Ares
5th October 2013, 09:51 AM
The TRUTH About
W-4 WITHHOLDING
Now let's check out one of the major areas where you provide the evidence against yourself, that you are liable for a tax. But let's get some terms straight first. First, remember this very important point: If you are not 'liable' for a tax, then you are not subject to withholding. And if you had no corporate taxable "income", as legally defined by the Supreme Court,, then there is no liability for a tax.
Withholding is taken out of your wages, but, what does that 'word of art' "wages" mean in the IRC (Internal Revenue Code), since 'wages' are subject to withholding?
IRC Section 3401 Definitions
(a) Wages. For purposes of this chapter, (Ch. 24 - withholding at the source) the term "wages" means all remuneration for services performed by an employee for his employer, including the cash value of all remuneration (including benefits) paid in any medium other than cash;
(c) Employee. For purposes of this chapter (Chapter 24 - Collection of Income Tax at Source on wages), the term "employee" includes an officer, employee or elected official of the United States, or of any political subdivision thereof, or of the District of Columbia, or any agency or instrumentality of the foregoing. The term "employee" also includes an officer of a corporation.
(d) Employer. For purposes of this chapter, the term "employer" means the person for whom an individual performs or performed any service, of whatever nature, as the employee of such person,
Notice that the only word that was really defined here was "employee" and even then they used 'employee' in the definition of 'employee'. Also. notice that the term 'employer' does NOT mean the company that you work for! The 'employer' is the one has "employees". And an employee is someone who is an officer, employee or elected official of the United States government, or an officer of a corporation.
IRC 3401(c) plainly states that corporation officers and government employees are definitely considered employees. This section is talking about withholding, of any tax imposed, at the source. Withholding is ONLY allowed on 'employees' (officers, employees or elected officials of the U.S.) Why? Because of the Public Salary Tax Act.
Let's examine that term "employee". It only "includes" government employees and corporate officers, therefore it would "exclude" all workers not in this category. Are you an officer, employee or elected official of the federal government? If you are not, then is the company you work for an "employer", as defined?
Now look at the definition of "employer". You will see that it means someone who has 'employees'. Remember, an employee, as defined, ONLY works for the government, or is a corporate officer. Therefore an 'employer' could only mean a government employer, since no one else could possibly employ 'employees'. The definition of employer says an employer is a "person" with an 'employee' who performs services for him. An 'employee' works for the government. It is the employee that makes the distinction, not the employer! Since an employee can only be a government employee, then the employer can only be a government employer. The employee definition is the controlling definition.
Now look at the definition of 'wages'. Wages are only, as defined, payment for services performed by a employee (government employee or corporate officer) for his employer (government). 'Employees' receiving 'wages' are subject to withholding, since the wages are received from a privileged occupation (government employment privilege or corporate privilege).
The Public Salary Tax Act applies to government employees, doesn't it? So I would venture to say that withholding only applies to government employees.
When you contract to be a U.S. citizen, you agree to become a voluntary slave to help collect revenue. Similarly, when you agree to work for the government, a privilege, you also agree to be a voluntary slave/employee. After all, for this privilege, you also get to pay a Public Salary Tax and get to have that tax withheld from your wages in advance. The government can dispose of a part of your labor, the tax withheld, and you cannot do anything about it, because you voluntarily chose to work for the government.
Slave. A person who is wholly subject to the will of another; one who has no freedom of action, but whose person and services are wholly under the control of another. One who is under the power of a master, and who belongs to him; so that the master may sell and dispose of his person, of his industry, and of his labor, without his being able to do anything, have anything, or acquire anything, but what must belong to his master. (Black's Law Dictionary - 6th Edition)
Person. In general usage, a human being (i.e. natural person), though by statute term may include labor organizations, partnerships, associations, corporations, legal representatives, trustees, trustees in bankruptcy, or receivers.
Scope and delineation of term is necessary for determining to whom Fourteenth Amendment of Constitution affords protection since this Amendment expressly applies to "person".
