IMPORTANT NOTES
There is no case and no law that says salaries, wages, and compensation for personal service is itself income, except for the compensation paid to POTUS and federal judges.
So from 26 U.S.C. §3121 we can see that a tax is imposed that is equal to 6.2 % of the "wages received by the individual with respect to employment (as defined in IRC Section 3121(b)).
Though Congress calls such wages income in this provision, the tax imposed is actually a tax on EMPLOYMENT (as defined in 3121(b) to be federally-connected) and the amount of tax is measured by the amount of "wages" from employment received by the individual.
That Court also refers to IRC Section 3402 which states:
26 U.S.C. §3402
(“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.”
This provision establishes only a withholding requirement on "wages" as defined in IRC Section 3401. It does NOT establish that "wages" for income tax withholding purposes are INCOME!!! It does not impose a tax of any kind on such "wages"!!!
Although the definitions of "wages" under IRC Sections 3121(a) and 3401(a) are nearly identical, Congress has imposed a tax only on the "wages" in IRC Section 3121.
26 U.S.C. §3121(a)(1)
in the case of the taxes imposed by sections 3101(a) and 3111(a) that part of the remuneration which, after remuneration (other than remuneration referred to in the succeeding paragraphs of this subsection) equal to the contribution and benefit base (as determined under section 230 of the Social Security Act) with respect to employment has been paid to an individual by an employer during the calendar year with respect to which such contribution and benefit base is effective, is paid to such individual by such employer during such calendar year.
No tax is imposed on "wages" as defined under 3401, and no provision of IRC establishes that such "wages" are income for income tax purposes!! This is because all employment taxes under Subtitle C of the Internal Revenue Code are classified as Tax Class 5, which is GIFTS. They are OFFSETS or credits to real taxes imposed elsewhere.
"wages" are never listed as being taxable in 26 U.S.C. 61, only "compensation for services, including fees, commissions, fringe benefits, and similar items", but never "labor". Businesses and fictions of law provide "services", Humans provide "labor". Even then, "income" as constitutionally defined is always PROFIT, and never everything paid:
“We must reject in this case, as we have rejected in cases arising under the Corporation Excise Tax Act of 1909 (Doyle, Collector, v. Mitchell Brothers Co., 247 U.S. 179, 38 Sup. Ct. 467, 62 L. Ed.--), the broad contention submitted on behalf of the government that all receipts—everything that comes in-are income within the proper definition of the term ‘gross income,’ and that the entire proceeds of a conversion of capital assets, in whatever form and under whatever circumstances accomplished, should be treated as gross income. Certainly the term “income’ has no broader meaning in the 1913 act than in that of 1909 (see Stratton’s Independence v. Howbert, 231 U.S. 399, 416, 417 S., 34 Sup. Ct. 136), and for the present purpose we assume there is not difference in its meaning as used in the two acts.”
[Southern Pacific Co., v. Lowe, 247 U.S. 330, 335, 38 S.Ct. 540 (1918)]
How to exclude your earnings from "employment" or "wages" on a W-8:
"• The relationship documented herein does not constitute “employment” because services are rendered outside the “United States” by OTHER than a “citizen” or “resident” as documented in 26 USC 3121(b) and 3121(l)(1) and therefore amounts paid cannot be statutory "wages" per 26 U.S.C. 3401(a)."
[EDITORIAL: The above language is included in the following free form:
W-8SUB, Form #04.231
https://sedm.org/Forms/04-Tax/2-Withholding/W-8SUB.pdf
More on the above at:
About IRS Form W-8BEN, Form #04.202
https://sedm.org/Forms/04-Tax/2-Withholding/W-8BEN/AboutIRSFormW-8BEN.htm
NOTE ALSO: Be aware that accepting coverage with SSA based on contributions from one's remuneration creates an equitable estoppel from arguing the remuneration is not "wages” and therefore “gross income”. If FICA and income tax "wages" are the same, and you don't dispute receipt of wages for FICA/SSA purposes, then you can't dispute receipt of "wages" for income tax purposes at the same time. it is a federally connected benefit. it is axiomatic that one cannot accept a benefit and repudiate the obligation that comes with it. The IRS can determine liability based solely on a W-2 without an assessment. For proof of this see:
“Latham also contends that the court erred in refusing to instruct the jury that an assessment under 26 U.S.C. § 6201 is a legal necessity before an individual can have an income tax liability. Latham's theory is that if there was no assessment, there can be no income tax liability and thus he cannot be found to have filed false W-4 forms since there was no tax liability in the preceding year. But an assessment under § 6201 is an administrative determination that a certain amount is currently due and owing as a tax with consequences somewhat similar to the reduction of a claim to judgment. Cohen v. Gross, 316 F.2d 521, 522-23 (3d Cir. 1963). The exempt status requirement of a tax liability in the preceding year does not support Latham's novel and ridiculous theory that there must have been an IRS determination in that year of tax due on income earned when (as here) the taxpayer failed to file a return. Latham cannot place himself in the exempt category in 1981 simply by failing to file a return in 1981"
[United States v. Latham, 754 F.2d. 747 (1985)]
So liability can exist via equity BEFORE an assessment is ever made.
It has to be "wages" for you to contribute. So if you contribute, It will equitably be treated as "wages" under 3121, and therefore wages under 3401.
It would be unjust enrichment to allow anyone the privilege of having covered earnings with SSA without paying the income tax liability that comes with it.
