The deconstruction of the federal income tax code.

Disclaimer: the following analysis and interpretations are for educational purposes only. The author is not an attorney, and so the following should not be construed as legal advice. The legal basis of the US federal income tax: the CTC hypothesis
by Fred Foldvary

Is the US federal personal income tax compatible with Constitutional rights?

The taxation of income has profound implications for an economy and for liberty. It imposes a substantial deadweight loss on the economy, both from raising costs and reducing gains, and also from the complience cost. Income taxation intrudes on personal privacy and challenges the natural right to work and own the wages from one's labor.

Probably uniquely among all countries, the US Constitution differentiates between direct taxes and indirect excise taxes. Direct taxes are paid by the person taxed or by the person owning the property or income that is taxed. Taxes are indirect or excise taxes when the person who sends the payment to the government can explicity pass on the tax to another person, as a seller of goods does when the buyer pays the seller the tax, or when an importer pays a tariff to the government and then adds this tariff to the price of the good paid by the buyer. Taxes are also indirect when the tax is levied on a privilege, with the amount of tax based on the profits gained from the privilege, and so only indirectly on the profits.

The Supreme Court has ruled that the effect of the 16th Amendment is to place the federal personal income tax in the category of indirect taxes. Since the tax falls on the income of the person who pays it, a tax on income is not explicitly transferred to others as is a sales tax. Therefore, as an indirect tax, the income tax must be on a privilege. The corporate income tax is on the legal privilege of operating a corporation. But a natural person has a natural and common-law right to engage in labor and to the wages of labor. Working in the private sector is a right, not a privilege. The 16th Amendment did not repeal the original Constitutional distinction between direct and indirect taxation. How then can the federal personal income tax be Constitutional?

Several authors have proposed the hypothesis that the income tax is legally invalid, the 16th Amendment notwithstanding. These hypothesis have been rejected by the US courts, and their practicing advocates have been penalized. Until recently, it was difficult to "crack the code," to analyze the lengthy and complex income tax code. In recent years, the personal income tax code has been available in the Internet, which greatly enables an analysis of its provisions.

In 2003, Peter Eric Hendrickson published a book, Cracking the Code, presenting a different hypothesis, accompanied by a CD and a web site Lost Horizons.

(Chapter 1, Cracking the Code of the US personal income tax.)

The CTC hypothesis is that the US federal income tax code is indeed Constitutionally sound, but written and implemented in a way that induces people to pay voluntarily, even if unknowingly, i.e. thinking that the payments are mandatory. He presents this proposition as fact, but for scholarly purposes, it is in my judgment a hypothesis which will be tested by practice, by scholarly analysis, and by the courts. During the next 20 years, these tests will either reject the hypothesis, or else show it to be a sound theory, a correct explanation, of the legality of the federal personal income tax. If found to be sound, the CTC interpretation will have profound implications for the public finances of the US government, possibly the abandonment of the personal income tax except for possibly on land rent.

THE UNITED STATES CONSTITUTION

Article. I.

Section. 2.

Clause 3: Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers,

Section. 8.

Clause 1: The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises

Section. 9.

Clause 4: No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.

 

The 16^th Amendment did not authorize any new taxing power.

The federal personal income tax is an indirect, excise, tax.

(Italics added)

"The provisions of the Sixteenth Amendment conferred no new power of taxation but simply prohibited the complete and plenary 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..." S. Pacific v. Lowe, 238 F. 847 (US Dist. Ct. S.D., N.Y., 1917); U.S. 330 (1918)

"The legislative history merely shows that the words 'from whatever source derived' of the Sixteenth Amendment were not affirmatively intended to authorize Congress to tax state bond interest or to have any other effect on which incomes were subject to the federal taxation, and that the sole purpose of the Sixteenth Amendment was to remove the apportionment requirement for whichever incomes were otherwise taxable." [South Carolina v. Baker, 485 U.S. 505 (1988) (footnote 13)]

"The Sixteenth Amendment, although referred to in argument, has no real bearing and may be put out of view. As pointed out in recent decisions, (Brushaber), it does not extend the taxing power to new or excepted subjects, but merely removes all occasion, which otherwise might exist, for an apportionment among the states of taxes laid on income, whether it be derived from one source or another." Peck v. Lowe, 247 U.S. 165 (1918.