Aliens. Aliens are "persons" within meaning of Fourteenth Amendment . . .
Corporation. A corporation is a "person" within meaning of Fourteenth Amendment . . ." (Black's Law Dictionary 6th Edition)
According to these definitions, a slave is a 'person', and a person can be an alien or a corporation. The 13th Amendment abolishes 'involuntary' slavery, but not 'voluntary' slavery. A U.S. citizen is a voluntary slave, with no rights to acquire property or income and must "return" a portion of his 'wages' every April 15.
14th Amendment. All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States, and of the State wherein they reside.
Since slaves are persons, could this be read all 'slaves' born or naturalized . . .? A U.S. citizen's name is spelled in all caps. A name spelled in all caps indicates a corporation or a corporate citizen (property).
Does the company you work for claim to be the United States or an agency thereof? Then, if he is NOT the United States, you are not an employee and you did NOT receive wages, as defined. And if you did not receive wages, then you are not subject to withholding. Isn't that simple! Give your employer a copy of this chapter and let him decide if he is the United States, or an agency thereof. If he thinks he is not, then he has no obligation to withhold taxes from your paycheck!
Withholding only applies to government employers. Is your employer a government employer?
Where is the statute that authorizes withholding?
IRC Sec. 3402. Income tax collected at source.
(a) Requirement of withholding.
(1) In general. Except as otherwise provided in this section, every employer making payment of wages shall deduct and withhold upon said wages a tax determined in accordance with tables or computational procedures prescribed by the Secretary.
As you can see, withholding only applies to government 'employers' making payments of 'wages'. The IRC defined 'employer' for us: a government employer who has employees (officers, employees and elected officials of the United States).
So if you ARE a government employee, you are required to furnish a W-4 exemption certificate, indicating how much public salary tax you want withheld.
Sec. 3402 (f) (2) Exemption certificates.
(A) On commencement of employment. On or before the date of the commencement of employment with an employer, the employee shall furnish the employer with a signed withholding exemption certificate relating to the number of withholding exemptions which he claims, which shall in no event exceed the number to which he is entitled.
This exemption certificate (W-4) section applies only to 'employees', as defined, working for a government 'employer', as defined in Sec. 3401(d).
If you are not an 'employee', then you qualify to be exempt from withholding on the W-4 withholding certificate.
Remember, these statutes only apply to those who are employees and have wages., as defined.
Think about this. If there is a law that allows the government to tax your income directly, do you need to sign a paper giving them permission to do so? No. Then why would you need to sign a paper, under penalty of perjury, for them to withhold a percentage of your wages up front, if they have a law that says they can do it? You say it is to claim an partial exemption from the withholding of tax.
But what if you did not want to claim an exemption? Do you still need to sign the form? After all, the form only applies to 'taxpayers' that want more or less tax withheld from their paycheck. Are you a 'taxpayer'? Only if you have a tax liability.
Maybe we better check another statute.
IRC Sec. 3401(e) Number of withholding exemptions claimed. For purposes of this chapter, the term 'number of withholding exemptions claimed' means the number of withholding exemptions claimed in a withholding exemption certificate in effect under section 3402(f), or in effect under the corresponding section of prior law, except that if no such certificate is in effect, the number of withholding exemptions claimed shall be considered to be zero.
Wait a second! I thought your employer told you that you had to file the form before you went to work. Then why the exception, that if no such certificate is in effect? If it is required, how could a certificate not be in effect? Because you chose not to sign one! After all, the exemption is a benefit granted by Congress to 'taxpayers'. Are you required to decline a benefit, under penalty of perjury, if you do not want the benefit? What if you do not want welfare or food stamps, do you need to sign a paper declining the benefit, before you don't get it? Why not? Because you cannot be forced to engage in a privileged activity or receive a privileged benefit, just so you can be taxed.
Since the government takes the tax out of your paycheck before you get it, they already have your money. And it is very difficult to get the money back once they have it. The best route is to keep them from taking it out of your paycheck in the first place! There is one situation in which you can stop withholding on your income.
