U.S. and all other "applicants", meaning Citizens of the 50 Union States, are assigned numbers upon application. And what method does a citizen use to apply for a SSN for himself or for his child by using Social Security Administration Form SS-5 "Application For Social Security Account Number". [see accompanying Social Security Administration Form SS-5 "Application For A Social Security Card"]
The Code of Federal Regulations for Title 20 states at section 422.103(b)(1), titled "Applying for a number": "An individual needing a social security number may apply for one by filing a signed Form SS-5 ... at any social security office, and submitting the required evidence ...".
SSN's are also assigned to newborns whose parents request a number for their child by checking off the appropriate approval box on hospital paperwork. The Social Security Administration issues arm-twisting instructions to hospital personnel to attempt to persuade the parent to say "yes". [see accompanying section 205.100 "Parent Objects To Assignment Of SSN To Child Under The Enumeration At Birth Program" from SSA instructions to hospital personnel]
If, in spite of the parents explicit instructions, the hospital keys "yes" in their computer, resulting in the issuance of a SSN to the newborn and the parent then timely and strenuously objects, the record of the application for the number will be expunged. [see accompanying letter from SSA to such a parent with regard to his daughter, Rebecca]
Because applying for an EIN or SSN by a citizen is strictly voluntary, one who does so presumably wishes to participate in social security and other federal welfare entitlement schemes. In other words, if you want to register to participate in social welfare programs, you must line up and take a number! But there is no requirement to do so.
On Office of Management And Budget (OMB) Standard Form 83, there are three boxes which an agency of the executive branch may check when requesting OMB approval of a particular form - "Voluntary", "Required to obtain or retain a benefit" and "Mandatory". On their application to OMB for approval of the SS-5 form, the Social Security Administration checked "Required to obtain or retain a benefit". [see OMB Standard Form 83 submitted by Social Security Administration to OMB for approval of Form SS-5]
In a letter dated May 17, 1988 from the Social Security Administration's Syracuse, New York office to Senator Alfonse D'Amato, the agency states: "There is no law which makes the Social Security number mandatory". [see accompanying copy of SSA letter to Mr. D'Amato]
In a letter dates May 22, 1998 to a citizen named Mark James, the Philadelphia office of Social Security writes: "There is no law on the books which requires a person to have a Social Security Number." [see accompanying copy of SSA letter to Mr. James]
In a letter written on January 10, 1986, a Ms. Penny Payton, a claims representative with the Sioux Falls office of the Social Security Administration, wrote to a citizen of South Dakota stating: "Social Security is a voluntary system in that no one is required to get a number." Ms. Payton also added: ".. a person with no Social Security Number would have no taxable income." [see accompanying copy of SSA Penny Payton letter]
One cannot help but wonder whether honest government employees like Ms. Payton retain their jobs after writing such letters. Copies of all such letters and all laws referenced in this presentation are available under the ordering information provided at the end.
EIN Not Required Of A Business Owner
There also exists today in America the widespread belief that a citizen who wishes to hire other citizens must first obtain an employer identification number, or "EIN". The fact is that this is equally untrue and always has been. The EIN is applied for on IRS Form SS-4, titled "Application For Employer Identification Number".
Section 301.6109-1 of the Code of Federal Regulations (CFR) for Title 26, Internal Revenue Code states at paragraph (d)(2)(i): "Any person required to furnish an employer identification number must apply for one, if not done so previously, on Form SS-4. A Form SS-4 may be obtained from any office of the Internal Revenue Service ...". [see accompanying copy of 26 CFR 301.6109-1]
To those unfamiliar with the law, this section might sound like a requirement to apply. It states "any person required to furnish an EIN ...", without stating who this "any person" who "must apply" actually is. Is it the citizen? If every business owner in America were required to apply for an EIN, wouldn't you expect this section to instead read: "Every American citizen who operates or plans to start a business and hire other citizens is required to have and use an EIN", or some such language?
If we examine section 301.6109 in its entirety, we discover that the only person required by law to obtain a TIN is a foreign person, referred to in the regulations as a "U.S. Person". Section 301.6109-1(b), titled "Requirement to furnish one's own number" states under subparagraph (1) titled "U.S. persons": "Every U.S. person who makes under this title a return, statement, or other document must furnish its own taxpayer identifying number as required by the forms and the accompanying instructions".
Subparagraph (2) goes on to reveal: "The provisions of paragraph (b)(1) of this section regarding the furnishing of one's own number shall apply to the following foreign persons."
It then goes on to list all of the foreign persons required to provide a TIN, however there is no listing of a citizen. The astute observer will note that both Form SS-5 "Application For Social Security Number" and Form SS-4 "Application For Employer Identification Number" have the word "application" in their titles.
In other words, they are to be used by applicants. However, as we shall see, there can be no legal requirement to apply. By volunteering to use an employer identification number, or "EIN", the covered employer imposes upon himself the requirement to withhold employment tax from covered employees, thereby adopting the unwelcome role of uncompensated bookkeeper for government.
In this new capacity, he must then undertake the time-intensive demands and burdensome costs of payroll bookkeeping, bank deposits, filings of state and federal tax forms and so forth, none of which make him any money or expand his business.
Voluntary Does Not Mean Mandatory
To "apply" means "to make application for" or "to request". In other words, an application is a consensual, voluntary act made of one's own free will and consent. If consent were absent with regard to a given act, then clearly that act could not be said to be voluntary.
Mandatory, meaning "required" or "compelled by force of Law", is the exact opposite of voluntary. Clearly an act cannot be both voluntary and mandatory at the same time, nor can it be partially voluntary and partially mandatory. An act is either voluntary or mandatory: there is no in between, just as one can not be partially dead or partially pregnant. If Party A has the legal authority to force Party B to volunteer to do something, then clearly Party B's participation can never be said to be voluntary.
If you will stop to recall, all applications you have ever filled out in your life, whether for a driver's license, a loan, a library card, a fishing permit, a SSN or an EIN, required your signature. Can you be forced to enter your signature on anything if you don't want to? Can your signature ever be anything but voluntary?
Clearly, the answer is no. The only way you could be forced to apply for anything would be if a pen were forced into your hand, your arm wrestled down to the table and your signature forcibly obtained. Obviously, no one, in or out of government, has compelled any of the hundreds of millions of Americans who have ever applied for a SSN or EIN to do so. All have applied for their very own government numbers of their own free will and volition. Of course, they did so believing that they had no choice; that their compliance was mandatory.
If you're struggling to understand this, ask yourself: If having either a SSN or an EIN were in fact mandatory, why would applications exist to apply for them? Put differently, if there were a legal requirement for a citizen to have either type of number, why would there be any application procedures or forms to apply on at all? Why wouldn't the government just serially number everyone without trying to persuade them to apply?
If the government could simply issue each citizen a TIN without any involvement on the citizen's part whatsoever, obviously there would be no need for application forms or procedures. The number would simply be thrust upon you with no participation on your part in the numbering process. Since, as we have seen, a TIN is required of a foreigner only, one would have to ask whether the government has been forthright and honest with its citizens in informing them of the truth about all this. Actually, if it were discovered that the government has been luring its citizens into applying for numbers when none were required, that would be disturbing enough.
However, the fact of the matter is that the Internal Revenue Service can only establish records in its computer databases for any entity that has volunteered to number itself with a "taxpayer identification number". Since both the SSN and the EIN are taxpayer identification numbers, presumably the party that volunteers to number itself must want to be a taxpayer. The reality is that many thousands of Americans of all ages - from toddler to senior citizen - have never applied for a SSN and most of these folks have never been contacted by the IRS their entire lives. Likewise, many Americans long ago started and continue to this day to operate their own businesses and hire others without obtaining an EIN.
If it were discovered that the government has been deliberately withholding the truth all these years by luring its free citizens into volunteering to become taxpayers by making it appear that TIN's are required of them, that would constitute constructive fraud. The IRS makes frequent use of the expression "voluntary compliance" which of course is meaningless since the two terms "voluntary" and "compliance" are polar opposites of each other. To believe otherwise would be to accept the kind of "doublespeak" of which George Orwell wrote in his novel, "1984".
Now you understand why we call ourselves "the honest IRS!".
Since there exists no requirement for a citizen to have or use a TIN, there is no authority for anyone else, including an employer, to demand one from him. After all, how can Party A lawfully demand or obtain something from Party B if Party B is not required by Law to have it in the first place?