"The income tax is, therefore, not a tax on income as such. It is an excise tax with respect to certain activities and privileges, which is measured by reference to the income which they produce. The income is not the subject of the tax: it is the basis for determining the amount of tax." F. Morse Hubbard, Treasury Department legislative draftsman. House Congressional Record March 27th 1943, page 2580.

"When a court refers to an income tax as being in the nature of an excise, it is merely stating that the tax is not on the property itself but rather it is a fee for the privilege of receiving gain from the property." John R. Luckey, Legislative Attorney with the Library of Congress, "Frequently Asked Questions "

"The tax imposed by sections 27 to 37, inclusive, of the act of 1894, so far as it falls on the income of real estate and of personal property, being a direct tax, within the meaning of the Constitution, and therefore unconstitutional and void because not apportioned according to representation, all those sections, constituting one entire scheme of taxation, are necessarily invalid." Pollock v. Farmers Loan & Trust, 157 U.S. 429 and 158 U.S. 601 (1895)

Geographical jurisdictions in the US Constitution

 

Article I, Section 8.

The Congress shall have [the] Power …

 

In such federal territory, Congress may tax anything it wants, including direct taxes, without regard to apportionment by population.

All other territory in the USA is under the jurisdiction of the states, and direct federal taxes must be apportioned by population.

 

On December 15, 1954, an interdepartmental committee was commissioned on the recommendation of the Attorney General of the United States, Herbert Brownell, Jr., and approved by President Eisenhower and his cabinet, named the Interdepartmental Committee for the Study of Jurisdiction Over Federal Areas Within the States, and charged with the duty of studying and reporting where the United States had legal authority to make someone subject to its jurisdiction.

 

The report stated, “It scarcely needs to be said that unless there has been a transfer of jurisdiction (1) pursuant to clause 17 by a Federal acquisition of land with State consent, or (2) by cession from the State to the Federal Government, or unless the Federal Government has reserved jurisdiction upon the admission of the State, the Federal Government possesses no legislative jurisdiction over any area within a State, such jurisdiction being for exercise by the State, subject to non-interference by the State with Federal functions,”

“It could hardly be denied that a tax laid specifically on the exercise of those freedoms [of speech, religion, etc.] would be unconstitutional.“ US Supreme Court, Murdock v. Pennsylvania 319 U.S. 105 480-487 (1943).

 

By the 9^th Amendment, the U.S. Constitution recognizes rights even when not listed or enumerated:

 

“The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.”

 

Because the federal government may not directly and specifically tax a right, an excise tax may only be levied on a privilege or else on the importation or sale of goods, where the buyer as an indirect payer is not forced to buy the good. A direct tax may be levied only either in federal territory or else in the states if it is apportioned by population.

"The terms ‘excise tax’ and ‘privilege tax’ are synonymous. The two are often used interchangeably.” American Airways v. Wallace 57 F.2d 877, 880

“Ordinarily, all taxes paid primarily by persons who can shift the burden upon some one else, or who are under no legal compulsion to pay them, are considered indirect taxes;” Pollock v. Farmer’s Loan & Trust, 157 U.S. 429, and 158 U.S. 601 (1895).

"Excises are taxes laid upon the manufacture, sale or consumption of commodities within the country, upon licenses to pursue certain occupations and upon corporate privileges; the requirement to pay such taxes involves the exercise of privilege. "Flint vs. Stone Tracy Co. 220 U.S. 107 (1911).

 

Therefore the federal government may levy an indirect or excise tax only on either privileges (including unearned income, i.e. rent) or else on the importation or sale of goods. In the latter case, the tax is indirectly paid by the buyer, the funds paid to the government by the importer or seller.

 

Unprivileged labor within the states is not subject to indirect federal taxation, unless agreed to by the taxpayer.

 

“The right to follow any of the common occupations of life is an inalienable right... To deny it ... is what no legislature has a right to do...” BUTCHERS’ UNION CO. v. CRESCENT CITY CO., 111 U.S. 746 (1884)

 

“Since the right to receive income or earnings is a right belonging to every person, this right cannot be taxed as privilege.” Jack Cole Company v. Alfred T. MacFarland, Commissioner, 206 Tenn. 694, 337 S.W.2d 453 (Tenn. 1960) Supreme Court of Tennessee, at Nashville, June 6, 1960,

 

The history of the federal income tax.