26 CFR (Code of Federal Regulations) 31.3402(n) Employees incurring no tax liability. An employer shall not deduct and withhold any tax under chapter 24 upon a payment of wages . . . if there is in effect, with respect to the payment, a withholding exemption certificate furnished by the employee which contains the statements that
(a) the employee incurred no liability for the income tax imposed under subtitle A of the Code for his preceding taxable year;
(b) the employee anticipates that he will incur no liability for income tax imposed by subtitle A for his current year.
What is the withholding exemption certificate? It is just the W-4 form. You can claim exempt if you meet the two conditions listed above.
Now I ask you, if you had no corporate income, or if you were an American Citizen and not a U.S, citizen, then did you have a tax liability for last year? No. But remember, the W-4 form is a withholding authorization form. It merely states that you ARE subject to withholding, but are exempt in this particular situation. The form is for taxpayers.
You should also question your "employer's" status as "withholding agent". Ask him if he is an authorized withholding agent. He will tell you yes. Only withholding agents are authorized to withhold tax from your paycheck. What is the definition of withholding agent? The IRC tells us.
IRC 7701(a)(16) Withholding agent. The term "withholding agent" means any person required to deduct and withhold any tax under the provisions of sections 1441, 1442, 1443, or 1461.
Oh really? Well, just what do sections 1441 - 1443 pertain to? In the IRC, Chapter 3 Subchapter A, is where these sections are found. What is the title of this Subchapter A? Nonresident Aliens and Foreign Corporations!
1441. Withholding of tax on nonresident aliens.
1442. Withholding of tax on foreign corporations.
1443. Foreign tax exempt organizations.
1461. Liability for withheld tax. Every person required to deduct and withhold any tax under this chapter is hereby made liable for such tax and is hereby indemnified against the claims and demands of any person for the amount of any payments in accordance with the provisions of this chapter.
Is your employer required to withhold tax from your paycheck? Only if you are a nonresident alien or foreign corporation, working for him! Are you either? If you are not, then send an affidavit to your employer titled, "Notice of Withdrawal of Authorization to Withhold Tax". Make a copy of the above sections from 26 USC (United States Code - found in your local law library) and attach them to your letter. You simply state that you are NOT a foreign person earning income in the U.S., and that you want all withholding to cease immediately. Claim that they are not withholding agents, as defined by law, and that there is no legal requirement to withhold tax from your pay. If you employer refuses to honor your request, then you may have to get more aggressive and demand that they prove that you are a foreigner, and that they are withholding agents, as defined by law, OR stop withholding. Do not fall for filling out the W-4 form as exempt, since this form is the form that authorizes withholding and provides evidence that you think you are liable for a tax, and want less tax withheld.
If you are not an 'employee', and your 'income' is not legally defined as "wages", and your employer is not the government, then how does your employer get away with having you fill out a W-4 in the first place? The IRC tells us again!
IRC 3402(p) Voluntary withholding agreements.
(3) Authority for other voluntary withholding. 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 does not constitute wages, . . . if the employer and employee, . . . 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 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 . . ."
So if you both agree to withholding, then you can have the tax withheld and 'treated as' a tax on wages, even if it is not. The W-4 is simply your voluntary agreement! You are signing a contract.
SELF EMPLOYED
OK. Now what if you are self-employed as an independent contractor? First we must find out what the meaning of self-employed is. Let's check the IRC. (Internal Revenue Code)
IRC Section 217(f) Self-employed individual. For purposes of this section (deduction for moving expenses), the term "self-employed individual" means an individual who performs personal services --
(1) as the owner of the entire interest in an unincorporated trade or business, or
(2) as a partner in a partnership carrying on a trade or business.
A self-employed individual has his/her own 'trade or business'.
Sec 1401. Rate of tax. (a) Old-age, survivors, and disability insurance. In addition to other taxes, there shall be imposed for each taxable year, on the self-employment income of every individual, a tax equal to the following percent of the amount of self-employment income for such taxable year.