“In addition to other taxes, there is hereby imposed on the income of every individual a tax equal to 6.2 percent of the wages (as defined in section 3121(a)) received by the individual with respect to employment (as defined in section 3121(b)).”
[
26 U.S.C. § 3101]
"Other taxes" =income taxes.]
IRS Publication 519:
Income Subject to Tax
Income from sources outside the United States that is not effectively connected with a trade or business in the United States is not taxable if you receive it while you are a nonresident alien. The income is not taxable even if you earned it while you were a resident alien or if you became a resident alien or a U.S. citizen after receiving it and before the end of the year.
[IRS Publication 519, Year 2000, p. 26]
26 C.F.R. §31.3401(a)(6)-1:
Title 26
PART 31—EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE
Subpart E—Collection of Income Tax at Source
§ 31.3401(a)(6)-1 Remuneration for services of nonresident alien individuals.
(a) In general. All remuneration paid after December 31, 1966, for services performed by a nonresident alien individual, if such remuneration otherwise constitutes wages within the meaning of §31.3401(a)–1 and if such remuneration is effectively connected with the conduct of a trade or business within the United States, is subject to withholding under section 3402 unless excepted from wages under this section. In regard to wages paid under this section after February 28, 1979, the term “nonresident alien individual” does not include a nonresident alien individual treated as a resident under section 6013 (g) or (h).
(b) Remuneration for services performed outside the United States. Remuneration paid to a nonresident alien individual (other than a resident of Puerto Rico) for services performed outside the United States is excepted from wages and hence is not subject to withholding.
IRS Website:
Services performed outside the U.S
Compensation paid to a nonresident alien (other than a resident of Puerto Rico) for services performed outside the United States [federal territory] is not considered wages and is not subject to graduated withholding or 30% withholding.
[SOURCE: http://www.irs.gov/businesses/small/international/article/0,,id=96594,00.html]
26 U.S. Code § 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—
(1)
in the case of the taxes imposed by sections 3101(a) and 3111(a) that part of the remuneration which, after remuneration (other than remuneration referred to in the succeeding paragraphs of this subsection) equal to the contribution and benefit base (as determined under section 230 of the Social Security Act) with respect to employment has been paid to an individual by an employer during the calendar year with respect to which such contribution and benefit base is effective, is paid to such individual by such employer during such calendar year. If an employer (hereinafter referred to as successor employer) during any calendar year acquires substantially all the property used in a trade or business of another employer (hereinafter referred to as a predecessor), or used in a separate unit of a trade or business of a predecessor, and immediately after the acquisition employs in his trade or business an individual who immediately prior to the acquisition was employed in the trade or business of such predecessor, then, for the purpose of determining whether the successor employer has paid remuneration (other than remuneration referred to in the succeeding paragraphs of this subsection) with respect to employment equal to the contribution and benefit base (as determined under section 230 of the Social Security Act) to such individual during such calendar year, any remuneration (other than remuneration referred to in the succeeding paragraphs of this subsection) with respect to employment paid (or considered under this paragraph as having been paid) to such individual by such predecessor during such calendar year and prior to such acquisition shall be considered as having been paid by such successor employer;
(2)the amount of any payment (including any amount paid by an employer for insurance or annuities, or into a fund, to provide for any such payment) made to, or on behalf of, an employee or any of his dependents under a plan or system established by an employer which makes provision for his employees generally (or for his employees generally and their dependents) or for a class or classes of his employees (or for a class or classes of his employees and their dependents), on account of—
(A)
sickness or accident disability (but, in the case of payments made to an employee or any of his dependents, this subparagraph shall exclude from the term “wages” only payments which are received under a workman’s compensation law), or
(B)
medical or hospitalization expenses in connection with sickness or accident disability, or
(C)
death, except that this paragraph does not apply to a payment for group-term life insurance to the extent that such payment is includible in the gross income of the employee;
(4)
any payment on account of sickness or accident disability, or medical or hospitalization expenses in connection with sickness or accident disability, made by an employer to, or on behalf of, an employee after the expiration of 6 calendar months following the last calendar month in which the employee worked for such employer;
(5)any payment made to, or on behalf of, an employee or his beneficiary—
(A)
from or to a trust described in section 401(a) which is exempt from tax under section 501(a) at the time of such payment unless such payment is made to an employee of the trust as remuneration for services rendered as such employee and not as a beneficiary of the trust,
(B)
under or to an annuity plan which, at the time of such payment, is a plan described in section 403(a),
(C)
under a simplified employee pension (as defined in section 408(k)(1)), other than any contributions described in section 408(k)(6),
(D)
under or to an annuity contract described in section 403(b), other than a payment for the purchase of such contract which is made by reason of a salary reduction agreement (whether evidenced by a written instrument or otherwise),
(F)
to supplement pension benefits under a plan or trust described in any of the foregoing provisions of this paragraph to take into account some portion or all of the increase in the cost of living (as determined by the Secretary of Labor) since retirement but only if such supplemental payments are under a plan which is treated as a welfare plan under section 3(2)(B)(ii) of the Employee Retirement Income Security Act of 1974,
(G)