(Cracking The Code, by Peter Henrickson, pp. 12+)

 

The Revenue Act of 1862 included the first US federal income tax.

 

Sec. 86 of that act levied an income tax on federal employees

Sec. 90 levied a tax on the “income” of other persons.

 

Section 86 acknowledges that federal employees are treated differently from other persons. Federal employment is considered a privilege. A corporation operates as a privilege.

 

In 1894, Congress revised the income tax. The Act of 1894 was challenged in the Supreme Court, in the case of Pollock v. Farmer’s Loan & Trust, 157 U.S. 429, and 158 U.S. 601 (1895).

 

The Supreme Court ruled that a tax on the income from property amounts to a tax on the property itself. Also:

 

“Ordinarily, all taxes paid primarily by persons who can shift the burden upon some one else, or who are under no legal compulsion to pay them, are considered indirect taxes;”

 

The Pollock decision ruled that the measurement of an income tax, as an excise tax, by revenue from property, is unconstitutional.

 

What is “income”?

 

The Court has recognized that "... 'income' as used in the statute should be given a meaning so as not to include everything that comes in, as the true function of the words 'gains' and 'profits' is to limit the meaning of the word 'income' " (So. Pacific v Lowe, 238 F 847) (U.S. District Court S.D.N.Y. 1917, 247 U.S. 30 (1918)).

 

“Income” has to involve profits, not just receipts or revenue.

 

Whose gains are included in “income”?

 

The Classification Act of 1923, 42 Stat. 1488, March 4, 1923; [H.R. 8928]

[Public, No. 516]

CHAP. 265.--An Act To provide for the classification of civilian positions within the District of Columbia and in the [federal] field services.

(Bold face added)

 

“The term ‘position’ means a specific civilian office or employment, whether occupied or vacant, in a [federal] department other than the following [list of jobs]. The term "employee" means any person temporarily or permanently in a position. The term "service" means the broadest division of related offices and employments

 

The term "compensation" means any salary, wage, fee, allowance, or other emolument paid to an employee for service in a position.

 

The 1923 act was repealed in 1949, but its definitions were incorporated into the Internal Revenue Code of 1939 and carried over to the revised IRC of 1954 and later.

 

The 1939 IRS code was the first Internal Revenue Code published.

 

If some payments and persons are “included,” are others necessarily excluded?

 

A common rule of statutory interpretation is the doctrine inclusio unius est exclusio alterius. This doctrine means “the inclusion of one is the exclusion of another…" This doctrine decrees that where law expressly describes a particular situation to which it shall apply, an irrefutable inference must be drawn that what is omitted or excluded was intended to be omitted or excluded.” (Black’s Law Dictionary 763 (6th Ed. 1990).) Since particular sources are listed as taxable in the tax law, then it is logical to infer that other sources of income are excluded from taxation.

 

Include or the participial form thereof, is defined to comprise 'within’; ‘to hold’; ‘to contain’; ‘to shut up’; and synonyms are ‘contain’; ‘enclose’; ‘comprehend’; ‘embrace’.”

U.S. Supreme Court, Montillo Salt co. v. Utah, 221 U.S. 452, at 455, 466.

 

“In the interpretation of statutes levying taxes, it is the established rule not to extend their provisions, by implication, beyond the clear import of the language used, or to enlarge their operations so as to embrace matters not specifically used, or to enlarge their operations so as to embrace matters not specifically pointed out. In case of doubt they are construed most strongly against the government and in favor of the citizen.”

Supreme Court: Gould v Gould, 245 U.S. 151, at 153:

 

This fact only underscores our duty to refrain from reading a phrase into the statute when Congress has left it out. " `[W]here Congress includes particular language in one section of a statute but omits it in another . . . , it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.' " Russello v. United States, 464 U.S. 16, 23 (1983)

 

"[w]here general words [such as the provisions of 7701(c) -PH] follow specific words in a statutory enumeration, the general words are construed to embrace only objects similar in nature to those objects enumerated by the preceding specific words."

Circuit City Stores v. Adams, 532 US 105, 114-115 (2001)

 

Therefore, one may infer that the term “includes” implies “includes only”.

 

More definitions [text in brackets is added to the original]

 

IRS Code

TITLE 26, Subtitle C, CHAPTER 21, Subchapter C, Sec. 3121.