The Law Says "Request", Not "Demand"
The legal authority does exist for the "payor of income" to "request" a TIN from another person, however there is no authority to demand or to obtain a TIN from a citizen. Here's what the law actually says: 26 Code of Federal Regulations for Title 26, Internal Revenue Code, states in pertinent part at section 301.6109-1(c), titled, "Requirement to furnish another's number":
"Every person required under this title to make a return, statement, or other document must furnish such taxpayer identifying numbers of other U.S. persons and foreign persons ... as required by the forms and the accompanying instructions ... If the person making the return, statement, or other document does not know the taxpayer identifying number of the other person ... such person must request the other person's number. The request should state that the identifying number is required to be furnished under authority of law. When the person making the return, statement, or other document does not know the number of the other person, and has complied with the request provision of this paragraph ... such person must sign an affidavit on the transmittal document forwarding such returns, statements, or other documents to the Internal Revenue Service, so stating.".
So we see that when an employer submits a Form W-4 to a prospective worker, he is actually complying with the above "request" provision within the law. When he files a transmittal document such as a Form W-4 or W-2 with the IRS on behalf of another person and does not know the TIN of that person, the Law merely requires him to request the number. He has no authority to demand or obtain it! If the number is not forthcoming, he is to attach an affidavit to the transmittal document stating that he requested the number and has thereby complied with the Law.
The correct procedure is not to leave the space on the transmittal document requesting a TIN blank, not to enter all zeros or nines and not to enter a false number or someone else's number which would constitute fraud, but to print "N-O-N-E". Two examples of common transmittal documents are Forms 1099 and W-2.
Of course, most employers believe that they are breaking the Law and will be subject to fees, fines or other penalties if they fail to obtain a SSN, and therefore will not hire a worker if he fails to provide it. Their ignorance of the Law is usually reinforced by the ignorance of their accountant and other tax professionals, virtually none of whom have ever read the Law. Interestingly, the W-4 is the only form made available by the IRS on which a citizen or resident alien can submit his SSN to the participating employer.
Why Would A Citizen Want A SSN, Anyway?
Since we see that there is no legal requirement for a citizen to have a SSN or EIN, why then would he apply for one? Presumably because he wants and desires the benefits of having such a number. And what might such benefits be?
Among others, to become eligible to make contributions towards vesting in government welfare programs and thereby eligible to receive benefits such as social security, Medicare, school lunch, agricultural subsidies, subsidized housing, school and business loans, free milk and cheese, free medical care, food stamps, and so forth.
However, the citizen's participation in all such entitlement programs is strictly voluntary. The worker who wishes to make such voluntary contributions must first give permission to the person he works for to withhold his contributions. The IRS makes this easy by providing a handy permission slip known as the Form W-4, titled "Employee's Withholding Allowance Certificate".
The very use of the word "allowance" in the title is a clear indication that the W-4 is permissive, and indeed, there is in fact no Law in existence requiring either business owner OR worker to use a W-4, although that fact will no doubt amaze many. The top of the W-4 states: "... give the certificate to your employer...". If the W-4 were a required return, wouldn't the IRS at least want a copy, let alone the original? But no, the IRS instructs the worker to "give the withholding certificate to your employer", NOT to us! That fact alone should be proof enough that the W-4 is not a required return. Most business owners simply stick signed W-4's in a drawer.
Code section 3402(p)(3) titled "Authority for other voluntary withholding" states: "The Secretary is authorized by regulations to provide for withholding - (A) from remuneration for services performed by an employee for the employee's employer which (without regard to this paragraph) does not constitute wages, and (B) from any other type of payment with respect to which the Secretary finds that withholding would be appropriate under the provisions of this chapter, if the employer and employee, or the person making and the person receiving such other type of payment agree to such withholding. Such agreement shall be in such form and manner as the Secretary may by regulations prescribe. For purposes of this chapter (and so much of subtitle F as relates to this chapter), remuneration or other payments with respect to which such agreement is made shall be treated as if they were wages paid by an employer to an employee to the extent that such remuneration is paid or other payments are made during the period for which the agreement is in effect."
Note the wording in sub-sections (b)(1)(ii) and (iii) of this regulation: "...an employee who desires to enter into an agreement" and "request for withholding", "desires withholding" and "mutually agree upon", all of which clearly and unambiguously show the voluntary nature of the entire withholding system. The significance of a Form W-4 "Employee's Withholding Allowance Certificate" is clearly explained in this regulation which states: "The furnishing of such Form W-4 shall constitute a request for withholding,"
Further evidence of the voluntary nature of the Form W-4 agreement between business owner and worker is provided under section 31.3402(p)-2 of the Code of Federal Regulations for Title 26, Internal Revenue Code, which states in pertinent parts: "An agreement under section 3402(p) shall be effective for such period as the employer and employee mutually agree upon. However, either the employer or the employee may terminate the agreement prior to the end of such period by furnishing a signed written notice to the other."
So we see that a citizen can terminate the W-4 - the Voluntary Withholding Agreement - at any time by giving written notice to the employer. Of course if the Voluntary Withholding Agreement, meaning the W-4, is not given to the business owner in the first place, there is no need for the worker to submit a written termination.
In light of all this, let's stop for a moment and examine the actual Supreme Law itself. Because this presentation deals, not with opinion or speculation, but with facts, truth and the written Law, let us review some basic terms and concepts within the Law. To understand the Law, we must begin with the Constitution itself since it is the highest law of the land. If it's been a while since you've read the Constitution, we suggest that you get out your family copy to refer to during this presentation.
Under Article VI, the Constitution declares itself to be the supreme Law of the land. [see accompanying copy of Article VI, Clause 2] Because of this "supremacy clause", no ordinary act of the legislature - that is, of Congress - can overturn or override the Constitution. All laws made by Congress must be in conformity to the Constitution, otherwise, as the courts have held many times, such acts of the legislature are void. The Constitution can only be amended through the amendment process as called for under Article V.
The Constitution created our form of government, which is not a Democracy as many have been taught, but a constitutional republic. Although the Constitution has been amended 26 times in its history, it has never been amended out of existence or replaced with any other foundational document. Therefore, it is still in as full force and effect right this very moment as it was when the ninth state, New Hampshire, ratified it as the supreme Law of the land on June 21, 1788. Any Act of Congress - by which we mean any Law - which does not conform 100% to the Constitution is automatically unconstitutional and therefore void. As we see, the tax Laws of the united States are 100% in conformity with the Constitution, a fact which would no doubt surprise many.
Under our constitutional republic, the rights of the minority are protected from the tyranny of pure democracy, otherwise known as "the majority". In other words, a majority of the People cannot vote away the rights of the minority, not even of a single individual. One hallmark of a constitutional republic is that all Law is a written Law so that a citizen can look it up and understand it for himself. Otherwise, laws could be passed in secret in the middle of the night and the citizen could have no way of knowing his duties and obligations under the Law.
The Law must also be written in plain English so that the citizen of average intelligence can read and understand it, otherwise, as the courts have repeatedly stated, it must be held "void for vagueness". A Law can have one, and only one, clear and unambiguous meaning. In other words, it cannot be subject to interpretation. If a given Law could be interpreted, meaning that two different people could understand it to have two different meanings, it would automatically be void for vagueness. After all, how could 12 jurors otherwise agree on what the laws says or means? This is an important concept for you to grasp since this presentation sticks solely to the written tax Laws that are currently "on the books" right now.
Americans have been conditioned to believe that the tax Laws are beyond the comprehension of mere mortals, which is why they believe we must have licensed financial professionals to protect us from our own bewilderment and ignorance.
Income Tax: Direct Or Indirect?
Now that you have an understanding of Law itself, let's stop and summarize what we've stated so far:
* A citizen is not required by Law to have or use a SSN.
* If he wants an SSN, he must apply for one and all applications can only ever be voluntary.
* Since he's not required to have a SSN, there's no Law requiring him to provide one in order to go to work for another citizen.
* And the citizen business owner for whom he would work is authorized only to "request" a number from him, not to demand or obtain it, nor is the business owner himself required to apply for or use an EIN.
* If he wants an EIN, he must apply for one and, again, all applications are voluntary.
In order to understand the provisions within the law which allow for the stopping of tax withholding in the workplace, let's first look at the limited authority to tax a citizen given to Congress within the Constitution. Once we understand this, the tax laws that are on the books right now will begin to make sense.
The Constitution authorizes only two forms of taxation: direct taxes and indirect taxes. Article 1, Section 2, Clause 3 states that: "... direct taxes shall be apportioned among the several states which may be included within this Union ...". [see accompanying copy of A1,S2,C3] You will note that it does not say "among the citizens", but "among the several states", from which we see that the property of the citizen cannot be taxed directly by the federal government.