Sec. 1402 Definitions. (b) Self-employment income. The term "self-employment income" means the net earnings from self-employment derived by an individual during any taxable year;
Sec. 1402. Definitions.
(a) Net earnings from self-employment. The term "net earnings from self-employment" means the gross income derived by an individual from any trade or business carried on by the individual, less the deductions allowed by this subtitle which are attributable to such trade or business, . . .
OK, now let's review 'trade or business' to see who it applies to.
Sec. 1402(c) Trade or business. The term "trade or business", when used with reference to self-employment income or net earnings from self-employment, shall have the same meaning as when used in section 162 (relating to trade or business expenses) except . . .
Notice this definition does not use 'includes' or 'means', because it is not a definition. It is a reference. In checking section 162, there is no definition of trade or business listed either. Therefore, by default, the general definition for the whole IRC comes into play.
IRC 7701(26) Trade or business. The term 'trade or business' includes the performance of the functions of a public office.
IRC 7701(10)(c) Includes and including. The terms '"includes" and "including" when used in a definition contained in this title shall not be deemed to exclude other things otherwise within the meaning of the term defined.
"Includes" means that ONLY terms in the same category that the definition applies to the term. It 'includes' ANY function of a public office, but EXCLUDES anything not within the term "performing the functions of a public office". i.e. The definition: "Fruit includes apples", would 'include' oranges, but would exclude corn. Even though only the term 'apples' was in the definition of fruit, it does not exclude other 'types' of fruit.
What is a 'trade or business'? The definition 'includes the performance of the functions of a public office'. That's all! If you are not performing the functions of a public office, then you are not self-employed! If you are a CPA, is that performing the function of a public office? Not the last time I checked. What if you were a CPA with a contract with the IRS or the Dept. of Agriculture? Would you then be performing the functions of a public office? Yes. WHY? Because you are technically working for the public office of the IRS, and performing their functions.
You are not an 'employee' working for an 'employer', but you ARE 'self-employed' by the government when you are contracting your services to them. If you don't contract with the government, then you are just a private entrepreneur. Private individuals contracting with other private individuals are never 'self-employed'. BUT, you can volunteer to be in that category if you like paying income tax. Just file a return, and confirm the presumption.
Remember, these are called 'words of art' in the legal profession. They are used to make special definitions for words that apply only to certain statutes. That's partly why they call the government regulations 'codes'. The words have special meanings that only those within the circle know the meaning to. The words do not mean the same as those found in the dictionary.
SUMMARY
"Employees" are defined as officers, employees, or elected officials of the United States. Only employees have wages.
Only wages, as defined, are subject to withholding of tax at the source.
If you are an "employer", defined as one who has employees, then you employee officers, employees and elected officials of the federal government, and therefore you must be the government. If you are not the government, you cannot have employees, as defined.
W-4's are only for 'taxpayers', who presume they are liable for a tax.
W-4's are voluntary consent forms (contracts) you file agreeing to the withholding of public salary tax.
Withholding agents are only REQUIRED to withhold from foreign persons or corporations.
Withholding only applies to government employers and their employees, and to corporate officers, who are subject to an income tax.
Only (government) employees and corporate officers receive 'wages'.
You are engaged in a 'trade or business' only when contracting with the government.
You are 'self-employed' only when you contract your services to the government as an independent contractor.
The W-4 withholding form is for 'employees', as legally defined, working for 'employers', as legally defined, when such employees are receiving 'wages' as legally defined, upon which a tax has been imposed.
The W-4 withholding exemption is a benefit granted by Congress to 'taxpayers'. You are not required to accept a benefit.
There are two conditions to meet to be exempt from withholding. That you had no tax liability last year, and that you expect no liability this year.
Also, if your employer is NOT a government employer, and you ARE a U.S. citizen, then you did NOT receive wages subject to withholding.
