TAX BASICS 101

 

Since 1982, the Save-A-Patriot Fellowship of 12 Carroll Street, Westminster, MD (410)-857-4441 has offered a standing $10,000 cash reward to anyone, in or out of government, who can disprove a single statement of fact or law found in their brochure "Believe it or not". The facts, which their reward is based on, are also shown on the page http://www.taxtruth4u.com/10k . To date, no one - not a single judge, lawyer, CPA, politician, or IRS agent - has been able to collect the $10,000 reward. We extend this same offer to you and to the person who prepares your taxes.

I am not a licensed attorney or tax professional, however, I do not require a license to simply show you the law. As a constitutional Republic, and not a democracy, America is a nation governed by written laws, and everyone - "We the People" and government alike - must uphold and obey the written law. If we don't like a particular law, we can work together to have it amended or repealed through the legislative process. Under our three-branch form of government, the legislature enacts its "intent" as the written "law of the land". The law (statute) must be written in explicit terms to mean exactly what it says. Any person of average intelligence must be able to understand a given law; otherwise the courts have ruled that it must be held "void for vagueness".

The following are the basic facts regarding "income" and "employment" taxes that every working American needs to understand. All United States law is categorized into 50 "titles" of law known as the United States Code (USC). Title 26 (26USC) encompasses the Internal Revenue Code (IRC). Regulations to enforce the law and specify civil penalties for violators are written and promulgated by agencies of the executive branch, such as the Department of the Treasury which oversees the Internal Revenue Service (IRS). The Treasury regulations for Title 26, Internal Revenue Code, are found in 26 Code of Federal Regulations (26CFR). It has been my consistent experience that the vast majority of tax attorneys and CPA's do not fundamentally understand the actual, limited liability of U.S. citizens working exclusively within the 50 states for income and employment (wage) taxes. They rely instead upon IRS booklets, pamphlets, publications, guidelines, circulars, etc., which is not law. It is simply assumed it is.

In order to understand the IRC, which encompasses far more than just "income" taxes, one must first understand the subdivision of the IRC. The IRC is divided into eleven subtitles. The first five (subtitles A through E) impose different categories of taxation, while the last six pertain to procedure, administration, definitions, etc. Subtitle A is the income tax. Subtitle B covers estate and gift taxes. Subtitle C is the wage (employment) tax. Subtitle D covers miscellaneous excise taxes, and Subtitle E covers alcohol. Each is distinct and separate with regards to the tax it imposes (the exception being Subtitle C, as explained below). The enforcing provisions within one subtitle do not apply to any other. In order to become the legally defined "taxpayers" defined in subtitle F under code section 7701(a)(14) and required to pay a particular class of tax, a liability for the tax must arise from written statute within that subtitle.

The tax on income under Subtitle A is an "indirect" tax in the form of an "excise" imposed on certain privileges or occupations and defined by the U.S. Supreme Court as gain separated from capital. The tax on wages under Subtitle C (for the purpose of building credits towards by employers on forms W-2 and 1099). Subtitle A, income tax, is in no way whatsoever related to or connected to Subtitle C, wage (employment/social security) tax. The only statute in all of Subtitle A making anyone liable for the "income" tax is code section 1461 which applies to withholding agents. Code section 7701(a) defines the "withholding agent" as one who is required to withhold income taxes from nonresident aliens under code section 1441, from foreign corporations under IRC 1442, and from certain foreign tax-exempt organizations under IRC 1443. The income tax under Subtitle A is on foreign activities only. This is why it is absolutely correct to state that, unless withholding from foreigners or living and working in a foreign country under a current tax treaty with the U.S. no citizen or resident alien who has lived and worked exclusively within the fifty states of the Union has ever paid a penny in income taxes. They've paid employment taxes, although swearing them to be "income" to themselves on the affidavit known as Form 1040.

With regard to the filing of returns, the only filing requirement for an individual under Subtitle A "income" tax is found in code section 6012(a). Under section 6012(a) and its underlying regulations, "taxable income" is limited to certain income that has been "earned" while living and working in certain foreign countries or territories.

As proof of the above, under the 1980 Paperwork Reduction Act, the Office of Management and Budget (OMB) must assign an OMB approval number to any agency return that requests and collects information from a U.S. citizen. According to OMB approval control number 1545-0067 assigned to Treasury regulations 1.1-1 "Tax imposed" and 1.6012-0 "Person required to make returns of income" under 26 CFR part 600 to end, the required return for a U.S. citizen to report income is not Form 1040, but Form 2555 "Foreign Earned Income." The 1040 return for the "U.S. Individual" is merely a supplemental worksheet for the required Form 2555. The top of Form 2555 instructs "attach to front of Form 1040" and "for use by U.S. citizens". Treasury Decision 2313 (TD 2313) clarifies that the Form 1040 individual income tax return is to be used only by the fiduciary of a nonresident alien and receiving interest and/or dividends from the stock of domestic (US) corporations on behalf of that alien. This decision was issued in 1916 to "collectors of internal revenue" pursuant to the U.S. Supreme Court under the Brushaber v. Union Pacific R.R. decision and still stands today.