The supreme Court confirmed this in their decision in the 1895 case Pollock v. Farmers' Loan & Trust Company in which they stated: "... the Constitution ... prohibits Congress from laying a direct tax on the revenue from property of the Citizen without regard to State lines ... taxes on personal property, being a direct tax ... the income of personal property, are likewise direct taxes."
Congress can pass an Act to raise a certain sum of money for a specific purpose, then apportion that bill to the States for them - not Congress - to collect according to the limitations of their respective State constitutions. Article 1, Section 9, Clause 4 explains how this bill is to be divided among the States in stating: "... no direct tax shall be laid unless in proportion to the census or enumeration hereinbefore directed to be taken". [see accompanying copy of A1,S9,C4]
Since population can shift from State to State over time, a national census is conducted every 10 years to count citizens and readjust the basis for apportionment. There are currently 435 representatives in the House of Representatives. Therefore, a State with 2 representatives such as New Hampshire would owe 2/435ths of the bill, while a state with 10 representatives such as Massachusetts, would owe 10/435ths of the bill. Congress lays direct taxes and the States collect them.
Five direct taxes have been laid in our nation's history - none in this century - although Congress could do so again at any time to balance the budget or for any other constitutionally lawful reason.
The other type of tax which Congress can impose is an indirect tax. Article 1, Section 8, Clause 1 states: "Congress shall have power to lay and collect taxes, duties, imposts and excises" and that all such taxes must be "uniform throughout the United States." [see accompanying copy of A1,S8,C1]
Excises taxes are indirect taxes which, unlike direct taxes, can be both laid and collected by Congress through agencies of its creation such as the IRS. So is the income tax a direct or an indirect tax?
Congressional Research Service report #79-131, written in 1979 by Legislative Attorney, Howard Zaritsky, and titled "Some Constitutional Questions Regarding The Federal Income Tax Laws", confirms: "... it is clear that the income tax is an "indirect" tax ... subject to the rule of uniformity, rather than the rule of apportionment." [see accompanying pages from CRS Report # 79-131A by Howard Zaritsky, Legislative Attorney]
And what is an excise? The supreme Court stated in its 1911 ruling in Flint v. Stone Tracy Co., that an excise is a tax: "... laid upon the manufacture, sale or consumption of commodities within the country, upon licenses to pursue certain occupations and upon corporate privileges ...". So we see that the income tax is an indirect tax in the form of an excise.
But what is the definition of income? The Supreme Court ruled in the 1920 case Eisner v. Macomber that income may: ".. be defined as the gain derived from capital, from labor, or from both combined." In other words, if I hire you out at $15 per hour and pay you $10 per hour, then the $5 per hour profit on your labor is the source of my income. Such profit would not be taxable to you, but may be taxable to me as profit derived from the taxable source, which is your labor.
Of course, for this to be true, we couldn't both be living and working with one of the 50 States of the Union, otherwise Article 1, Section 2, Clause 3 would be violated. We'd have to be living and working abroad in a U.S. possession or territory or in a foreign country under a current tax treaty.
This is what Congress meant by their use of the term "source" in the 16th Amendment which states that "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."
The 16th Amendment Changed Absolutely Nothing!
Many Americans believe that the 16th Amendment changed the Constitution to authorize a direct income tax on the wages of a U.S. citizen. However the supreme Court closed the door on this erroneous understanding in their decision in the 1916 case Stanton v. Baltic Mining. In the Stanton case, the high Court stated that the 16th conferred ".. no new power of taxation", but merely ".. prohibited the ... power of income taxation possessed by Congress from the beginning from being taken out of the category of indirect taxation to which it inherently belonged ...".
Since the 16th did not repeal those sections of the Constitution which require that all direct taxes be apportioned among the States, therefore the Congress, and its administrative agency, the IRS, still to this day lacks the constitutional authority to directly tax the wages of a U.S. citizen.
The Founders of our nation read and understood Matthew 17, verses 24 through 27. We suggest you look these verses up for yourself. Based on their clear understanding of Natural Law and Natural Rights, the Founders intended that American citizens remain free of internal taxation and that foreigners only be taxed for the privilege of doing business within the States of the Union.
The foreigner was to be taxed at ports of entry on goods, including investments, imported into the united States. This is in fact the federal taxing scheme as it actually exists "on the books" today and can be summarized simply as "citizens abroad and foreigners here at home". This same scheme has existed since the day George Washington took office.
Examining The Internal Revenue Code
Now that we've taken a brief overview of the constitutionality of the federal taxing scheme, let's look at the taxing laws, or statues, themselves. Title 26, abbreviated "26 USC", encompasses the entire Internal Revenue Code, also abbreviated "IRC" for short, and covers all Laws pertaining to taxation within over 9,000 code sections.
A regulation is a rule enacted by an agency of the Executive Branch to administer and enforce a Law passed by Congress and to specify penalties for violators. Regulations correspond to their related statutes and are found in the Code of Federal Regulations, abbreviated "CFR". Tax regulations are issued, or promulgated, by the Department of the Treasury which oversees the Internal Revenue Service.
In order to understand the Internal Revenue Code which encompasses far more than just "income" taxes , one must first understand the subdivision of the code. The code is currently divided into 11 subtitles, the first 5 of which, subtitles A through E, each cover different categories of taxation.
Subtitle A is the income tax, Subtitle B covers estate and gift taxes, Subtitle C covers the wage or employment tax for social security purposes, Subtitle D covers miscellaneous excise taxes, and Subtitle E covers alcohol, tobacco, and "certain other excise taxes".
Subtitles F through K pertain to procedure, administration, general provision, definitions, etc.
Each subtitle is totally distinct and separate with regards to the type of tax it covers and the enforcing provisions within one subtitle do not apply to any other.
The term "taxpayer" is a one-word legal term with no space between "tax" and "payer" and is defined in subtitle F under code section 7701(a)(14) as "Any person subject to any internal revenue tax". [see accompanying copy of IRC section 7701(a)(14)]
In order to become the taxpayer liable to pay a particular type of tax, a liability for that tax must first arise from written statute within that subtitle. Subtitle A, "income" tax is found in chapters 1-6 of the code. The employment, or social security, tax is covered under subtitle C of the code within chapters 21-24. These two taxes have nothing whatsoever to do with each other under the Law, as can be seen by the fact that an entire subtitle - B - lies between them and has nothing to do with either. Therefore, a citizen or resident alien becomes liable for income or employment tax under completely separate and distinct circumstances.
Who Actually Owes The Income Tax?
There is only one code section within all of subtitle A "income" tax, or indeed within the entire Internal Revenue Code for that matter, making any "person" liable to pay the income tax. The word "person" itself is defined at section 7701(a)(1) and may be not just a flesh and blood human being, but a corporation, a partnership or other artificial entity. [see accompanying IRC section 7701(a)(1)] In other words, both IBM and the individual citizen are legal persons under the law.
The person made liable to pay the income tax. is identified under code section 7701(a)(16) as the "withholding agent", meaning the American agent or representative of a foreigner doing business within this country. [see accompanying copy of IRC section 7701(a)(16)]
The withholding agent is made liable under code section 1461 to withhold from a nonresident alien under code section 1441, from a foreign corporation under section 1442 and from a foreign tax exempt organization under section 1443. [see accompanying copies of IRC sections 1461, 1441, 1442, and 1443]
There is no code section within subtitle A or indeed anywhere else within the entire width and breadth of the Internal Revenue Code that authorizes the withholding of income tax from the citizen living and working within the 50 States of the Union. None whatsoever. This will no doubt shock and astonish most tax preparers, although that does not change the facts that it's none the less true. No such code section exists.
Remember, we are dealing here with Law, not with opinions or beliefs or mindsets. As stated earlier, the law is a written law: if there were a liability to withhold income tax from the citizen within the 50 States of the Union, it would have to state so somewhere in the Law. However, a careful scrutiny of the code will confirm that such a code section simply cannot be found - it's just not there.
This can be confirmed for yourself by performing a computer search for such terms as "income", "liable", "liability" and "citizen" through the entire Internal Revenue Code available on CD-ROM from several sources, including from the Government Printing Office and many sites on the World Wide Web.
Note that, under the Law, it is the withholding agent who becomes the actual taxpayer - the payer of the income tax - and must pay it into the Treasury, although it is not a tax on his own income, but a tax on the income of the foreigner that is being withheld and paid on the foreigner's behalf.
Since we have been discussing income, it might be useful to look at what income actually is and examine the code sections that impose the income tax and require the filing of returns.
The Term "Income" Is Not Defined In The Code
Surprisingly, with regard to income tax, Congress has carefully avoided defining the thing being taxed! "Income" is never defined anywhere in the entire Internal Revenue Code.