under a cafeteria plan (within the meaning of section 125) if such payment would not be treated as wages without regard to such plan and it is reasonable to believe that (if section 125 applied for purposes of this section) section 125 would not treat any wages as constructively received,
(H)
under an arrangement to which section 408(p) applies, other than any elective contributions under paragraph (2)(A)(i) thereof, or
(I)
under a plan described in section 457(e)(11)(A)(ii) and maintained by an eligible employer (as defined in section 457(e)(1));
(6)the payment by an employer (without deduction from the remuneration of the employee)—
(A)
of the tax imposed upon an employee under section 3101, or
(B)
of any payment required from an employee under a State unemployment compensation law,
(7)
(A)
remuneration paid in any medium other than cash to an employee for service not in the course of the employer’s trade or business or for domestic service in a private home of the employer;
(B)
cash remuneration paid by an employer in any calendar year to an employee for domestic service in a private home of the employer (including domestic service on a farm operated for profit), if the cash remuneration paid in such year by the employer to the employee for such service is less than the applicable dollar threshold (as defined in subsection (x)) for such year;
(C)
cash remuneration paid by an employer in any calendar year to an employee for service not in the course of the employer’s trade or business, if the cash remuneration paid in such year by the employer to the employee for such service is less than $100. As used in this subparagraph, the term “service not in the course of the employer’s trade or business” does not include domestic service in a private home of the employer and does not include service described in subsection (g)(5);
(8)
(B)cash remuneration paid by an employer in any calendar year to an employee for agricultural labor unless—
(i)
the cash remuneration paid in such year by the employer to the employee for such labor is $150 or more, or
except that clause (ii) shall not apply in determining whether remuneration paid to an employee constitutes “wages” under this section if such employee (I) is employed as a hand harvest laborer and is paid on a piece rate basis in an operation which has been, and is customarily and generally recognized as having been, paid on a piece rate basis in the region of employment, (II) commutes daily from his permanent residence to the farm on which he is so employed, and (III) has been employed in agriculture less than 13 weeks during the preceding calendar year;
(10)
remuneration paid by an employer in any calendar year to an employee for service described in subsection (d)(3)(C) (relating to home workers), if the cash remuneration paid in such year by the employer to the employee for such service is less than $100;
(11)
remuneration paid to or on behalf of an employee if (and to the extent that) at the time of the payment of such remuneration it is reasonable to believe that a corresponding deduction is allowable under section 217 (determined without regard to section 274(n));
(12)
(A)
tips paid in any medium other than cash;
(B)
cash tips received by an employee in any calendar month in the course of his employment by an employer unless the amount of such cash tips is $20 or more;
(13)any payment or series of payments by an employer to an employee or any of his dependents which is paid—
(A)
upon or after the termination of an employee’s employment relationship because of (i) death, or (ii) retirement for disability, and
(B)
under a plan established by the employer which makes provision for his employees generally or a class or classes of his employees (or for such employees or class or classes of employees and their dependents),
other than any such payment or series of payments which would have been paid if the employee’s employment relationship had not been so terminated;
(14)
any payment made by an employer to a survivor or the estate of a former employee after the calendar year in which such employee died;
(15)
any payment made by an employer to an employee, if at the time such payment is made such employee is entitled to disability insurance benefits under section 223(a) of the Social Security Act and such entitlement commenced prior to the calendar year in which such payment is made, and if such employee did not perform any services for such employer during the period for which such payment is made;
(16)
remuneration paid by an organization exempt from income tax under section 501(a) (other than an organization described in section 401(a)) or under section 521 in any calendar year to an employee for service rendered in the employ of such organization, if the remuneration paid in such year by the organization to the employee for such service is less than $100;
(18)
any payment made, or benefit furnished, to or for the benefit of an employee if at the time of such payment or such furnishing it is reasonable to believe that the employee will be able to exclude such payment or benefit from income under section 127, 129, 134(b)(4), or 134(b)(5);
(19)
the value of any meals or lodging furnished by or on behalf of the employer if at the time of such furnishing it is reasonable to believe that the employee will be able to exclude such items from income under section 119;
(20)
any benefit provided to or on behalf of an employee if at the time such benefit is provided it is reasonable to believe that the employee will be able to exclude such benefit from income under section 74(c), 108(f)(4), 117, or 132;
(21)
in the case of a member of an Indian tribe, any remuneration on which no tax is imposed by this chapter by reason of section 7873 (relating to income derived by Indians from exercise of fishing rights);
(22)remuneration on account of—
(A)
a transfer of a share of stock to any individual pursuant to an exercise of an incentive stock option (as defined in section 422(b)) or under an employee stock purchase plan (as defined in section 423(b)), or
(B)
any disposition by the individual of such stock; or
(23)
any benefit or payment which is excludable from the gross income of the employee under section section [1] 139B(a).
Nothing in the regulations prescribed for purposes of chapter 24 (relating to income tax withholding) which provides an exclusion from “ wages” as used in such chapter shall be construed to require a similar exclusion from “ wages” in the regulations prescribed for purposes of this chapter. Except as otherwise provided in regulations prescribed by the Secretary, any third party which makes a payment included in wages solely by reason of the parenthetical matter contained in subparagraph (A) of paragraph (2) shall be treated for purposes of this chapter and chapter 22 as the employer with respect to such wages. [. . .]