Remember, if you don't owe any tax, or did not receive 'wages', or are not a foreign person, then you are not subject to withholding of tax! But you can volunteer!
http://www.usa-the-republic.com/revenue/true_history/Chap11.html
W-4 WITHHOLDING
Now let's check out one of the major areas where you provide the evidence against yourself, that you are liable for a tax. But let's get some terms straight first. First, remember this very important point: If you are not 'liable' for a tax, then you are not subject to withholding. And if you had no corporate taxable "income", as legally defined by the Supreme Court,, then there is no liability for a tax.
Withholding is taken out of your wages, but, what does that 'word of art' "wages" mean in the IRC (Internal Revenue Code), since 'wages' are subject to withholding?
IRC Section 3401 Definitions
(a) Wages. For purposes of this chapter, (Ch. 24 - withholding at the source) the term "wages" means all remuneration for services performed by an employee for his employer, including the cash value of all remuneration (including benefits) paid in any medium other than cash;
(c) Employee. For purposes of this chapter (Chapter 24 - Collection of Income Tax at Source on wages), the term "employee" includes an officer, employee or elected official of the United States, or of any political subdivision thereof, or of the District of Columbia, or any agency or instrumentality of the foregoing. The term "employee" also includes an officer of a corporation.
(d) Employer. For purposes of this chapter, the term "employer" means the person for whom an individual performs or performed any service, of whatever nature, as the employee of such person,
Notice that the only word that was really defined here was "employee" and even then they used 'employee' in the definition of 'employee'. Also. notice that the term 'employer' does NOT mean the company that you work for! The 'employer' is the one has "employees". And an employee is someone who is an officer, employee or elected official of the United States government, or an officer of a corporation.
IRC 3401(c) plainly states that corporation officers and government employees are definitely considered employees. This section is talking about withholding, of any tax imposed, at the source. Withholding is ONLY allowed on 'employees' (officers, employees or elected officials of the U.S.) Why? Because of the Public Salary Tax Act.
Let's examine that term "employee". It only "includes" government employees and corporate officers, therefore it would "exclude" all workers not in this category. Are you an officer, employee or elected official of the federal government? If you are not, then is the company you work for an "employer", as defined?
Now look at the definition of "employer". You will see that it means someone who has 'employees'. Remember, an employee, as defined, ONLY works for the government, or is a corporate officer. Therefore an 'employer' could only mean a government employer, since no one else could possibly employ 'employees'. The definition of employer says an employer is a "person" with an 'employee' who performs services for him. An 'employee' works for the government. It is the employee that makes the distinction, not the employer! Since an employee can only be a government employee, then the employer can only be a government employer. The employee definition is the controlling definition.
Now look at the definition of 'wages'. Wages are only, as defined, payment for services performed by a employee (government employee or corporate officer) for his employer (government). 'Employees' receiving 'wages' are subject to withholding, since the wages are received from a privileged occupation (government employment privilege or corporate privilege).
The Public Salary Tax Act applies to government employees, doesn't it? So I would venture to say that withholding only applies to government employees.
When you contract to be a U.S. citizen, you agree to become a voluntary slave to help collect revenue. Similarly, when you agree to work for the government, a privilege, you also agree to be a voluntary slave/employee. After all, for this privilege, you also get to pay a Public Salary Tax and get to have that tax withheld from your wages in advance. The government can dispose of a part of your labor, the tax withheld, and you cannot do anything about it, because you voluntarily chose to work for the government.
Slave. A person who is wholly subject to the will of another; one who has no freedom of action, but whose person and services are wholly under the control of another. One who is under the power of a master, and who belongs to him; so that the master may sell and dispose of his person, of his industry, and of his labor, without his being able to do anything, have anything, or acquire anything, but what must belong to his master. (Black's Law Dictionary - 6th Edition)
Person. In general usage, a human being (i.e. natural person), though by statute term may include labor organizations, partnerships, associations, corporations, legal representatives, trustees, trustees in bankruptcy, or receivers.
Scope and delineation of term is necessary for determining to whom Fourteenth Amendment of Constitution affords protection since this Amendment expressly applies to "person".
Aliens. Aliens are "persons" within meaning of Fourteenth Amendment . . .