"Gross income" and "taxable income" are defined, however if you research the regulations for "taxable income", meaning gross income minus allowable deductions, under 26 Code of Federal Regulations at section 1.861-8(e)(11)(f), you will discover that, in order to have taxable income from sources within the United States, those sources must all be foreign. [see accompanying "The Proof Is In The Law Itself"]
This, of course, completely in keeping the same pattern we have already mentioned: the federal income taxing scheme since day one is still "citizens abroad and foreigners here at home".
In the case Stapler v. U.S., the supreme Court ruled that income is not a wage or compensation for any type of labor. In Doyle v. Mitchell Brothers, the high Court ruled: "Whatever difficulty there may be about a precise and scientific definition of income, it imports something entirely distinct from principal or capital either as a subject of taxation or as a measure of the tax; conveying rather the idea of gain or increase arising from corporate activities ... We must reject ... the broad contention submitted in behalf of the government that all receipts, everything that comes in ... are income ...".
In Conner v. United States, the high court ruled: "..The meaning of income in its everyday sense is gain... the amount of such gain recovered by an individual in a given period of time ... whatever may constitute income, therefore, must have the essential feature of gain to the recipient. This was true when the 16th Amendment became effective ... Congress has taxed income not compensation.".
The high Court is therefore saying that to go to work for someone else, exchanging your hours for compensation, is a like-kind exchange: one unit of labor given in exchange for one unit of compensation received. Therefore, there is no gain and no income. It is also instructive to note that these decisions of the Court have never been overturned and stand to this day.
The mandate of the IRS is to collect as much tax as possible, no matter what, so one might keep this motive in mind when observing whether or not the IRS usually upholds the law as written. As mentioned earlier, the IRS refers to the duty to pay the income tax as "voluntary compliance". But as we covered earlier, how can compliance ever be voluntary?
Since the Law is not applied generally but is always limited in its application, the question of whether or not the income tax is mandatory or voluntary is actually superfluous. The question is one of jurisdiction: who and under what circumstances does the Law apply? In other words, who is being taxed, where, when involved in what activity and over what period of time?
The fact is that the income tax under Subtitle A is not "voluntary" as some have asserted. If you are the withholding agent, as was covered earlier, you must withhold income tax from the foreigner doing business in this country and pay it into the Treasury. There is nothing voluntary about it.
Income Tax Is Mandatory - Employment Is Tax Voluntary
With regard to the tax on wages under Subtitle C, otherwise known as the employment or social security tax, certain legal requirements may be considered mandatory, but only for the "employer", who is the actual payor of the wages, and even then, only if both "employer" and "covered employee" have voluntarily agreed via voluntary application on Form W-4 to participate in the entitlement programs.
Since, as stated earlier, there is no legal requirement for a citizen to have a SSN in order to live and work in the U.S. or simply for the sake of having one; no legal requirement to enter a SSN on Form W-4, and; no legal requirement for a business owner to obtain an EIN in order to hire workers, neither party - "employee" or "employer" - can be compelled to participate in the entitlement programs, hence compliance under Subtitle C is correctly said to be voluntary.
With regard to income tax, while it is true that code section 1461 is the only section to be found within all of subtitle A making any person liable to pay the income tax, code section 1 does impose the income tax on some unspecified "individual".
Identifying The Mysterious, Unspecified "Individual"
This individual may be a married person, a single person, a head of household, and so forth. In fact, the language of code section 1 will be familiar to anyone who has ever read the instruction booklet that accompanies Form 1040 each year. Code section 6012(a) makes this same unspecified "individual" liable to file a return to report income. [see accompanying copies of IRC sections 1 and 6012(a)]
Presumably, since the code does not specify, this "individual" must be the citizen living and working within the States of the Union. Otherwise, why would piles up Form 1040 crop up in banks, post offices and libraries each spring? Why would the IRS mail a return to one who filed it last year?
It shocks many to discover upon examination of the Code of Federal Regulations for Title 26 that the "individual" referenced in code sections 1 and 6012(a) is NOT the citizen working within the States of the Union, but one with foreign sources of income only.
As stated earlier, the citizen living within the states of the union would owe income tax if withholding from a foreigner, however this would be a tax on the foreigner's income not on the citizen's, although the citizen-withholding agent would be liable to pay it. He would also owe the income tax if he had investment or dividend income from certain foreign sources within foreign countries with which the united States has a current tax treaty. He would also be liable for the income tax if working abroad in a foreign country under a current tax treaty with the United States and earning above the annual $70,000 exclusion. However, if the typical American has never engaged in any of the above activities he has in fact never paid - and is not now paying - the income tax!
This comes as a great surprise to most Americans when they discover the truth within the Law and is no doubt the reason why the IRS refers to the filing of a Form 1040 as "voluntary compliance" and "self-assessment". The logical question such a stunned and disbelieving American would immediately ask is: "If I haven't been paying the income tax, then what have I been paying?" "I've certainly paid thousands of dollars of SOMETHING all these years!"
The answer is that he has been paying the employment tax and swearing it to be income to him. And how is this swearing accomplished? On a Form 1040. You see, the 1040 form bears a perjury clause which makes it an affidavit on which the filer swears that all material facts contained on the form are true and correct. Since he swears this to be so under the pains and penalties of perjury, he commits a felony if he makes a false statement or misrepresents amounts of income and expenses on the return. Mere failure to file a return is a misdemeanor, a far less serious charge than a felony.
From the IRS' point of view, it is of no concern whether or not the Law is being misapplied since, once the 1040 is sworn to and filed, it becomes prima facie evidence of a liability for foreign income tax. The IRS relies upon this sworn testimony which is why they don't return the check with a note explaining the error.
It is also worth mentioning that if you have voluntarily filed Form 1040 in the past, you have created a legal presumption of a requirement where none may actually exist under the Law. Under these circumstances, the IRS will expect the former filer to continue filing unless he rebuts the presumption that he is required to file. This reversal of jurisdiction is accomplished by means of an Affidavit of Revocation and Rescission as explained at various sites on the Internet.
With regard to the filing of returns, the only filing requirement for our as yet unspecified "individual" under Subtitle A "income" tax is found in code section 6012(a), as mentioned earlier. An examination of the regulations underlying section 6012(a) reveals that the 1040 form is actually a non-primary, non-required return - a worksheet, actually, to be attached to the front of Form 2555, titled "Foreign Earned Income". [see accompanying papers "26 CFR, Part 600 To End", "Part 602 - OMB Control Numbers Under The Paperwork Reduction Act", "26 CFR section 602.101", "paragraph (b) Cross-reference", "cover letter and OMB SF83 - Treasury request for approval of Form 2555", "Form 2555"]
As proof of the above, under the 1980 Paperwork Reduction Act, the Office of Management and Budget (OMB) must review and approve any agency form that requests and collects information from a citizen. OMB must compare the regulations which the agency - in this case, the Department of the Treasury - claims as its authority for the form to determine if the form is indeed authorized by law. It OMB approves the form, it assigns an OMB approval number to be displayed clearly in the upper right hand corner of the approved form.
Under 26 Code of Federal Regulations, part 600 to end, also known as the Parallel Table of Authorities, OMB assigned the same approval control number to both Treasury regulations 1.1-1 and 1.6012-0. These are the corresponding regulations to code sections 1 and 6012(a) which we mentioned earlier. Again, both of these regulations refer to some unspecified "individual" - presumably a citizen - upon whom income tax is imposed and who must make returns of income.
The number OMB assigned to these two code sections and to their regulations is "1545-0067". "1545" is the standard agency prefix assigned to all IRS forms and "0067" is the OMB approval number assigned to a specific return. The question is, which return? If indeed every citizen in America is the unspecified "individual" upon whom the income tax is imposed under section 1 and required to file returns under section 6012(a), one would naturally expect to find OMB number "1545-0067" displayed on Form 1040.
But it's not. The 1040 form bears OMB approval control number "1545-0074". Clearly there is a discrepancy here. Please take out any past copy of Form 1040 and confirm this for yourself. Out of literally thousands of IRS forms, the only form bearing OMB approval control number "1545-0067" is Form 2555, titled "Foreign Earned Income." The top of Form 2555 states "for use by U.S. citizens" The 1040 form is titled "U.S. Individual Income Tax Return".
Why is the 1040 not titled "U.S. Citizen Income Tax Return"? Apparently, the IRS does know the distinction between an individual and a citizen after all.
The top of Form 2555 instructs the filer to "attach to Form 1040", by which we see that the 1040 is a supplemental worksheet to be attached behind the required Form 2555. There's no place on Form 2555 for numbers. It simply allows you to state where you were working abroad, whether you were renting or owned a home, etc.