\

(e) State, United States, and citizen

For purposes of this chapter -

(1) State

The term "State" includes [only] the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, and American Samoa.

 

Thus, a “state” in the IRS code does not include the 50 sovereign jurisdictions of California, Texas, etc.

 

Section 3121(e)(2). For purposes of this chapter -

(2) United States. The term "United States" when used in a geographical sense includes [only] the Commonwealth of Puerto Rico, the Virgin Islands, Guam and American Samoa.

 

Thus, in the IRS code, no other territory is included in the “United States.”

 

Note: "remunerate" means to compensate or pay.

 

TITLE 26 > Subtitle C > CHAPTER 24 > § 3401. Definitions

(a) Wages

For purposes of this chapter, the term “wages” means all remuneration (other than fees paid to a public official) for services performed by an employee for his employer,

 

(c) Employee

(IRS TITLE 26, Subtitle C, CHAPTER 24 >Code 3401(c))

For purposes of this chapter, the term “employee” includes [only] an officer, employee, or elected official of the United States, a State, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing. The term “employee” also includes an officer of a corporation.

 

Thus, nobody else is “included” as an “employee”.

 

FICA (Federal Insurance Contributions Act) (Social Security) taxes:

 

The Social Security Act does not require a person to have a social security number in order to work in the USA, nor is an SS number legally required in order to open a bank account. One needs this number if one wishes to receive social security benefits.

 

TITLE 26 > Subtitle C > CHAPTER 21 > Subchapter A > § 3101

§ 3101. Rate of tax

(a) Old-age, survivors, and disability insurance

In addition to other taxes, there is hereby imposed on the income of every individual a tax equal to the following percentages of the wages (as defined in section 3121 (a)) received by him with respect to employment (as defined in section 3121 (b))—

 

TITLE 26 > Subtitle C > CHAPTER 21 > Subchapter C > § 3121

§ 3121. Definitions

(a) Wages

For purposes of this chapter, the term “wages” means all remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash; except that such term shall not include— [pre-tax deductions]

 

(b) Employment

For purposes of this chapter, the term “employment” means any service, of whatever nature, performed

(A) by an employee for the person employing him, irrespective of the citizenship or residence of either,

(i) within the United States, or

(ii) on or in connection with an American vessel or American aircraft … or

(B) outside the United States by a citizen or resident of the United States as an employee for an American employer (as defined in subsection (h)),

 

(e) State, United States, and citizen

For purposes of this chapter—

(1) State

The term “State” includes the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, and American Samoa.

(2) United States

The term “United States” when used in a geographical sense includes the Commonwealth of Puerto Rico, the Virgin Islands, Guam, and American Samoa.

 

(h) American employer

For purposes of this chapter, the term “American employer” means an employer which is—

(1) the United States or any instrumentality thereof,

(2) an individual who is a resident of the United States,

(3) a partnership, if two-thirds or more of the partners are residents of the United States,

(4) a trust, if all of the trustees are residents of the United States, or

(5) a corporation organized under the laws of the United States or of any State.

 

FICA is a personal “income” tax on “wages” paid for “employment,” which is “service” performed within Puerto Rico, etc. (CTC 78).

The term “resident” is geographical.

 

What are “trade or business” and “self-employment” in the income tax code? (CTC 82+)

 

TITLE 26 > Subtitle A > CHAPTER 2 > § 1401

§ 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 the self-employment income for such taxable year…

 

§ 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 such individual, less the deductions allowed by this subtitle which are attributable to such trade or business …

 

(b) Self-employment income

The term “self-employment income” means the net earnings from self-employment derived by an individual

 

TITLE 26 > Subtitle F > CHAPTER 79 > § 7701

§ 7701. Definitions

(a) When used in this title, where not otherwise distinctly expressed or manifestly incompatible with the intent thereof—

 

(26) Trade or business

The term “trade or business” includes [only] the performance of the functions of a public office.

(Trade of business therefore excludes other performance.)

 

TITLE 26 > Subtitle F > CHAPTER 61 > Subchapter A > PART III > Subpart B > § 6041

§ 6041. Information at source

(a) Payments of $600 or more

All persons engaged in a trade or business and making payment in the course of such trade or business to another person, of rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income … of $600 or more … shall render a true and accurate return

 

Form 1099 states:

Trade or business reporting only. Report on Form 1099-MISC only when payments are made in the course of your trade or business.