(l)Agreements entered into by American employers with respect to foreign affiliates
(1)Agreement with respect to certain employees of foreign affiliate
The Secretary shall, at the American employer’s request, enter into an agreement (in such manner and form as may be prescribed by the Secretary) with any American employer (as defined in subsection (h)) who desires to have the insurance system established by title II of the Social Security Act extended to service performed outside the United States in the employ of any 1 or more of such employer’s foreign affiliates (as defined in paragraph (6)) by all employees who are citizens or residents of the United States, except that the agreement shall not apply to any service performed by, or remuneration paid to, an employee if such service or remuneration would be excluded from the term “employment” or “wages”, as defined in this section, had the service been performed in the United States. Such agreement may be amended at any time so as to be made applicable, in the same manner and under the same conditions, with respect to any other foreign affiliate of such American employer. Such agreement shall be applicable with respect to citizens or residents of the United States who, on or after the effective date of the agreement, are employees of and perform services outside the United States for any foreign affiliate specified in the agreement. Such agreement shall provide—
(A)
that the American employer shall pay to the Secretary, at such time or times as the Secretary may by regulations prescribe, amounts equivalent to the sum of the taxes which would be imposed by sections 3101 and 3111 (including amounts equivalent to the interest, additions to the taxes, additional amounts, and penalties which would be applicable) with respect to the remuneration which would be wages if the services covered by the agreement constituted employment as defined in this section; and
(B)
that the American employer will comply with such regulations relating to payments and reports as the Secretary may prescribe to carry out the purposes of this subsection.
(2)Effective period of agreement
An agreement entered into pursuant to paragraph (1) shall be in effect for the period beginning with the first day of the calendar quarter in which such agreement is entered into or the first day of the succeeding calendar quarter, as may be specified in the agreement; except that in case such agreement is amended to include the services performed for any other affiliate and such amendment is executed after the first month following the first calendar quarter for which the agreement is in effect, the agreement shall be in effect with respect to service performed for such other affiliate only after the calendar quarter in which such amendment is executed. Notwithstanding any other provision of this subsection, the period for which any such agreement is effective with respect to any foreign entity shall terminate at the end of any calendar quarter in which the foreign entity, at any time in such quarter, ceases to be a foreign affiliate as defined in paragraph (6).
(3)No termination of agreement
No agreement under this subsection may be terminated, either in its entirety or with respect to any foreign affiliate, on or after June 15, 1989.
(4)Deposits in trust fundsFor purposes of section 201 of the Social Security Act, relating to appropriations to the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund, such remuneration—
(A)
paid for services covered by an agreement entered into pursuant to paragraph (1) as would be wages if the services constituted employment, and
(B)
as is reported to the Secretary pursuant to the provisions of such agreement or of the regulations issued under this subsection,
shall be considered wages subject to the taxes imposed by this chapter.
(5)Overpayments and underpayments
(A)
If more or less than the correct amount due under an agreement entered into pursuant to this subsection is paid with respect to any payment of remuneration, proper adjustments with respect to the amounts due under such agreement shall be made, without interest, in such manner and at such times as may be required by regulations prescribed by the Secretary.
(B)
If an overpayment cannot be adjusted under subparagraph (A), the amount thereof shall be paid by the Secretary, through the Fiscal Service of the Treasury Department, but only if a claim for such overpayment is filed with the Secretary within two years from the time such overpayment was made.
(6)Foreign affiliate definedFor purposes of this subsection and section 210(a) of the Social Security Act—
(B)Determination of 10-percent interestFor purposes of subparagraph (A), an American employer has a 10-percent interest in any entity if such employer has such an interest directly (or through one or more entities)—
(i)
in the case of a corporation, in the voting stock thereof, and
(ii)
in the case of any other entity, in the profits thereof.
(7)American employer as separate entity
Each American employer which enters into an agreement pursuant to paragraph (1) of this subsection shall, for purposes of this subsection and section 6413(c)(2)(C), relating to special refunds in the case of employees of certain foreign entities, be considered an employer in its capacity as a party to such agreement separate and distinct from its identity as a person employing individuals on its own account.
(8)Regulations
Regulations of the Secretary to carry out the purposes of this subsection shall be designed to make the requirements imposed on American employers with respect to services covered by an agreement entered into pursuant to this subsection the same, so far as practicable, as those imposed upon employers pursuant to this title with respect to the taxes imposed by this chapter.
[26 U.S.C. §3121]
26 U.S.C. Sec. 3401(a):
(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,
including
the cash value of all remuneration (including benefits) paid in any
medium
other
than cash; except that such term shall not include remuneration paid
-
(1) for active service
performed in a month for which such employee is entitled to the
benefits of section 112 (relating to certain combat zone compensation
of members of
the
Armed Forces of the United States) to the extent remuneration for such
service is
excludable
from gross income under such section; or
(2) for agricultural labor (as defined in section 3121(g)) unless the
remuneration paid for
such
labor is wages (as defined in section 3121(a)); or
(3) for domestic service in a private home, local college club, or local
chapter of a
college
fraternity or sorority; or
(4) for service not in the course of the employer's trade or business
performed in any
calendar
quarter by an employee, unless the cash remuneration paid for such service
is $50
or more and such service is performed by an individual who is regularly
employed
by such employer to perform such service. For purposes of this paragraph,
an individual
shall be deemed to be regularly employed by an employer during a
calendar
quarter only if -
(A)
on each of some 24 days during such quarter such individual performs
for such
employer for some portion of the day service not in the course
of the employer's
trade or business;