As further proof of the above, Treasury Decision 2313 was issued in 1916 to "collecters of internal revenue" and clarifies that the Form 1040 individual income tax return is to be used only by the U.S. representative of a nonresident alien receiving interest and/or dividends from the stock of domestic corporations on behalf of that alien. [see accompanying TD2313] Treasury Decision 2313 has not been overturned to this day.
Now that we have seen that most Americans have never actually paid a dime in income tax, we need to examine the employment tax to see who owes it and how they became liable to pay it.
Subtitle C encompasses Chapters 21-24 of the Internal Revenue Code and is where employment, or social security, taxes are covered. It is of interest to note that, unlike subtitle A which imposes the income tax on the individual with foreign source income, there is no code section in all of subtitle C which imposes the employment tax directly from the written statute itself. The employment tax is self-imposed by the citizen who wishes to become a covered employee by using a SSN, presumably because he wishes to build credits towards vesting in welfare entitlement programs such as social security, Medicare and so forth.
Now let's look at the proper paperwork within the law to stop withholding of income and employment tax in the workplace. IRS Publication 515 contains a statement the IRS probably hopes most Americans never see. [see pages from accompanying IRS Publication 515]
Under the main heading "Withholding Exemptions and Reductions" and within the paragraph titled "Evidence of Residence", the IRS states the following in speaking to the payer of income, such as the business owner: "If an individual gives you a written statement stating that he or she is a citizen or resident of the United States, and you do not know otherwise, you do not have to withhold tax under the rules discussed in this publication.Instead, get Publication 15, Circular E, Employer's Tax Guide." [see accompanying title page from Circular E, Employer's Tax Guide]
Obviously, if the citizen were ever liable for the withholding of income tax, this statement would never need to appear in print anywhere. With regard to the suggestion to obtain Circular E, our friends at the IRS fail to clarify that the Employer's Tax Guide has to do with employment taxes under subtitle C of the code, and has nothing whatsoever to do with the withholding of the income tax under subtitle A, which is the subject of Publication 515. Of course, the IRS would never use such devious and misleading language on purpose, would it?
The Law supporting the above statement in Publication 515 is found at section 1.1441-5 of the Code of Federal Regulations for Title 26, in which a U.S. withholding agent is authorized to accept a statement of citizenship from a citizen. [see accompanying 26 CFR 1.1441-5, paragraphs (a) through (c)]
Under the Law, the withholding agent is to retain the original of the statement of citizenship and to send a copy with a transmittal letter, not to the local IRS service center, but to the service center in Philadelphia only. This is understandable since Philadelphia is the IRS' international, or foreign tax office and the income tax, as we shall see, is an excise tax on foreign income only. For a copy of Publication 515, call the IRS forms distribution center at 1-800-TAX-FORM or download it from their Internet web site at http://www.ustreas.gov.
Some claim that the proper way to stop withholding is to mark a Form W-4 "exempt." This is incorrect. The Law allows only students and certain members of the clergy to claim exemption from withholding on Form W-4 since, under certain circumstances, they may be eligible for entitlement benefits without having contributed themselves. If the W-4 is marked "exempt", the IRS' Questionable W-4 Computing Center in Detroit, Michigan ordinarily will not prosecute for fraud but will simply write and instruct the business owner to withhold at the rate of single : zero.
Many working Americans have successfully stopped tax withholding upon presenting the statement of citizenship and accompanying paperwork to the business owner. Of course, a great many more have been refused their right to take home 100% of the fruits of their labor, due to many business owners' refusal to accept and forward the statement of citizenship to Philadelphia, no doubt due to their fear of the IRS and reliance upon undereducated tax professionals who tend to believe that, if they haven't seen it before, it cannot be true.
If this is the case, there are Non-Covered Employee Contracting services which will accept the statement of citizenship so that the worker will achieve his objective: namely, to take home 100% of his paycheck. And the benefit to the business owner is that he is relieved of the costs of Workers' Compensation and 50% matching co-FICA on the worker. In fact, upon discovering the advantages of contracting out for the employment of a worker, many business owners have become so enthusiastic that they've encouraged all of their other employees to do likewise!
One common concern voiced by workers who become intrigued with the idea of taking home 100% of their paycheck but remain as yet unfamiliar with the law goes something like this: "But if I don't have taxes withheld during the year, what will I do next April 15th"? As we have seen, there is no requirement under the law for a citizen to file returns to report his own domestic income.
"Covered Employment"
The Social Security tax is covered under chapter 21 of the Internal Revenue Code, titled: "Federal Insurance Contributions Act". But who is covered and where?
Section 3121(e)(2) of the code states: "For purposes of this chapter - The term "United States" when used in a geographical sense includes the Commonwealth of Puerto Rico, the Virgin Islands, Guam and American Samoa." In law, the term "includes" is always restrictive, never expansive. In other words, it's restricted to ONLY what is listed and no more.
As proof of the above, code section 7655 titled "cross references" states: "(a) Imposition of tax in possessions. For provisions imposing tax in possessions, see - (1) Chapter 2, relating to self-employment tax; (2) Chapter 21, relating to the tax under the Federal Insurance Contributions Act."
Clearly this section shows the application of both the self-employment tax and the FICA tax imposed under Chapters 2 and 21 to be limited to "possessions", namely Puerto Rico, Virgin Islands, Guam, and America Samoa as listed in IR Code section 3121(e}(2) defining the term "United States".
Section 3403 titled "Liability for tax" states: "The employer shall be liable for the payment of the tax required to be deducted and withheld under this chapter, and shall not be liable to any person for the amount of any such payment." This section usually erroneously convinces non-government employers that they are personally liable to pay to the IRS the amount the withholding tables specify even if they do not withhold the money from their employees' pay.
Non-government employers rarely understand that the term "employer" used in this section does not apply to them because the term "employer" as defined in the withholding provisions, means only Federal government related agencies and instrumentalities as listed in section 3401(c)). Even then, withholding applies only within the four island possessions and then only when there is a voluntary mutual agreement for withholding requested by the "employee" and agreed to by the "employer".
In a letter dated January 24, 1996 to a constituent, Congresswoman Barbara Kennelly admits: [see accompanying copy of letter] "... Section 3(a) of H.R. 97 (legislation she was sponsoring) defining the word state, and 26 U.S. Code 3121(e) are ... not the same ... The term state in 26 U.S. Code 3121(e) specifically includes only the named U.S. territories and possessions of the District of Columbia, Puerto Rico, the Virgin Islands, Guam and American Samoa ...".
Because of these facts there is no way a non-government employer within the fifty states can be required to withhold tax under Chapter 24. He cannot be "liable" for payment of the tax unless he voluntarily acts as an unpaid tax collector for the government. The FICA tax imposed on workers under the provisions of Section 3101 is a territorial income tax which applies only in the four island possessions.
The regulations implementing the withholding provisions in the IR Code clearly show that all withholding is voluntary for all individuals, both government employees, (under 3402(p)(l)(A) and non-government (under 3402(p)(3)) workers. In order to institute withholding, a voluntary request must be made by the employee and acceptance must be made by the employer.
The bottom line is that there is no legal requirement for the common law business owner within the 50 union States to become an uncompensated bookkeeper for government, unless he likes working for free. And the citizen-worker can take home 100% of his paycheck unless he wants to be eligible for government welfare.
The employer who volunteers to obtain and use an EIN actually converts his constitutionally protected status from common law employer to statutorily defined "covered" or "participating" employer. Likewise, the employee who volunteers to obtain and use an SSN converts his constitutionally protected status from common law employee to statutorily defined "covered" or "participating" employee. Here is what the law says with regard to covered employment. [see accompanying pages from 20 CFR, sections 404.1001, 404.1003 and 404.1005]
The Code of Federal Regulations for Title 20, at section 404.1001 states at paragraph (a)(2): "If you are an employee, your covered work is called 'employment'."
Section 404.1001(a)(3) states: "If your work is 'employment' your covered earnings are called 'wages'."
Section 404.1003 states: "Employment means, generally, any service covered by social security performed by an employee for his or her employer."
Section 404.1041(a) states: "The term "wages" means remuneration paid to you as an employee for employment unless specifically excluded."
So we see that covered employment is the legally defined condition of receiving covered earnings from a covered employer as compared to non-covered employment which is simply common law employment, that is, the exercise of one's basic right to work without having monies withheld as contributions towards government welfare schemes.
The business owner who is not making use of an EIN is simply a common law employer while the employee who is not making use of a SSN is simply a common law employee.
Property Rights Protected In Our Constitutional Republic
Clearly, the distinction between employee and "covered employee" is not merely one of semantics, but one which reaches to the very bedrock of American Liberty since all socialist wealth redistribution schemes in our republic can only be 100% voluntary! The reason this is true is because one's labor is the ultimate form of personal property and the federal Constitution expressly prohibits the taking of private property for public use without just compensation under the 5th Amendment.