 

The text specifies “trade or business” because the law refers to the definition in 7701(26).

 

TITLE 26 > Subtitle F > CHAPTER 61 > Subchapter A > PART III > Subpart B > § 6049

§ 6049. Returns regarding payments of interest

(d) Definitions and special rules

For purposes of this section—

(1) Person

The term “person” includes [only] any governmental unit and any agency or instrumentality thereof …

 

On whom is the personal income tax legally imposed?

 

CTC (87) concludes from the above, that “unless one’s works involves the performance of the functions of a public office, one has no “net earnings from self-employment” and need file no return regarding the proceeds of self-employment.”

 

"The individual may stand upon his constitutional rights as a citizen. He is entitled to carry on his private business in his own way. His power to contract is unlimited. He owes no duty to the state or to his neighbors to divulge his business, or to open his doors to an investigation, so far as it may tend to criminate him. He owes no such duty to the state, since he receives nothing therefrom, beyond the protection of his life and property. His rights are such as existed by the law of the land long antecedent to the organization of the state, and can only be taken from him by due process of law, and in accordance with the Constitution." HALE v. HENKEL, 201 U.S. 43 (1906)

 

Summary so far, for the IRS code:

“Income” means “objects proper to an excise,” which are privileges, activities not of common right.

 

The only lawful object of the personal “income” tax outside of federal territory is activity for which one is paid by the federal government; activity regarding the performance of a government office; or activity as a paid officer of a corporation. (CTC 88)

 

And if the law is not clear?

 

“…a statute which either forbids or requires the doing of an act in terms so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application, violates the first essential of due process of law.” CONNALLY v. GENERAL CONST. CO., 269 U.S. 385 (1926)

 

"The revenue laws are a code or system in regulation of tax assessment and collection. They relate to taxpayers, and not to nontaxpayers. The latter are without their scope. No procedure is prescribed for nontaxpayers, and no attempt is made to annul any of their rights and remedies in due course of law. With them [nontaxpayers] Congress does not assume to deal, and they are neither of the subject nor of the object of the revenue laws". Economy Plumbing and Heating Co. v. United States, 470 F. 2d 585 (1972)

 

For those without taxable income, the federal income tax is voluntary.

 

“Let me point this out now. Your income tax is 100 percent voluntary tax, and your liquor tax is 100 percent enforced tax. Now the situation is as different as day and night. Consequently, your same rules just will not apply." Testimony of Dwight E. Avis, Head of the Alcohol and Tobacco Tax Division of the Bureau of Internal Revenue, before the House Ways and Means Committee on Restructuring the IRS (83rd Congress, 1953).

 

"Taxpayers in the United States assess their tax liabilities against themselves and pay them voluntarily. This system of assessment and payment is based on the principle of voluntary compliance." Internal Revenue Manual, Section 20:123 (7/15/96).

 

Why would U.S. citizens and permanent residents be obligated to pay personal income taxes?

 

Many U.S. citizens or residents (as the terms are generically used) are led to believe that paying the federal and state personal income taxes are compulsory. They make this self-fulfilling by entering into or agreeing with documents declaring that they have taxable "income" or are residents of federal territory such as the District of Columbia.

 

"Whatever the form in which the Government functions, anyone entering into an arrangement with the Government takes the risk of having accurately ascertained that he who purports to act for the Government stays within the bounds of his authority. The scope of this authority may be explicitly defined by Congress or be limited by delegated legislation, properly exercised through the rule-making power. And this is so even though, as here, the agent himself may have been unaware of the limitations upon his authority." FEDERAL CROP INS. CORPORATION V. MERRILL , 332 U.S. 380 (1947)

 

Such documents that people enter into certify that the targeted individual is a federal worker, or that his funds come from the federal government, or that the target is a citizen or resident (United States person) in a federal jurisdiction, such as the District of Columbia.

 

For example, "national banks are instrumentalities of the federal government, created for a public purpose, and as such necessarily subject to the paramount authority of the United States." DAVIS v. ELMIRA SAV. BANK, 161 U.S. 275 (1896)

 

National banks are required, by section 6109 of the IRS code, to request the execution of a W-9 form when one opens an account. It is a "request for taxpayer identification number and certification." The applicant certifies that he or she is "a U.S. person."