or
(B)
such individual was regularly employed (as determined under subparagraph
(A))
by such employer in the performance of such service during the
preceding calendar
quarter; or
(5) for services by a citizen or resident of the United States for a
foreign government or
an international
organization; or
(6) for such services, performed by a nonresident alien individual,
as may be designated
by regulations prescribed by the Secretary; or
(7) Repealed. Pub. L. 89-809, title I, Sec. 103(k), Nov. 13, 1966, 80
Stat. 1554)
(8)
(A) for services
for an employer (other than the United States or any agency thereof)
-
(i) performed by a citizen of the United States if, at the time
of the payment of such
remuneration, it is reasonable to believe that such remuneration
will be excluded
from gross income under section 911; or
(ii) performed in a foreign country or in a possession of the
United States by such a
citizen if, at the time of the payment of such remuneration,
the employer is
required by the law of any foreign country or possession of the
United States to
withhold income tax upon such remuneration; or
(B)
for services for an employer (other than the United States or any agency
thereof)
performed by a citizen of the United States within a possession
of the United States
(other than Puerto Rico), if it is reasonable to believe that
at least 80 percent of the
remuneration to be paid to the employee by such employer during
the calendar
year will be for such services; or
(C)
for services for an employer (other than the United States or any agency
thereof)
performed by a citizen of the United States within Puerto Rico,
if it is reasonable to
believe that during the entire calendar year the employee will
be a bona fide
resident of Puerto Rico; or
(D)
for services for the United States (or any agency thereof) performed
by a citizen of
the United States within a possession of the United States to
the extent the United
States (or such agency) withholds taxes on such remuneration
pursuant to an
agreement with such possession; or
(9) for services performed by a duly ordained, commissioned, or licensed
minister of a
church
in the exercise of his ministry or by a member of a religious order
in the
exercise
of duties required by such order; or
(10)
(A) for services performed
by an individual under the age of 18 in the delivery or
distribution of newspapers or shopping news, not including delivery
or distribution
to any point for subsequent delivery or distribution; or
(B) for services performed by an individual in, and at the time of,
the sale of newspapers
or magazines
to ultimate consumers, under an arrangement under which the
newspapers
or magazines are to be sold by him at a fixed price, his compensation
being
based on the retention of the excess of such price over the amount at
which the
newspapers
or magazines are charged to him, whether or not he is guaranteed a
minimum
amount of compensation for such services, or is entitled to be credited
with
the
unsold newspapers or magazines turned back; or
(11) for services not in the course of the employer's trade or business,
to the extent paid
in any
medium other than cash; or
(12) to, or on behalf of, an employee or his beneficiary -
(A) from or to a
trust described in section 401(a) which is exempt from tax under
section 501(a) at
the time of such payment unless such payment is made to an
employee of the
trust as remuneration for services rendered as such employee and
not as a beneficiary of the trust; or
(B) under or to
an annuity plan which, at the time of such payment, is a plan described
in section 403(a); or
(C) for a payment
described in section 402(h)(1) and (2) if, at the time of such payment,
it is reasonable to believe that the employee will be entitled
to an exclusion under
such section for payment; or
(D) under
an arrangement to which section 408(p) applies; or
(13) pursuant to any provision of law other than section 5(c) or 6(1)
of the Peace Corps
Act, for service performed as a volunteer or volunteer leader
within the meaning of
such Act; or
(14) in the form of group-term life insurance on the life of an employee;
or
(15) to or on behalf of an employee if (and to the extent that) at the
time of the payment of
such remuneration it is
reasonable to believe that a corresponding deduction is
allowable under section 217 (determined without regard to section
274(n)); or
(16)
(A) as tips in any
medium other than cash;
(B) as cash tips
to an employee in any calendar month in the course of his employment
by an employer unless the amount of such cash tips is $20 or
more; [1]
(17) for service described in section 3121(b)(20); [1]
(18) for any payment made, or benefit furnished, to or for the benefit
of an employee if at
the time of such payment or such furnishing it is reasonable
to believe that the
employee will be able to exclude such payment or benefit from
income under section
127 or 129; [1]
(19) for any benefit provided to or on behalf of an employee if
at the time such benefit is
provided it is reasonable to believe that the employee will be
able to exclude such
benefit from income under section 74(c), 117, or 132; [1]
(20) for any medical care reimbursement made to or for the benefit of
an employee under
a self-insured medical reimbursement plan (within the meaning
of section
105(h)(6)); or
(21) for any payment made to or for the benefit of an employee if at
the time of such
payment it is reasonable to believe that the employee will be
able to exclude such
payment from income under section 106(b).
Pay that is not wages
Employment for which the pay is not considered wages (for graduated
income tax withholding) includes, but is not limited to, the following
items:
-
Agricultural labor if the total cash wages paid to an
individual worker during the year is less than $150
and the total paid to all workers during the year is
less than $2,500. But even if the total amount paid
to all workers is $2,500 or more, wages of less than
$150 per year paid to a worker are not subject to income
tax withholding if certain conditions are met. For these
conditions, see
Publication 51 (Circular A), Agricultural Employer's
Tax Guide. For further discussion of withholding
and reporting taxes on foreign agricultural workers
in the United States refer to
Foreign Agricultural Workers.
-
Services of a household nature performed in or about
the private home of an employer, or in or about the
clubrooms or house of a local college club, fraternity,
or sorority. A local college club, fraternity, or sorority
does not include an alumni club or chapter and may not
be operated primarily as a business enterprise. Examples
of these services include those performed as a cook,
janitor, housekeeper, governess, gardener, or houseparent.
-
Certain services performed outside the course of the
employer's trade or business for which cash payment
is less than $50 for the calendar quarter.
-
Services performed as an employee of a foreign government,
without regard to citizenship, residence, or where services
are performed. These include services performed by ambassadors,
other diplomatic and consular officers and employees,
and nondiplomatic representatives. They do not include
services for a U.S. or Puerto Rican corporation owned
by a foreign government.