Simply stated, money cannot be taken by government from one citizen without his consent and given to another citizen without robbery occurring, regardless of whether or nor such takings are couched behind phrases like "fair share", "entitlements", and "social policy". In order for money to be exacted from citizen A and given via government to citizen B, the consent of citizen A must first be obtained.
The bottom line is that the citizen who wishes to work for another citizen is not required by Law to have his most private property - the fruits of his labor - withheld from him before he can receive it, and redistributed through federal and state give-away programs to other citizens who may not be as productive.
Covered employment, although an entangling web which imposes many burdens upon both covered employer and covered employee, is voluntary since there is no legal requirement to enter the web. To repeat: the citizen who wishes to start his own business is not required by Law to function as an uncompensated bookkeeper for government. He must volunteer into this status of unpaid servitude. Such noble volunteerism has come back to haunt many a small businessperson who fell behind in making deposits of withheld payroll taxes.
Such withholdings are called "trust funds" and the IRS is particularly aggressive in going after the hapless business owner who dips into such withholdings to cover the costs of other business operations.
Introducing "Non-Covered Employee Contracting"
What business owners need, although most are still unaware of the arrangement, is the form of working relationship known as Non-Covered Employee Contracting, which simply means the exercise of one's constitutionally protected right to contract.
Employment contracting reaches down to the most basic principles of the American experiment in individual liberty and self-government with its built-in constitutional protections of individual rights. Namely, under what conditions are you truly a free man or woman? If someone else - government, for example - can take a portion of your property without your permission, can you truly be free?
The answer is both yes and no. As supreme Court Justice Fields stated in the 1883 supreme Court case Butchers' Union Company v. Crescent City Company: "It has been well said that the property which every man has in his own labor, as it is the original foundation of all other property, so it is the most sacred and inviolable."
One's own life is unarguably the most personal form of property. And of what does one's life consist? Of a limited number of hours which, once passed, can never be relived. Because one's labor involves the sale of one's hours - of one's very life - for compensation, it can logically be said that without control over the disposition of one's own labor, one is not in control over the disposition of one's life and cannot truly be said to be in a condition of Liberty.
Anything less than 100% Liberty is some percent of slavery, or involuntary servitude, which is prohibited under the 13th Amendment to the Constitution. Translated, this simply means that if you don't have total control over your personal property including your labor, you don't fully control your own life and Liberty. You are controlled by someone else.
All rights come from God, not from man or his agents in government and rights cannot be taxed. For example, consider your God given right to life. Can it be taxed? Of course not. If it could, the tax could be raised so high as to force you to give up your life due to your inability to pay the tax. Obviously such a proposition is ludicrous.
The license to form a corporation, partnership or other such entity, however, is a privilege granted by government, meaning by man - specifically, by those men and women in the legislatures who write the laws affecting such artificial entities. A corporation can not only be taxed, it can be regulated according to the pleasure of the legislature and taxed high enough to force it into certain types of behavior. In this manner, legislatures routinely manipulate the levers of political control.
The Founders and Framers of our nation recognized that one's right to contract was a basic, elementary right which preceded even the forming of our Constitution, which is why Article 1, Section 10 of the Constitution states: "No State shall pass any Law impairing the Obligation Of Contracts".
This simply means that any citizen of one of the currently 50 States of the Union enjoys the unalienable right to contract with another citizen, absent fraud or the intent to commit fraud, with no interference by or "partnership" with government. He can start his own business and contract with any other citizen for labor, goods or services and no act of the legislature can impair his right to do so.
What does it mean to contract with another citizen for one's labor? Quite simply, to go to
work for someone else, exchanging the hours of one's life for compensation. This is a
like-kind exchange: one unit of labor given in exchange for one unit of compensation
received. Therefore, there is no gain: there is complete parity in the exchange since
neither party benefits unevenly.
Each receives exactly the same from the other, however the form or substance of the compensation can be whatever is agreeable to both parties as a medium of exchange and can take the form of green pieces of paper called Federal Reserve Notes, of real money in the form of gold and silver coin, or of some other physical substance such as firewood, food or whatever.
Since the right to contract for one's labor is an inherent God-given right and not a privilege, the worker logically has the inherent right to keep 100% of the compensation he receives for the performance of the service or product he provides. If this is true, and it is, then where does income tax, the second plank in Karl Marx's "Communist Manifesto", fit into a constitutionally limited republic such as ours?
The answer is that it doesn't. The primary reason why all democracies throughout history have failed is that the majority of the citizens eventually discovered that they could elect those politicians who would guarantee them the greatest share of wealth from the public trough. America's Founders knew and understood this. Perhaps, through information such as you have just learned, their vision will finally prevail.
Court Forbids Congress To Legislate Socialism
Interestingly, the supreme Court addressed this issue precisely in the case Railroad Retirement Board vs. Alton Railroad Company, decided May 6, 1935. Congress had passed an act to provide for the retirement of railroad workers and the Court declared it unconstitutional, stating:
"The catalog of means and actions which might be imposed upon an employer in any business, tending to the comfort and satisfaction of his employees, seems endless. Provisions for free medical attendance and nursing, for clothing, for food, for housing, for the education of children, and a hundred other matters might with equal propriety be proposed as tending to relieve the employee of mental strain and worry. Can it fairly be said that the power of Congress to regulate interstate commerce extends to the prescription of any or all of these things? Is it not apparent that they are really and essentially related solely to the social welfare of the worker, and therefore remote from any regulation of commerce as such? We think the answer is plain. These matters obviously lie outside the orbit of Congressional power."
In other words, Congress has no constitutional authority to legislate for the social welfare of the worker.
Roosevelt Gets Social Security Passed As A Treaty!
Three months later, in order to sidestep the high Court, the Social Security Act that President Franklin D. Roosevelt signed on August 14th, 1935, was treaty based. As incredible as the truth actually is, this act was imposed on aliens only, yet hundreds of millions of unwitting Americans have since obtained a SSN and contributed towards retirement benefits under treaty based legislation. Roosevelt knew that the supreme Court would have no objection to treaty-based legislation which taxed American citizens in their own country only when they volunteer to apply for government benefits.
You see, treaties are between governments, not citizens, therefore a treaty between the united States and a foreign country would affect the conduct of the citizen when he's an alien in the other country with whom the treaty exists, but has no bearing on the citizen when in his own country. To believe otherwise would be ludicrous. How, for example, could French law sweep across the Atlantic ocean and down into a farm house in Kansas to dictate to Farmer Brown and his wife how they must lawfully conduct themselves?
Of course, that doesn't prevent the Browns from volunteering to be covered under a treaty-based program when in their own country. Although the social security program requires TIN's of foreigners only, the citizen can elect to number himself and participate in government handout schemes.
If you have always leaned towards or supported liberal give-away and spending programs, please don't misunderstand what we are saying or misconstrue us as hard-hearted. Nothing could be further from the truth. All rational societies in man's history have provided to take care of those less fortunate, by which we mean to say those who are disabled or otherwise incapable of caring for themselves as opposed to those who are simply unwilling to work.
If your neighbor is in need of a pair of shoes and you have an extra pair, you can give them to him of your own free will. That's called charity and has existed since mankind's earliest days in many forms, including personal giving, community and church volunteerism and private philanthropy. But if, however noble my motives may be, I come to your house and take a pair of shoes from you without your consent at gunpoint or under threat of fines or incarceration in order to give them to someone else, that's still robbery. It is no less robbery if the robber is named government.
If you believe that government should be in the public charity business, the federal government offers many voluntary programs such as social security into which you can contribute and from which you can collect with no robbery involved because they're all voluntary. Of course, the legislature may borrow your contributions in the meantime and spend them to bail out their private banker friends, study the sex life of the tse tse fly, travel on pork barrel "good will" expeditions to tropical vacation atolls , etc., and basically forget all about you and your "reitrement".
Unfortunately, the government has for the most part neglected to explain the voluntary aspect of social security to its taxpaying constituents. Most Americans don't realize that no federal benefits are paid automatically, they must be applied for. Even a retiree who wishes to begin receiving social security payments must apply for the benefits. In order to become eligible to receive, you first must have given, although both ends of the pipeline are voluntary. You apply for the number, a voluntary act; you then apply for permission to use the number and be withheld from when you work, another voluntary act; and, finally, you apply for permission to receive benefits, another voluntary act.
