| FORMS: 6.9 POSITION STATEMENT TO IRS REGARDING W-4 Exempt |
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This form is to be sent to the IRS when a citizen has attempted to stop income tax withholding using a W-4Exempt and the IRS has come back and told the employer to withhold at single with no exemptions. <<NAME>> <<ADDRESS>> <<CITY>>, <<STATE>> <<ZIP>>
<<DATE>>
Internal Revenue Service 1111 Constitution Ave., NW Washington, DC 20224
Dear Sir or Madam:
On <<DATE>>, I sent to your office a copy of a letter I had sent to my employer, <<COMPANY NAME>>, insisting that they not withhold as per my claim of exempt status on my W-4 form. (Let it be it known for your records that any mention of the Department of Justice in that letter was intended to refer to the courts, a part of the judicial branch, and therefore not to the United States Department of Justice, a part of the executive branch. The reference to the Department of Justice rather than the courts was erroneous, and, under penalty of perjury, I declare that all references to the “Department of Justice” in that letter were intended to refer to the courts, not to the Department of Justice.)
The claim of exempt status on my W-4 form is not to be construed as a willful attempt to commit fraudulent action to avoid payment of owed taxes. It is my belief and position that while I do indeed receive income from services rendered, it is not gross income as defined by the Internal Revenue Code and the associated federal regulations.
Indeed, none of my income in my present or past has ever derived from a taxable source. 26 C.F.R. § 1.861-8 is the section of the Federal Regulations that is used to determine “sources of income” for the purposes of income taxes. The specific sources and activities listed in 26 C.F.R. § 1.861-8(f)(1) do not include my income. If you believe that my position is flawed, and you believe a counter argument could be proven in a federal court of law, as I believe mine could be proven in a federal court of law, then you or a representative of your service is encouraged to contact me to explain your argument. If I agree that the arguments are more sound than the attached position, and you can ultimately prove that my source of income is a taxable source of income that I am required to pay, I would be absolutely willing to withdraw the claim of exempt status on my W-4 form and to remit all due taxes and the 1040 form as required by the Internal Revenue Code. However, if I am not provided a persuasive argument that 26 C.F.R. § 1.861-8(f)(1) is not intended to determine the list of specific sources and activities (“operative sections”) of income that is referenced by the term “whatever source” in 26 USC § 61 and by the same term in the Sixteenth Amendment of the Constitution of the United States of America, and if it is not proven to me that income taxes (where it is understood that all forms of taxes are understood to be imposed and required, regardless of whether compliance is “voluntary”) for citizens working and living in the United States receiving income from sources or activities not included in 26 C.F.R. § 1.861-8(f)(1) would not be involuntary servitude nor slavery within the geographic borders of the United States of America, I will continue to claim exempt status on my W-4 form, and I will not file an unnecessary 1040 tax return form that does not apply to me since my income is not gross income as defined by Section 61 of the Internal Revenue Code. This statement of intent is my official statement on the matter of income taxes, and is the explanation regarding why you will not receive an inapplicable and irrelevant 1040 form this year.
Sincerely,
<<NAME>>
Position
Statement Preface: The income tax is imposed (by 26 USC §
1) on “taxable income”; “taxable income” is generally defined as
“gross income” minus allowable deductions (26 USC § 63); and “gross
income” is generally defined in 26 USC § 61.
(All emphasis in citations below has been added.) Issue #1: “Gross
income” is defined (generally) in 26 USC § 61 as “all income from whatever source
derived.” While 26 USC
§ 61 lists the more common “items” of income
which may be taxable (and following sections specifically include or
exclude various other “items” of income), Part I of Subchapter N of
the Code (Section 861 and following), and the related regulations,
determine what constitutes a “source”
of income (from which those items must derive in order to be taxable)
subject to the income tax imposed by 26 USC § 1.