-
Services performed within or outside the United States
by an employee or officer (regardless of citizenship
or residence) of an international organization designated
under the International Organizations Immunities Act.
-
Services performed by a duly ordained, commissioned,
or licensed minister of a church, but only if performed
in the exercise of the ministry and not as an employee
of the United States, a U.S. possession, or a foreign
government, or any of their political subdivisions.
These also include services performed by a member of
a religious order in carrying out duties required by
that order.
-
Tips paid to an employee if they are paid in any medium
other than cash or, if in cash, they amount to less
than $20 in any calendar month in the course of employment
For further discussion about federal income tax withholding
and reporting on payments made to employees of foreign governments
and international organizations refer to
Persons Employed by a Foreign Government or International Organization.
For further discussion about Social Security and Medicare taxes
on payments made to employees of foreign governments and international
organizations refer to
Persons Employed by a Foreign Government or International Organization
- FICA.
Services performed outside the U.S
Compensation paid to a nonresident alien for services performed
outside the United States is not considered wages and is not subject
to graduated withholding or 30% withholding.
Title 26: Internal Revenue
PART 31—EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE
Subpart E—Collection of Income Tax at Source
§ 31.3401(a)(11)-1 Remuneration other than in cash for
service not in the course of employer's trade or business.
(a) Remuneration paid in any medium
other than cash for services not in the course of the employer's
trade or business is excepted
from wages and hence is not subject to withholding. Cash
remuneration includes checks and other monetary media of exchange.
Remuneration paid in any medium other than cash, such as lodging,
food, or other goods or commodities, for services not in the course
of the employer's trade or business
does not constitute wages. Remuneration paid in any medium other
than cash for other types of services does not come within this
exception from wages. For provisions relating to cash remuneration
for service not in the course of employer's trade or business, see
§31.3401(a)(4)–1.
(b) As used in this section, the term “services not in the course
of the employer's trade or business” has the same meaning as when
used in §31.3401(a)(4)–1
(a) In general.
Notwithstanding the exceptions to the definition of wages specified
in section 3401(a) and the regulations thereunder, the term “wages”
includes the amounts described in paragraph (b)(1) of this section with
respect to which there is a voluntary withholding agreement in effect
under section 3402(p). References in this chapter to the definition
of wages contained in section 3401(a) shall be deemed to refer also
to this section (§31.3401(a)–3).
(b) Remuneration
for services. (1) Except as provided in subparagraph (2) of this paragraph,
the amounts referred to in paragraph (a) of this section include
any remuneration for services performed by an employee for an employer
which, without regard to this section, does not constitute wages under
section 3401(a). For example, remuneration for services performed
by an agricultural worker or a domestic worker in a private home (amounts
which are specifically excluded from the definition of wages by section
3401(a) (2) and (3), respectively) are amounts with respect to which
a voluntary withholding agreement may be entered into under section
3402(p). See §§31.3401(c)–1 and 31.3401(d)–1 for the definitions of
“employee” and “employer”.
(a) In general. An employee and his employer may enter into an agreement
under section 3402(b) to provide for the withholding of income tax
upon payments of amounts described in paragraph (b)(1) of §31.3401(a)–3,
made after December 31, 1970. An agreement may be entered
into under this section only with respect to amounts which are includible
in the gross income of the employee under section 61, and must be
applicable to all such amounts paid by the employer to the employee.
The amount to be withheld pursuant to an agreement under section
3402(p) shall be determined under the rules contained in section
3402 and the regulations thereunder. See §31.3405(c)–1, Q&A–3 concerning
agreements to have more than 20-percent Federal income tax withheld
from eligible rollover distributions within the meaning of section
402.
TITLE 5 >
PART III >
Subpart G >
CHAPTER 85 >
SUBCHAPTER I > § 8501
§ 8501. Definitions
For the purpose of
this subchapter—
(2) “Federal
wages” means all pay and allowances, in cash and in kind, for Federal
service;
RS 01401.005 Wages Defined
DEFINITIONS
1.
Wages
Wages means all remuneration
for employment including
the cash value of all remuneration paid in any medium other than
cash, unless specifically excluded under section
209 of the Social Security Act (Act). The name given the payment
is not controlling in determining whether it constitutes wages.
Payments may be paid on an hourly, daily, weekly, biweekly, monthly,
yearly or on a piecework or percentage basis.
2.
Wage exclusions
Wage exclusions are payments that are either totally or partially
excluded from the definition of wages under section
209 of the Act.
3.
Wage Credits
Wage credits are deemed dollar amounts credited to a veteran's
earnings record for active duty prior to 1957 and to the earnings
records of uniformed service members on active duty after 1956.
REFERENCES:
WARNING!: The red boldfaced
and underlined words above are "words of art" defined in the Classification
Act of 1923, 42 Stat. 1488, and they refer ONLY to federal and not private
employment.
Truax v. Raich, 239 U.S. 33, 34 (1915)
“The right to work for a living in the common occupations of the community is of the essence of that personal freedom and opportunity which it was the purpose of the Fourteenth Amendment to secure. ”
[Truax v. Raich, 239 U.S. 33, 34 (1915)]
Coppage v. Kansas, 236 U.S. 1, 2 (1915)
“Included in the right of personal liberty and the right of private property — partaking of the nature of each — is the right to make contracts for the acquisition of property, chief among which is that of personal employment by which labor and other services are exchanged for money or other forms of property. ”
[Coppage v. Kansas, 236 U.S. 1, 2 (1915);
EDITORIAL: Note this case and the previous one were issued AFTER the 16th Amendment in 1913. There was no change to the property right in labor and the right to make a living did not then (or any time later) come under the tax power of Congress!