In order for the Social Security Administration to keep track of how many contributions are being accumulated, or credited, towards such benefits, a unique number must be assigned to each taxpayer so that his records will not be confused or combined with those of any other taxpayer. Since the IRS is tasked by Congress with the job of collecting all taxes, including the social security tax, the IRS has a space on virtually all of its forms that request the TIN of the person making out the form. Most IRS forms require a signature in order to be filed, and as mentioned earlier, a signature can only ever be voluntary. Furthermore, virtually all IRS forms contain a penalty of perjury clause, which is further evidence of their voluntary nature, since, under the 4th Amendment to the Constitution, no one can be compelled to produce books and records unless under court order and even then, cannot be forced to testify as a witness against himself under the 5th Amendment.
The most common way today that working citizens accumulate credits towards vesting in federal welfare programs such as social security is to have contributions withheld from their paychecks in the workplace before receiving the balance of their property in their pay envelope. Since the citizen gives the business owner his private permission to withhold, without which the owner would be committing theft, the citizen's constitutionally protected right to private property is not violated. Presumably, having tax monies withheld before you ever see them is far less painful than assessing yourself a voluntary contribution each April 15th. As the old saying goes "out of sight, out of mind".
Since the Constitution protects the right of one citizen to "contract out" his labor to another citizen, neither federal nor state government can interfere with this basic and unalienable right. Such contracting is called "employment contracting" and not only relieves the business owner of all of the burdens of payroll bookkeeping, it allows the worker to take home 100% of his weekly paychecks with no taxes withheld.
Movie Star Introduces Tax Withholding As Crowds Cheer
At this point, it would be useful to take a look at the history behind tax withholding. The Victory Tax Act was enacted in 1942 at the outset of World War II. The Victory Tax was a direct tax on income and therefore in violation of Article 1, Section 2, Clause 3 of the United States Constitution, however, the constitutionality of the tax was never challenged.
The Victory Tax was first introduced to the American people by Disney Studios' star property, Donald Duck, in a color cartoon commissioned by the Department of the Treasury and titled "The Spirit Of '43". That's right, Donald Duck. Remember what you are about to learn the next time you visit a Disney theme park (and why is this not depicted in an "animatronic" exhibit?)
This short color film ran for an extended period as a leader to popular motion pictures of the era shown in movie theatres nationwide. In a time prior to the advent of television, movie going was a common and popular pastime, with most Americans going to the movies at least once each week. By various estimates, over 60 million Americans viewed a reluctant Donald Duck being converted into an eager, tax paying duck who would allow taxes to be withheld "to defeat the Axis". A Gallup poll indicated that the film affected 37% of all American taxpayers' willingness to pay the Victory Tax.
Due to its sophisticated displays of anti-Nazi symbolism, audiences stood and cheered at the film's end with patriotic fervor and any American at that time who argued the constitutionality of the Victory Tax would no doubt have been strung up from the nearest streetlight as a Nazi sympathizer. The end result of this effective propaganda campaign by the Treasury Department is that over 39,000,000 Americans were persuaded to pay the voluntary Victory Tax as a patriotic contribution towards the war effort.
The Victory Tax Act was renewed in 1944 and was to expire upon the cessation of hostilities, yet remains in effect today, codified under the Internal Revenue Code at code section 3402 in subtitle C. You see, when Roosevelt's war (some still call it World War II) was over, Washington simply could not let go of its newfound riches - the payroll tax the public had been conditioned to accept. The "baby boom" generation would not even question it.
Top Banker Reveals: "Taxes For Revenue Are Obsolete"
The concept of wage tax withholding was actually introduced by Beardsley Ruml, then Chairman of the powerful New York branch of the Federal Reserve Bank of New York. Mr. Ruml called his proposed withholding scheme "the Ruml pay-as-you-go plan". In 1946, Mr. Ruml wrote a paper titled "Taxes For Revenue Are Obsolete" which he read before the American Bar Association and was published in the January 1946 issue of American Affairs magazine. [see accompanying synopsis of Mr. Ruml's speech]
In this article, he revealed that the real reason for the income tax is to protect the buying power of a paper money that is no longer backed by gold or silver. Mr. Ruml explained that, by transferring purchasing power from the people to the government, the income tax offers a safety valve through which inflationary spending can be released. By ladling excess paper from circulation through confiscatory taxation, the hyperinflation that would ordinarily result from fractional reserve banking can be delayed.
For those who may be interested, the true, hidden purpose for the income tax is revealed thoroughly in a two-hour video titled "The Truth Behind The Income Tax" and can be ordered directly from us for $25 which includes shipping and handling. See our mailing address above.
It is interesting to note that today's wage tax withholding which is a continuation of the Ruml pay-as-you-go scheme was designed not by an official of the federal government, but the most influential American banker of his day. This fact alone should reveal the true nature of the symbiotic relationship between the banker and the taxman.
The OMB approval control number which is displayed in the upper right corner of IRS Form W-4 is "1545-0010". A tracing of this number under the tax regulations will reveal that the sole authority for the Form W-4 is code section 3402 which is found in Chapter 24 of subtitle C of the code and deals with employment tax only. As stated above, 3402 is the current codification of Mr. Ruml's withholding scheme.
Where Do Your Hard Earned Tax Dollars Really Go?
And where do the income taxes that are collected actually go? In 1982, President Ronald Reagan formed The President's Private Sector Survey On Cost Control, an independent panel of 160 of the country's top business leaders headed by Peter Grace and known as The Grace Commission, in order to find ways to cut federal spending.
In their report submitted to President Reagan on January 15, 1984, this blue-ribbon panel stated the following, quoting directly from page 12 of their report:
"Resistance to additional income taxes would be even more widespread if people were aware that one-third of all their taxes are consumed by waste and inefficiency in the Federal government as previously identified. With two-thirds of everyone's personal income taxes wasted or not collected, 100% of what is collected is absorbed solely by interest on the federal debt ... in other words, all individual income tax revenues are gone before one nickel is spent on the services taxpayers expect from the government."
This illustrious private panel reported that not one dollar of personal income tax collected by the IRS goes to pay for government services, but actually goes to pay the interest on our "debt" to the Federal Reserve. President Reagan thanked the Grace Commission for their report and then shelved it. None of the recommended measures to cut billions in government spending were implemented.
So we see that the income tax goes to pay the interest on our debt to the Federal Reserve. Of course this corresponds perfectly with what Beardsley Ruml explained was the true purpose of the income tax - to protect and prop up the buying power of paper money.
A properly educated employment contracting company will uphold and protect the property rights of a citizen. It will accept the proper paperwork under the federal regulations as will be explained shortly and will not withhold income or employment tax. It will insist that due process be preserved with regard to claims by third parties and will dishonor an IRS or state "Notice of Levy" if not accompanied by a Warrant of Distraint from a court of competent jurisdiction.
Section 6331 of the Title 26, Internal Revenue Code, states that it is lawful for the Secretary to collect taxes by means of a levy only after Demand for Payment has been sent to the person liable. It has been our experience that the IRS routinely violates the law by never bothering to send a proper Demand for Payment to a citizen. Instead, they fool the business owner into accepting a Notice of Levy which is not a proper, lawful levy.
The business owner honors the non-levy and sends the withheld monies to the IRS. This common and unfortunate practice occurs since most employers and their attending tax professionals never bother to read the Law.
Internal Revenue Code section 6331 title "Levy and Distraint" is the only code section defining against whom levy may be made. When the IRS sends out a Form 668-W, Notice Of Levy, on the reverse of the notice they start with paragraph 6331(b), and deliberately omit printing paragraph 6331(a), the definition of whom levy can legally be made against. [see accompanying 26 USC section 6331(a)]
Paragraph (a) states: "Levy may be made upon the accrued salary or wages of any officer, employee, or elected official, of the United States, [or] the District of Columbia ... by serving a notice of levy on the employer ... of such officer, employee, or elected official."
Section 6331 is the only authority in the entire IR Code that provides for the levy of wages and salaries etc., and the limitation of that authority should be rather obvious since it pertains only to certain officers, employees, and elected officials of the government. In other words, there exists no authority under Law for the IRS to levy on the wages of a working citizen who is not an "... officer, employee, or elected official, of the United States, [or] the District of Columbia ...".
The Legal Reference Guide For Revenue Agents, states at section 331.1: ".. it should be born in mind that a levy requires that the property levied upon be brought into legal custody through seizure ... it cannot be emphasized too strongly that constitutional guarantees and individual rights must not be violated...". Of course, most agents never bother to read their own employee manual and just do what their supervisors tell them to do. Many agents upon discovering the truth become troubled at their actions and quit. Perhaps such realizations contribute to the IRS' annual 40% employee turnover.