Corporation. A corporation is a "person" within meaning of Fourteenth Amendment . . ." (Black's Law Dictionary 6th Edition)
According to these definitions, a slave is a 'person', and a person can be an alien or a corporation. The 13th Amendment abolishes 'involuntary' slavery, but not 'voluntary' slavery. A U.S. citizen is a voluntary slave, with no rights to acquire property or income and must "return" a portion of his 'wages' every April 15.
14th Amendment. All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States, and of the State wherein they reside.
Since slaves are persons, could this be read all 'slaves' born or naturalized . . .? A U.S. citizen's name is spelled in all caps. A name spelled in all caps indicates a corporation or a corporate citizen (property).
Does the company you work for claim to be the United States or an agency thereof? Then, if he is NOT the United States, you are not an employee and you did NOT receive wages, as defined. And if you did not receive wages, then you are not subject to withholding. Isn't that simple! Give your employer a copy of this chapter and let him decide if he is the United States, or an agency thereof. If he thinks he is not, then he has no obligation to withhold taxes from your paycheck!
Withholding only applies to government employers. Is your employer a government employer?
Where is the statute that authorizes withholding?
IRC Sec. 3402. Income tax collected at source.
(a) Requirement of withholding.
(1) In general. Except as otherwise provided in this section, every employer making payment of wages shall deduct and withhold upon said wages a tax determined in accordance with tables or computational procedures prescribed by the Secretary.
As you can see, withholding only applies to government 'employers' making payments of 'wages'. The IRC defined 'employer' for us: a government employer who has employees (officers, employees and elected officials of the United States).
So if you ARE a government employee, you are required to furnish a W-4 exemption certificate, indicating how much public salary tax you want withheld.
Sec. 3402 (f) (2) Exemption certificates.
(A) On commencement of employment. On or before the date of the commencement of employment with an employer, the employee shall furnish the employer with a signed withholding exemption certificate relating to the number of withholding exemptions which he claims, which shall in no event exceed the number to which he is entitled.
This exemption certificate (W-4) section applies only to 'employees', as defined, working for a government 'employer', as defined in Sec. 3401(d).
If you are not an 'employee', then you qualify to be exempt from withholding on the W-4 withholding certificate.
Remember, these statutes only apply to those who are employees and have wages., as defined.
Think about this. If there is a law that allows the government to tax your income directly, do you need to sign a paper giving them permission to do so? No. Then why would you need to sign a paper, under penalty of perjury, for them to withhold a percentage of your wages up front, if they have a law that says they can do it? You say it is to claim an partial exemption from the withholding of tax.
But what if you did not want to claim an exemption? Do you still need to sign the form? After all, the form only applies to 'taxpayers' that want more or less tax withheld from their paycheck. Are you a 'taxpayer'? Only if you have a tax liability.
Maybe we better check another statute.
IRC Sec. 3401(e) Number of withholding exemptions claimed. For purposes of this chapter, the term 'number of withholding exemptions claimed' means the number of withholding exemptions claimed in a withholding exemption certificate in effect under section 3402(f), or in effect under the corresponding section of prior law, except that if no such certificate is in effect, the number of withholding exemptions claimed shall be considered to be zero.
Wait a second! I thought your employer told you that you had to file the form before you went to work. Then why the exception, that if no such certificate is in effect? If it is required, how could a certificate not be in effect? Because you chose not to sign one! After all, the exemption is a benefit granted by Congress to 'taxpayers'. Are you required to decline a benefit, under penalty of perjury, if you do not want the benefit? What if you do not want welfare or food stamps, do you need to sign a paper declining the benefit, before you don't get it? Why not? Because you cannot be forced to engage in a privileged activity or receive a privileged benefit, just so you can be taxed.
Since the government takes the tax out of your paycheck before you get it, they already have your money. And it is very difficult to get the money back once they have it. The best route is to keep them from taking it out of your paycheck in the first place! There is one situation in which you can stop withholding on your income.