For the above reasons, the income tax under Subtitle A is not "voluntary", as some have asserted. It is mandatory, but only for those to whom it applies as explained above. Since the law is limited in its application, the question of whether it is mandatory or voluntary is superfluous. The question is to whom and under what circumstances is the law applied? With regard to the wage tax under Subtitle C, certain legal requirements may be considered mandatory. But only for the payor of the wages (the "employer") and even then, only if both the "employer" and the "covered employee" has voluntarily agreed (via voluntary application on Form W-4) to participate in the entitlement programs. Since there is no legal requirement to have a social security number (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, sign or submit it, and; no legal requirement for an employer to obtain an employer identification number (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.

IRS Publication 515 and Treasury regulation 1.1441-5 explain the proper use of the Statement of Citizenship (SOC), a copy of which is sent by the employer (who retains the original) only to the IRS in Philadelphia which makes sense since Philadelphia is the IRS international tax office. The SOC authorizes (and indemnifies) the employer to stop withholding income taxes from the worker who chooses not to have his or her taxes withheld. Call the IRS form distribution center at 1-800-TAX-FORM for a copy of Form 2555 and Publication 515. Title 26 and 26 Code of Federal Regulations can be consulted at any law library and even at many large cities libraries. Or you can simply go to the links from this page.

If you are a citizen (or resident alien) working for a living within one of the 50 states of the Union, you have never been made liable by Congress for the payment of the income tax under title 26, Subtitle A. Unless of course you have voluntarily filed Form 1040 in the past. If you have you have created a legal presumption of a requirement where none actually exists under law. You will be expected (by the IRS) to keep filing unless and until you rebut that presumption via sworn affidavit, thereby shifting the burden of proof to the agency (Secretary of the Treasury/IRS), which must then disprove your statements and cannot. One who legally quits the Social Security entitlement program (via affidavit) is no longer required to pay Social Security taxes, will not receive back any monies already paid in, and will be ineligible to receive any future federal benefits. I invite those of you who may be experiencing difficulties with the IRS or just wish to explore your options under the law, such as stopping tax withholding or legally quitting the Social Security welfare scheme to contact me for more information.

A simply step by step review:

* The Internal revenue laws are limited in application.

* The Internal Revenue Code encompasses more than just "income tax."

The Code is divided into 11 subtitles. The first 5 subtitles each deal with different categories of taxation. The last 6 pertain to

* Subtitle "A" is income tax.

* Subtitle "C" is employment tax or social security tax.

* Subtitle "A" is in no way related to subtitle C.

* The W-2 and 1099 "wage" information commonly reported by employers is a function of the tax on wages under subtitle C (not income tax) for the purpose of building credits towards social security. The tax on wages has absolutely nothing to do with the tax on income under subtitle A.

* The "income tax" under subtitle A is an "indirect" tax in the form of an "excise" imposed on certain "activities" or "occupations" and a liability to pay the tax must arise from statute.

* The only statute under subtitle A (income tax) making anyone liable is section 1461 which applies to withholding agents who are required to withhold only from foreign entities like nonresident aliens and foreign corporations.

* The only requirement for an individual to file a return under subtitle A (income tax) is section 6012(a). The Internal Revenue Service identifies the imposition of the income tax and the type of income that is considered "taxable income" for the purpose of this filing requirement in their request to the U.S. government's Office of Management and Budget (OMB). The OMB must "approve" the administration and enforcement of the applicable regulations. Taxable income for the purpose of this section is limited to certain income that has been "earned" while living and working in certain "foreign" countries or territories.

* According to the OMB, the return that is required under this section of the Internal Revenue Code is Form 2555 (not the 1040) and it is entitled "Foreign Earned Income." According to the regulations, 26 CFR part 600 to end, the 1040 return is merely a supplemental return or worksheet for the required Form 2555.

* Treasury Decision 2313 clarifies that the Form 1040 individual income tax return is appropriate for any person acting as a fiduciary for a nonresident alien and receiving interest and/or dividends from the stock of domestic (US) corporations on behalf of that alien.

* The income tax under subtitle A is mandatory for those mentioned above (but only for those to whom it applies). It is NOT voluntary as some have asserted. Since the law is limited in application, the question of whether it is mandatory or voluntary is superfluous. The question is: to whom, and under what circumstances is the law applied?

* Certain legal requirements with regard to the wage tax under subtitle C may also be considered mandatory, but only for the payor of the wages (the employer) and even then, only if both the employer and the employee have voluntarily agreed (via application) to participate in the entitlement program. Since neither can be compelled to participate, compliance is said to be voluntary. 

(The foregoing statements are NOT legal advice. They are merely factual statements about the law.)

 

 

 Thank You

Jim

Exam Certified Independent Representative for the

Save A Patriot Fellowship

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