In the case United States v. O'Dell, the Circuit Court of Appeals for the Sixth District stated on March 10, 1947 that a "... levy requires that property be brought into legal custody through seizure... and that mere notice is insufficient". The court also stated that the method for accomplishing a levy is the issuing of a Warrant of Distraint, the making of the bank or employer a party, then serving them with a Notice of levy, a copy of the Warrant of Distraint, and a Notice of Lien.
26 United States Code at section 6335(a) under Notice of Seizure confirms this in stating: "As soon as practicable after seizure of property, notice in writing shall be given by the Secretary to the owner of the Property ...". In other words, the Law with regard to levy clearly states that the property to be levied upon must first be in the possession of the United States. Seizure must precede levy and only property subject to forfeiture can be seized, namely items manufactured for resale under subtitle E of the Internal Revenue Code which covers alcohol, tobacco and firearm products exclusively.
The "Court Order" is a requirement for the levy procedure because it establishes the validity of the IRS's claim to the third party to whom the levy is presented, namely the bank manager or business owner. Proper procedures assure the third party that the lien and subsequent levy have been executed in a lawful manner.
The "Court Order" also protects the third party from a liability which may arise under the Code of Federal Regulations for Title 26, Internal Revenue Code, at section 301.6332-1(c) which states in part: " ... Any person who mistakenly surrenders to the United States property or rights to property not properly subject to levy [i.e., the bank manager] is not relieved from liability to a third party who owns the property...".
A bank manager or business owner is a fiduciary with the responsibility for protecting the private property of his customer or worker, namely the monies in his possession. Unfortunately, virtually everyone, including most bank managers and business owners, assume that the IRS has the absolute authority to do absolutely anything it wants to.
A responsible contracting company understands that, in our nation of
Law, the responsibility of the individual - including the employer - is to know the Law
that authorizes his or her individual actions, and ignorance of the Law is no excuse.
If the business owner knowingly breaks the law by honoring an IRS Notice of Levy without
the proper accompanying court documents, he is in violation of the state property Law of
"theft by conversion" or unauthorized use of funds. This is a felony offense
under State law, and one that business owners who review this presentation should consider
carefully.
A responsible contracting company would never honor an IRS Notice of Levy on its face without also receiving a copy of the Notice of Lien and the Warrant of Distraint from a court of competent jurisdiction as the Law requires.
Here's an example of how a knowledgeable Non-Covered Employee Contracting company can protect your privacy. Tax preparers routinely fire off an IRS Form 1099 to any person whom they consider to be a subcontractor. Of course, that's not what the Law says.
If you were to research the OMB approval control number on Form 1099 back to the Code of Federal Regulations, you will discover that it goes to two code sections only: 1041 and 3042. Both of these code sections have to do with employment tax exclusively and have nothing whatsoever to do with income tax.
If a contracted worker/client gives a properly educated contracting company a written statement that he is not a voluntary participant in subtitle C employment withholding, the contracting company will not issue him a 1099, therefore there will be no copy of the 1099 send to the IRS.
Taking Your Financial Affairs Into Your Own Hands
Today, more and more Americans are taking their personal and business affairs into their own hands and relying less and less upon licensed, fee-based professionals in all fields. One example of this is seen in the area of health and medicine.
A large segment of the public now exhibits a healthy mistrust of licensed medical professionals and has come to embrace alternative, holistic and other natural forms of healing, many of which can be practiced at home. The days of putting Marcus Welby, M.D. on a pedestal and blindly following his every utterance are long past.
In similar fashion, the public is growing increasingly skeptical of lawyers, C.P.A.'s, accountants, financial planners, tax preparers and government-licensed professionals in general, and is learning more and more to trust their own good judgment to cake care of their own business affairs without depending upon licensed professionals of all types, including our professional legislators in Congress, virtually all of whom are members of the private labor union known as the Bar Association.
It has not escaped the public that Congress has succeeded in putting America $5.6 trillion dollars into debt as of this writing, while escalating taxes to the breaking point for most American families. The public has watched these career legislators "fudge the numbers" and create the appearance of balancing the government's books by raiding the so-called "trust funds", year after year.
To date, Congress has borrowed - let's call it what it really is - stolen, every dime not just from the social security trust fund, but from the retirement trust funds for current government employees and veterans of our armed services as well. All of these funds have been sucked dry with nothing left behind but non-negotiable government bonds. Any private business person who got caught doing likewise would end up in jail alongside the junk bond kings.
For an autopsy of the entire swindle, pick up a copy of Martin Gross's paperback "The Government Racket: Washington Waste From A To Z". Once is reminded of the quote attributed to Samuel Clemens, a/k/a author "Mark Twain": "There is no distinctly native, American criminal class, except Congress". In keeping with this sardonic remark, let's take a humor break. [see accompanying comic strips and cartoons - certainly appropriate within any discussion of the legislature]
The only way the beneficiaries of these trust funds including tomorrow's social security recipients can ever be paid is through reduced benefits, increased taxes or, most likely, both. Most Americans do not realize that they have no actual, individual contract with the government for social security benefits, nor do they have any actual "account".
Social security is not a contract, but a political promise and Congress could renege on all payments tomorrow morning if they voted to do so. [see accompanying "Social Security Is Not a Contract" by prominent constitutional criminal defense attorney, Lowell Becraft, Jr.]
In short, the public has witnessed its trusted representatives to Congress abdicate their solemn responsibility as fiduciaries of these taxpayer monies, spending them instead to bail out the private S&L's, to provide loans and outright giveaways through the International Monetary Fund to rescue the economies of Mexico, Russia and, lately, a host of Pacific Rim nations.
The public has seen the investment portfolio managers of many of America's private corporations, from the smallest companies to major Fortune 500 conglomerates, rob their own employee retirement funds to finance advertising and marketing campaigns. How do they get away with this? Because they know they can turn to the Federal Pension Guarantee Corporation trust fund to bail them out with taxpayer dollars. Of course, this trust fund is already in the red too, which should cause any cautious person with a 401(k) or other pension plan to scrutinize the activities of his pension fund manager.
Increasingly, America's workers are coming to realize that the monies withheld from their paychecks each week to be managed by a spendthrift Congress could better be privately invested by themselves towards their own retirement, under their own direct supervision and control. Indeed, today's worker is highly motivated not to contribute to failing federal welfare schemes. Just recently, social security has been denounced in Forbes Magazine and others as a "ponzi scheme". [see accompanying articles from Forbes Magazine and Readers Digest] An associate of ours has suggested that a statue of Italian immigrant, Charles Ponzi, father of the ponzi pyramid scheme, should be erected in the main lobby of the Social Security building in Baltimore!
Even Dorcas Hardy, former Social Security Commissioner under President Reagan and author of the book Social Insecurity was quoted in the December 1995 Reader's Digest as saying: "There is no prospect that today's younger workers will receive all the Social Security and Medicare benefits currently promised them".
A recent research report titled The Financial Outlook for Social Security and Medicare, published by the Congressional Research Service as report number 92-608, dated July 31, 1992, uses the word "insolvent" over two dozen times. [see accompanying cover page of CRS Report 92-608] Write to your Representative and request a copy of the full report.
Given the truth of the above, many Americans are now asking themselves: "Why on earth am I contributing to this Black Hole each week? I'll never see these monies again as long as I live! If only there were some alternative." As a result of such realizations, many Americans have concluded that they are more than capable of handling their own personal and business affairs. Some of these "affairs" include providing for their own retirement. Others include providing for their own health and dental coverage as well as provisions for their own automobile allowances, insurance and other day-to-day miscellaneous expenses.
In short, these people want to take full control over the monies they receive in their paycheck.
That concludes our presentation - we hope you found it useful. We thank you for your time and interest in preserving the American way of life as envisioned by our nation's founders, many of whom sacrificed everything to create the Liberty you now have the protected right to enjoy.
We hope you've learned a little about property rights and due process. Remember, go look up the Law!
For a copy of the full 104 page report from which this transcript was derived, including copies of the law plus all legal exhibits, references and letters cited in this presentation, please forward a donation of 20 Federal Reserve Notes (which includes shipping and handling) to the address below.
Please understand that most contracting firms will NOT explain the law to you, since they are not licensed attorneys and therefor do not want the liability of giving, or even of appearing to give legal advice.
[END OF PRINTED REPORT]
If you would like a FREE REFERRAL to a reliable and reputable
Non-Covered Employee Contracting firm, please write to:
William Cash, Senior
Manager
Independent Referral Services
12 Carroll Street, Suite 1441
Westminster, MD 21157-4843
"Putting You In Touch With The Right People ... We're The Honest IRS!"
Last Update: Tuesday, May 18, 1999 02:06:12 PM