“Sec. 1.861-1
Income from sources
within the United States. This fact has been stated in the first
sentence of the regulations under 26 USC § 861 since 1954 (when Section
861 came into existence). Numerous
sections of the statutes identify Section 861 as the section defining “income from sources within the United States,” and 26 USC § 306
uses the phrase “...part
I of subchapter N (sec. 861
and following, relating to determination
of sources of income).” Similarly, the indexes
of both the United States Code and the Code of Federal Regulations refer
to 26 USC § 861 and the related regulations regarding “determination of sources of income.” “Income
tax
“Income
from sources inside or outside U.S., determination of sources of income, 26 C.F.R. 1 (1.861-1--1.864-8T).”
[C.F.R. Index] In addition, the title of the part of regulations
beginning at 26 C.F.R. § 1.861-1 is titled “Determination
of sources of income” (as were the related statutes up until 1988). The language of 26 USC § 861(a) quite clearly gives the
general rules concerning which income constitutes “gross income” from
“sources” within the United
States. “Sec. 861. Income
from sources within the United States The corresponding regulations in 26 C.F.R. § 1.861-1
reiterate the point. “Sec. 1.861-1
Income from sources within the United States. The “items” of income which may be
taxable (as dealt with in 26 USC § 61 and following) are a separate issue
from the “sources” from which those items must derive to be taxable,
which is dealt with by Subchapter N, “Tax
based on income from sources
within or without the United
States.” (For example,
the listing of “interest” in 26 USC § 61 does not make the
foreign-earned interest of all foreigners taxable.)
In fact, in the
full version of Title 26 (with all notes and amendments), 26 USC § 61
itself contains the following cross-reference, clarifying that the matter
of “sources” is dealt with by Section 861 and following: “Income
from sources - But again, the clearest statement on
the matter is found in the first sentence of regulations under 26 USC §
861, which states that “section 861
and following... and the regulations thereunder determine the sources
of income for purposes of the income tax.” The statutes of Part I of Subchapter N
(Section 861 and following), and related regulations, show income to be
taxable only when it derives from the “specific sources” listed in 26
C.F.R. § 1.861-8(f)(1). (Those
“specific sources” are also described in various “operative
sections” throughout the statutes of Subchapter N.)
My income does not derive from any of the listed “specific
sources.”
“(ii) Relationship
of sections 861, 862, 863(a), and 863(b). Sections 861, 862, 863(a), and 863(b) are the four provisions applicable in determining
taxable income from specific
sources.”
[26 C.F.R. § 1.861-8(f)(3)(ii)] “The
rules contained in this section apply in determining taxable
income of the taxpayer from specific
sources and activities under other sections of the Code, referred
to in this section as operative sections. See
paragraph (f)(1) of this section for a list and description of
operative sections.” [26 C.F.R. § 1.861-8(a)(1)] “[T]he term ‘statutory grouping’ means the gross income from a specific
source or activity which must first be determined in order to arrive
at ‘taxable income’ from which specific
source or activity under an operative section.
(See paragraph (f)(1) of
this section.)” [26 C.F.R. § 1.861-8(a)(4)] “The
operative sections of the Code which require the determination
of taxable income of the taxpayer from specific
sources or activities and which gives rise to statutory groupings
to which this section is applicable include the sections described below. Both the regulations under Section
22(a) of the 1939 Code (predecessor to 26 USC § 61), and the regulations
under Section 119 of the 1939 Code (predecessor of 26 USC §§ 861 - 864)
list the same taxable activities (“sources”) when discussing income
from within the United States. This
reinforces that the legal meaning of the word “source,” “for
purposes of the income tax” (rather than just for certain special
situations) is limited to those matters to which 26 USC § 861 and its
predecessors apply. 39.22(a)-1 What included in gross income... Profits
of citizens, residents, or domestic corporations derived from sales in
foreign commerce must be included in their gross income; but special
provisions are made for nonresident
aliens and foreign
corporations by sections 211 to 238, inclusive, and, in certain
cases, by section 251, for citizens and domestic corporations deriving
income from sources within possessions
of the United States.” [26 C.F.R. § 29.22(a)-1 (1945)] Sec. 29.119-1. Income
from sources within the United States. Issue #2: While 26 USC § 63 generally defines
“taxable income” (as
“gross income” minus deductions), the sections to be used specifically
for determining taxable income from sources within
the United States are 26 USC §
861(b) and 26 C.F.R. § 1.861-8.