26 CFR (Code of Federal Regulations) 31.3402(n) Employees incurring no tax liability. An employer shall not deduct and withhold any tax under chapter 24 upon a payment of wages . . . if there is in effect, with respect to the payment, a withholding exemption certificate furnished by the employee which contains the statements that
(a) the employee incurred no liability for the income tax imposed under subtitle A of the Code for his preceding taxable year;
(b) the employee anticipates that he will incur no liability for income tax imposed by subtitle A for his current year.
What is the withholding exemption certificate? It is just the W-4 form. You can claim exempt if you meet the two conditions listed above.
Now I ask you, if you had no corporate income, or if you were an American Citizen and not a U.S, citizen, then did you have a tax liability for last year? No. But remember, the W-4 form is a withholding authorization form. It merely states that you ARE subject to withholding, but are exempt in this particular situation. The form is for taxpayers.
You should also question your "employer's" status as "withholding agent". Ask him if he is an authorized withholding agent. He will tell you yes. Only withholding agents are authorized to withhold tax from your paycheck. What is the definition of withholding agent? The IRC tells us.
IRC 7701(a)(16) Withholding agent. The term "withholding agent" means any person required to deduct and withhold any tax under the provisions of sections 1441, 1442, 1443, or 1461.
Oh really? Well, just what do sections 1441 - 1443 pertain to? In the IRC, Chapter 3 Subchapter A, is where these sections are found. What is the title of this Subchapter A? Nonresident Aliens and Foreign Corporations!
1441. Withholding of tax on nonresident aliens.
1442. Withholding of tax on foreign corporations.
1443. Foreign tax exempt organizations.
1461. Liability for withheld tax. Every person required to deduct and withhold any tax under this chapter is hereby made liable for such tax and is hereby indemnified against the claims and demands of any person for the amount of any payments in accordance with the provisions of this chapter.
Is your employer required to withhold tax from your paycheck? Only if you are a nonresident alien or foreign corporation, working for him! Are you either? If you are not, then send an affidavit to your employer titled, "Notice of Withdrawal of Authorization to Withhold Tax". Make a copy of the above sections from 26 USC (United States Code - found in your local law library) and attach them to your letter. You simply state that you are NOT a foreign person earning income in the U.S., and that you want all withholding to cease immediately. Claim that they are not withholding agents, as defined by law, and that there is no legal requirement to withhold tax from your pay. If you employer refuses to honor your request, then you may have to get more aggressive and demand that they prove that you are a foreigner, and that they are withholding agents, as defined by law, OR stop withholding. Do not fall for filling out the W-4 form as exempt, since this form is the form that authorizes withholding and provides evidence that you think you are liable for a tax, and want less tax withheld.
If you are not an 'employee', and your 'income' is not legally defined as "wages", and your employer is not the government, then how does your employer get away with having you fill out a W-4 in the first place? The IRC tells us again!
IRC 3402(p) Voluntary withholding agreements.
(3) Authority for other voluntary withholding. 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 does not constitute wages, . . . if the employer and employee, . . . 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 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 . . ."
So if you both agree to withholding, then you can have the tax withheld and 'treated as' a tax on wages, even if it is not. The W-4 is simply your voluntary agreement! You are signing a contract.
SELF EMPLOYED
OK. Now what if you are self-employed as an independent contractor? First we must find out what the meaning of self-employed is. Let's check the IRC. (Internal Revenue Code)
IRC Section 217(f) Self-employed individual. For purposes of this section (deduction for moving expenses), the term "self-employed individual" means an individual who performs personal services --
(1) as the owner of the entire interest in an unincorporated trade or business, or
(2) as a partner in a partnership carrying on a trade or business.
A self-employed individual has his/her own 'trade or business'.
Sec 1401. Rate of tax. (a) Old-age, survivors, and disability insurance. In addition to other taxes, there shall be imposed for each taxable year, on the self-employment income of every individual, a tax equal to the following percent of the amount of self-employment income for such taxable year.