]
Congress enacted the predecessor provisions of FICA and FUTA as Titles VIII and IX of the Social Security Act of 1935, ch. 531, 49 Stat. 636, 639. It chose "wages " as the base for taxation of employers, § 804, 49 Stat. 637; § 901, 49 Stat. 639, and it defined "wages ." § 811(a), 49 Stat. 639; § 907(b), 49 Stat. 642. Congress originated the present income-tax withholding system in § 172 of the Revenue Act of 1942, 56 Stat. 884. See Central Illinois Public Service Co. v. United States, supra, at 26-27. It again chose "wages " as the base, 56 Stat. 888, and defined "wages " in substantially the same language that it used in FICA and FUTA, id., at 887. When Congress revised the withholding system by replacing § 172 with the Current Tax Payment Act of 1943, 57 Stat. 126, it retained the definition of "wages ." Ibid. In view of this sequence of consistency, the plain language of the statutes is strong evidence that Congress intended "wages " to mean the same thing under FICA, FUTA, and income-tax withholding.
The legislative histories of the Acts establishing income-tax withholding support the conclusion to be drawn from the plain language. These histories reveal a congressional concern for "the interest of simplicity and ease of administration." S. Rep. No. 1631, 77th Cong., 2d Sess., 165 (1942) (Revenue Act of 1942). See Central Illinois Public Service Co. v. United States, supra, at 31. They also reveal that one of the means Congress chose in order to promote simplicity was to base withholding upon the same measure — "wages " — as taxation under FICA and FUTA. Thus, whereas the withholding system proposed by the House provided for withholding upon dividends and bond interest in addition to wages , H.R. Rep. No. 2333, 77th Cong., 2d Sess., 125 (1942), the system proposed by the Senate and enacted in § 172 limited withholding to wages . S. Rep. No. 1631, supra, at 165. "This was a standard that was intentionally narrow and precise." Central Illinois Public Service Co. v. United States, supra, at 31. Section 172 also specified that remuneration for certain services was excepted from "wages ." According to the Senate Report, "[t]hese exceptions [for income-tax withholding] are identical with the exceptions extended to such services for Social Security tax purposes and are intended to receive the same construction and have the same scope." S. Rep. No. 1631, supra, at 166.
[The
Rowan Cos. v. United States, 452 U.S. 247, 255-56 (1981)]
[EDITORIAL: So Rowan is the case where SCOTUS said "wages" under IRC 3121 = "wages" under 3401. If you establish it is not "employment" under 3121(b) then it is not "wages" under 3121 and also not "wages" under 3401]
That § 3402( o) does not narrow FICA's “wages” definition is also consistent with the major principle of Rowan Cos. v. United States, 452 U.S. 247, 101 S. Ct. 2288, 68 L. Ed. 2d 814: that simplicity of administration and consistency of statutory interpretation instruct that the meaning of “wages” should be in general the same for income-tax withholding and for FICA calculations. Pp. 149-156, 134 S. Ct. 1395, 188 L. Ed. 2d, at 421-425.
[United States v. Quality Stores, Inc., 572 U.S. 141, 142 (2014)]
"Every man has a natural
right to the fruits of his own labor, is generally admitted; and no
other person can rightfully deprive him of those fruits, and appropriate
them against his will..."
[The
Antelope, 23 U.S. 66; 10 Wheat 66; 6 L.Ed. 268 (1825)]
Commercial League Association of America v. People ex. rel. Needles, Auditor, 90 Ill. 166 (1878):
"But the by-law, if enforced, would not be inconsistent with the statute. HN5 The section of the statute should receive a reasonable construction, and when this is placed upon it, we doubt if any court could properly hold that if a member was an officer of the association, and was paid a compensation for his services, such payment would be "receiving money as profit or otherwise." The object of the statute, no doubt, was to prevent the corporation from making dividends of profits among the members, as do corporations organized for pecuniary profit; and while the statute might subserve a useful purpose if construed in this manner, we fail to perceive any benefit which would result if member of the association, who happened to fill an office, should be deprived of receiving compensation for his labor as an officer. HN6 Compensation for labor can not be regarded as profit, within the meaning of the law. The word "profit," as ordinarily used, means the gain [**13] made upon any business or investment--a different thing altogether from mere compensation for labor."
[Commercial League Association of America v. People ex. rel. Needles, Auditor, 90 Ill. 166 (1878)]
Edwards v. Keith, 231 Fed 110:
"One does not derive income by rendering services and charging
for them."
[Edwards v. Keith, 231 Fed. 110]
Conner v. US, 303 F.Supp 1187 (1969) on page 1191:
"If there is no gain there is no income... Congress has taxed
income not compensation."
[Conner v. US, 303 F.Supp 1187 (1969) on page 1191]
Wilby v. State, 93 Miss. 767:
"It certainly was not the intention of the legislature to levy
a tax upon honest toil and labor."
[Wilby v. Mississippi, 47 Miss. 767]
U.S. v. Ballard, 535 F.2d. 400, 404 (1976):
" The general term 'income' is not defined in the Internal Revenue Code . Section 61 of the Code, 26 U.S.C. § 61, defines 'gross income' to mean all income from whatever source derived, including (but not limited to) the following items:
(1) Compensation for services, including fees, commissions, and similar items;
(2) Gross income derived from business;"
[U.S. v. Ballard 535 F.2d. 400, 404 (1976)]
Jack Cole v. MacFarland, 206 Tenn. 694 (1960):
"Realizing and receiving income or earnings is not a privilege that can be taxed.