(The regulations under 26 USC § 63 give no instructions for
determining taxable income.) “Determination of
taxable income. The taxpayer's taxable
income from sources within or
without the United States will be
determined under the rules of Secs. 1.861-8 through 1.861-14T,
for determining taxable income from
sources within the United States.” [26 C.F.R. § 1.863-1(c)] “Rules are
prescribed for determination of
gross income and taxable income derived from sources within and
without the United States... §§
1.861-1 through 1.864.
(Secs. 861-864; ’54
Code.)” [Treasury Decision 6258] “Sections 861(b)
and 863(a) state in general terms how to determine
taxable income of a taxpayer from sources within the United States
after gross income from sources within the United States has been
determined.” [26 C.F.R. § 1.861-8] “The taxable income from sources within the United States… shall be
determined by deducting therefrom, in accordance with sections 861(b)
and 863(a), [allowable deductions].
See Secs. 1.861-8 and
1.863-1.” [26 C.F.R. § 1.861-1] “Sec. 1.861-8 [is the section] for determining the taxable
income from sources within
the United States.” [26 C.F.R. § 1.862-1] Secs.
1.861-1 to 1.863-5, [give the principles]
for determining the gross and the taxable income from sources within and
without the United States.” [26 C.F.R. § 1.863-6] 26 USC § 861(b) is entitled “Taxable
income from sources within the United States,” and the
corresponding regulations in 26 C.F.R. § 1.861-8 are entitled “Computation of taxable income from sources within the United States
*and from other sources and activities.”
(The portion of the title after the asterisk was added in 1978.) (As shown in Issue #1, 26 USC § 861(b) and 26 C.F.R. §
1.861-8 do not show my income to
be taxable.) Issue #3: The Treasury regulations state that the
“items” of income listed in 26 USC § 61 (which make up “classes of
gross income”) may include income excluded
from federal taxation. [A “class of gross income”] “may
consist of one or more items...
of gross income enumerated in section
61.” [26 C.F.R. § 1.861-8(a)(3)] “[P]aragraph (d)(2)
of this section... provides that a class
of gross income may include excluded
income.” [26 C.F.R. § 1.861-8(b)(1)] Concerning the matter of whether or not
such “items” are exempt, the reader is directed to 26 C.F.R. §
1.861-8T(d)(2), which states the following: “ (ii)
Exempt income and exempt asset defined--(A) In general. For purposes of
this section, the term exempt
income means any income that is, in whole or in part, exempt,
excluded, or eliminated for federal income tax purposes.” The section then goes on to specify what is not exempt. “(iii)
Income that is not considered tax exempt.
The following items are not
considered to be exempt,
eliminated, or excluded income and, thus, may have expenses, losses, or
other deductions allocated and apportioned to them: Again, only those engaged in
international or foreign commerce (including commerce within federal
possessions) are identified as not being exempt by law.
The regulations in 26 C.F.R. § 1.61-1 defines “gross income” as
“all income from whatever source derived, unless
excluded by law.”
Prior regulations clarify that the term “excluded
by law” means exempt by statute or
exempt by the Constitution (though the phrase is often misread as
referring only to statutory
exemption). “Sec. 29.21-1.
Meaning of net income. “Sec. 29.22(b)-1.