Sec. 1402 Definitions. (b) Self-employment income. The term "self-employment income" means the net earnings from self-employment derived by an individual during any taxable year;
Sec. 1402. Definitions.
(a) Net earnings from self-employment. The term "net earnings from self-employment" means the gross income derived by an individual from any trade or business carried on by the individual, less the deductions allowed by this subtitle which are attributable to such trade or business, . . .
OK, now let's review 'trade or business' to see who it applies to.
Sec. 1402(c) Trade or business. The term "trade or business", when used with reference to self-employment income or net earnings from self-employment, shall have the same meaning as when used in section 162 (relating to trade or business expenses) except . . .
Notice this definition does not use 'includes' or 'means', because it is not a definition. It is a reference. In checking section 162, there is no definition of trade or business listed either. Therefore, by default, the general definition for the whole IRC comes into play.
IRC 7701(26) Trade or business. The term 'trade or business' includes the performance of the functions of a public office.
IRC 7701(10)(c) Includes and including. The terms '"includes" and "including" when used in a definition contained in this title shall not be deemed to exclude other things otherwise within the meaning of the term defined.
"Includes" means that ONLY terms in the same category that the definition applies to the term. It 'includes' ANY function of a public office, but EXCLUDES anything not within the term "performing the functions of a public office". i.e. The definition: "Fruit includes apples", would 'include' oranges, but would exclude corn. Even though only the term 'apples' was in the definition of fruit, it does not exclude other 'types' of fruit.
What is a 'trade or business'? The definition 'includes the performance of the functions of a public office'. That's all! If you are not performing the functions of a public office, then you are not self-employed! If you are a CPA, is that performing the function of a public office? Not the last time I checked. What if you were a CPA with a contract with the IRS or the Dept. of Agriculture? Would you then be performing the functions of a public office? Yes. WHY? Because you are technically working for the public office of the IRS, and performing their functions.
You are not an 'employee' working for an 'employer', but you ARE 'self-employed' by the government when you are contracting your services to them. If you don't contract with the government, then you are just a private entrepreneur. Private individuals contracting with other private individuals are never 'self-employed'. BUT, you can volunteer to be in that category if you like paying income tax. Just file a return, and confirm the presumption.
Remember, these are called 'words of art' in the legal profession. They are used to make special definitions for words that apply only to certain statutes. That's partly why they call the government regulations 'codes'. The words have special meanings that only those within the circle know the meaning to. The words do not mean the same as those found in the dictionary.
SUMMARY
"Employees" are defined as officers, employees, or elected officials of the United States. Only employees have wages.
Only wages, as defined, are subject to withholding of tax at the source.
If you are an "employer", defined as one who has employees, then you employee officers, employees and elected officials of the federal government, and therefore you must be the government. If you are not the government, you cannot have employees, as defined.
W-4's are only for 'taxpayers', who presume they are liable for a tax.
W-4's are voluntary consent forms (contracts) you file agreeing to the withholding of public salary tax.
Withholding agents are only REQUIRED to withhold from foreign persons or corporations.
Withholding only applies to government employers and their employees, and to corporate officers, who are subject to an income tax.
Only (government) employees and corporate officers receive 'wages'.
You are engaged in a 'trade or business' only when contracting with the government.
You are 'self-employed' only when you contract your services to the government as an independent contractor.
The W-4 withholding form is for 'employees', as legally defined, working for 'employers', as legally defined, when such employees are receiving 'wages' as legally defined, upon which a tax has been imposed.
The W-4 withholding exemption is a benefit granted by Congress to 'taxpayers'. You are not required to accept a benefit.
There are two conditions to meet to be exempt from withholding. That you had no tax liability last year, and that you expect no liability this year.
Also, if your employer is NOT a government employer, and you ARE a U.S. citizen, then you did NOT receive wages subject to withholding.
Remember, if you don't owe any tax, or did not receive 'wages', or are not a foreign person, then you are not subject to withholding of tax! But you can volunteer!
http://www.usa-the-republic.com/revenue/true_history/Chap11.html