 

What is a "United States person"?

 

TITLE 26 > Subtitle F > CHAPTER 79 > § 7701, Definitions

(30) United States person

The term “United States person” means—

(A) a citizen or resident of the United States,

(B) a domestic partnership,

(C) a domestic corporation,

(D) any estate (other than a foreign estate, within the meaning of paragraph (31)), and

(E) any trust if—

(i) a court within the United States is able to exercise primary supervision over the administration of the trust, and

(ii) one or more United States persons have the authority to control all substantial decisions of the trust.

 

(9) United States

The term “United States” when used in a geographical sense includes only the States and the District of Columbia.

(10) State

The term “State” shall be construed to include [only] the District of Columbia, where such construction is necessary to carry out provisions of this title.

 

The instructions of the W-9 form state:

"Use Form W-9 only if you are a U.S. person."

 

While banks must request those who open new accounts to fill out this form, the applicant is not required to do so. The bank is in compliance if it just asks. (CTC, 127).

When an applicant fills out and signs the form, he certifies that he is a U.S. person and therefore receives taxable income.

 

When someone becomes employed, he or she is also asked to provide a taxpayer ID to the employer (301.6109-1(b)(1)) "with respect to persons subject to the taxes imposed".

 

Most firms in the U.S. send to their workers and to the IRS a W-2 form, as specified in:

 

TITLE 26 > Subtitle F > CHAPTER 61 > Subchapter A > PART III > Subpart C >

§ 6051. Receipts for employees

(a) Requirement

Every person [who is] required to deduct and withhold from an employee a tax under section 3101 or 3402, … or every employer engaged in a trade or business who pays remuneration for services performed by an employee, … shall furnish to each such employee … a written statement showing the following:

(2) the name of the employee (and his social security account number if wages as defined in section 3121 (a) have been paid),

(3) the total amount of wages as defined in section 3401 (a),

(5) the total amount of wages as defined in section 3121 (a),

[See below for 3402]

 

Wages in 3401 and 3121 were defined above as remuneration to federal employees or residents or corporate officers.

 

As stated in CTC p. 138, "Once a W-2 (or 1099) has been transmitted, it is legally presumed to be honest and accurate. It is an affidavit, signed under penalty of perjury in the case of W-2s… Once created, the payee identified on such a document will be presumed to have received taxable income."

 

The W-4 form

 

New hired workers are also asked to fill out a W-4, the "Employee's Withholding Allowance Certificate." It authorizes the employer to withhold some of the remuneration from his pay and transfer the funds to the IRS, as specified in:

 

TITLE 26 > Subtitle C > CHAPTER 24 > § 3402 Prev | Next

§ 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 such wages a tax determined in accordance with tables or computational procedures prescribed by the Secretary.

(f) Withholding exemptions

(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…

 

As noted above, "employee" etc. refers to federal employment, etc.

 

As stated in CTC p.151, "a W-4 becomes a piece of evidence amounting to a signed declaration of 'wage'-paid-'employee' status."

The W-4 then justifies transmitting the W-2 forms.

 

A worker who wishes to rescind the statements made in the W-4 could write a "termination of authority to withhold" statement and deliver it to the personnel or human resources department. If the agreement is not required, then the worker may withdraw it. A new worker may add a disclaimer or qualifying declaration to the form if the employer insists on his filling it out.

 

The 1040 and other tax forms

 

IRS code section 7701, referenced above, also defines "taxpayer":

 

TITLE 26 > Subtitle F > CHAPTER 79 >

§ 7701. Definitions

(a) When used in this title, where not otherwise distinctly expressed or manifestly incompatible with the intent thereof—

(14) Taxpayer

The term “taxpayer” means any person subject to any internal revenue tax.

 

Most of the personal income tax code applies only to "taxpayers."

 

The 1040 form creates a legally definitive statement of the taxpayer's "income." The 1040 can also be used to claim a refund for funds withheld or other overpayments. To obtain a refund, one may need to rebut erroneous allegations of "income" paid which were submitted by others, such as with form 1099.

 

The IRS also provides form 4852 to correct W-2 or 1099-R forms.

 

In response to requests for refunds, the IRS may claim that there is a problem with the forms submitted. Those who pursue such activity should refer to informed sources of information or council.

 

Reminder: the text here is purely for educational purposes, to better understand the US income tax system.