Exemption--Exclusions from gross income. The prior regulations under the
definition of “gross income,” as well as the current regulations in 26
C.F.R. § 1.861-8T(d)(2) (shown above), give very similar positive lists of
those types of activities, income from which is not
exempted from federal taxation by the Constitution. Though this issue is settled by the
regulations alone, how the
Constitution exempts certain income from federal taxation will be
addressed, for completeness’ sake. Congress’ legal power within the 50
states is limited to those matters enumerated in Article I, Section 8 (see
the Tenth Amendment). “We start with first principles.
The Constitution creates a Federal Government of enumerated powers. See U.S.
Const., Art. I, 8. As James Madison wrote, ‘[t]he
powers delegated by the proposed Constitution to the federal government
are few and defined...’” Though Article I, Section 8 includes
(in the first clause) the power to “lay
and collect taxes,” the Supreme Court has repeatedly made clear that
this does not empower Congress
to control matters otherwise outside of the jurisdiction, merely by
putting legislation in the form of a “tax.” “Grant the validity of this law,
and all that Congress would need to do, hereafter, in seeking to take over
to its control any one of the great number of subjects of public interest,
jurisdiction of which the states have never parted with, and which are
reserved to them by the Tenth
Amendment, would be to enact a detailed measure of complete regulation
of the subject and enforce it by a
socalled tax upon departures from it. To
give such magic to the word 'tax' would be to break down all
constitutional limitation of the powers of Congress and completely
wipe out the sovereignty of the states.” “[The
citation above] has complete
application to the act before us, and requires us to hold that the
provisions of the act we have been discussing cannot
be sustained as an exercise of the taxing power of Congress conferred by
section 8, article 1.” The power to tax is therefore limited
to those matters otherwise under
federal jurisdiction (particularly with taxes which result in a
significant regulation of behavior).
For example, the power to tax combined
with the power to regulate international commerce authorizes Congress to
impose an income tax on income derived from international commerce.
Concerning the income tax of 1913, in a case dealing with a
taxpayer engaged in international commerce, the Supreme Court stated the
following:
“The
Constitution broadly empowers Congress not only 'to
lay and collect taxes, duties, imposts, and excises,' but
also ‘to regulate commerce with foreign nations.’ So, if
the [the clause forbidding taxes on exports from states] be not in the way, Congress undoubtedly has power to lay and collect such a tax as is here in question.”
Correspondingly, the taxable activities
spelled out in the statutes (see Subchapter N) and regulations (see 26 CFR
§§ 1.861-8, 1.861-8T) limit the tax to those matters specifically under
federal jurisdiction pursuant to Article I, Section 8 of the Constitution
(such as international commerce and federal possessions). Brief mention should be made of the
Sixteenth Amendment to the Constitution, since many incorrectly believe
that it increased Congress’ power to tax.
The Supreme Court (in the Brushaber and Stanton cases) and the
Secretary of the Treasury agreed that “[t]he provisions of the sixteenth amendment conferred no new
power of taxation,
but simply prohibited [Congress’ original power to tax incomes] from being taken out of the category of indirect taxation, to
which it inherently belonged, and being placed in the category of
direct taxation subject to apportionment.” [Treasury Decision 2303]
The Sixteenth Amendment had no effect whatsoever on Congress’
taxing jurisdiction. (The above discussion concerning the
Constitutional limits on Congress’ taxing power is included only to show
the reason for the wording of the Treasury regulations. No claim is made that the current statutes and regulations
are in any way unconstitutional.) Conclusion: Whereas: 1) The
income I receive derives from activities which do not constitute “sources
of income for purposes of the income tax” (26 C.F.R. § 1.861-1), and; 2) I
engage in no activities which generate taxable income, according to the
section “for determining taxable
income from sources within the United State” (26 C.F.R. § 1.861-8),
and; 3) The
income I receive is excluded from the list of “non-exempt” income (26
C.F.R. § 1.861-8T(d)(2)) (due to being exempted by the Tenth Amendment to
the Constitution); I therefore conclude that I receive no
income subject to the “income tax” imposed by 26 USC § 1. Signed, <<NAME>> |