[*699] "A privilege is whatever business, pursuit, occupation, or vocation, affecting the public, the Legislature chooses to declare and tax as such." Corn et al. [**456] v. Fort, 170 Tenn. 377, 385, 95 S.W.2d 620, 623, 106 A.L.R. 647.
"Privileges are special [***6] rights, belonging to the individual or class, and not to the mass; properly, an exemption from some general burden, obligation or duty; a right peculiar to some individual or body." Lonas v. State, 50 Tenn. 287, 307.
Since the right to receive income or earnings is a right belonging to every person, this right cannot be taxed as privilege.
[Jack Cole v. MacFarland, 206 Tenn. 694 (1960):]
McCulloch v. Maryland, 4 Wheat 316:
"If it could be said that the state had the power to tax a right,
this would enable the state to destroy rights guaranteed by the
constitutions through the use of oppressive taxation. ... The power
to tax involves the power to destroy."
[McCulloch v. Maryland, 4 Wheat 316]
"The property which every man has in his own labor, as it is
the original foundation of all other property, so it is the most
sacred and inviolable. ... to hinder his employing this strength
and dexterity in what manner he thinks proper without injury to
his neighbor, is a plain violation of this most sacred property."
[Butcher's
Union v. Crescent City 111 U.S. 746 (1884)]
Oliver v. Halstead, 196 Va. 992 (1955):
"The word "profit" is defined in Black's Law Dictionary (3rd ed.) as "The advance in the price of goods sold beyond the cost of purchase. The gain made by the sale of produce or manufactures, after deducting the value of the labor, materials, rents, and all expenses, together with the interest of the capital employed." There is a clear distinction between "profit" and "wages" or compensation for labor. "Compensation for labor can not be regarded as profit within the meaning of the law. The word 'profit', as ordinarily used, means the gain made upon any business or investment -- a different thing altogether from mere compensation for labor." The Commercial [***5] League Association of America v. The People ex rel. Thomas B. Needles, Auditor, 90 Ill. 166. "Reasonable compensation for labor or services rendered is not profit." Laureldale Cemetery Association v. Matthews, 354 Pa. 239, 47 A.(2d) 277."
[Oliver v. Halstead, 196 Va. 992 (1955)]
"income ... may be defined as the gain derived from capital or
from labor or from both combined."
[Stratton's
Independence v. Howbert, 231 U.S. 309, 45 (1913)]
[subsequently reaffirmed in Goodrich v. Edwards,
255 US 527 (1921):]
- "... it becomes essential to distinguish between what is, and
what is not 'income'...
- "Congress may not, by any definition it may adopt, conclude
the matter, since it cannot by legislation alter the Constitution,
from which alone it derives its power to legislate, and within whose
limitations alone, that power can be lawfully exercised...."
- "Income may be defined as gain derived from capital, from labor
or from both combined, provided it be understood to include profits
gained through sale or conversion of capital assets."
In the 1959 Tax Court case Penn Mutual Indemnity Co. v. Commissioner
(32 Tax Court page 681):
"The rule of Eisner v. Macomber has been reaffirmed on so many
occasions that citation of the cases to this effect would be unnecessarily
burdensome. To depart from the rule at this late date would ignore
the sound principles upon which that case was decided and would
throw into confusion the fundamental income tax structure and law
as it has developed in the almost half century which has elapsed
since adoption of the 16th amendment. That there cannot be 'income'
without a 'gain' accords with the common understanding of the term,
a test of construction which is particularly appropriate in our
system of self-assessed Federal income tax... Moreover, that which
is not income in fact manifestly cannot be made such by the legislative
expedient of calling it income...."
"'income' as used in the statute should be given a meaning so
as not to include everything that comes in. The true function of
the words 'gains' and 'profits' is to limit the meaning of the word
'income'.
[So.
Pacific v. Lowe 238 F. Supp 736, 247 U.S. 330 (1918)]
Laureldale Cemetery Assoc. v. Matthews, 345 A 239, and 47 A.2d
277 (1946):
"Reasonable compensation for labor or services rendered is not
profit."
[Laureldale Cemetery Assoc. v. Matthews, 345 A 239, and 47 A.2d
277 (1946)]
Murdock v. Pennsylvania, 319 U.S. 105, at 113 (1943):
"A state may not... impose a charge for the enjoyment of a right
granted by the Federal constitution."
[Murdock v. Pennsylvania, 319 U.S. 105, at 113 (1943)]
"The power to tax the exercise of a [right] ... is the power
to control or suppress its enjoyment."
[Magnano
Co. v. Hamilton 292 U.S. 40 (1934):]
President Jefferson, concluding his first inaugural address,
March 4, 1801:
"... a wise and frugal government, which shall restrain men from
injuring one another, which shall leave them otherwise free to regulate
their own pursuits of industry and improvement, and shall not take
from the mouth of labor the bread it has earned. This is the sum
of good government… "
"the citizen is exempt from taxation unless the same is imposed
by clear and unequivocal language".
[Spreckels
Sugar Ref. Co. v. Mclain, 192 U.S. 397; 24 SCt 382 (1904)]
Redfield v. Fisher, 135 Ore. 180 (1930):
" The individual, unlike the corporation, cannot be taxed for the mere privilege [***26] of existing. HN8 The corporation is an artificial entity which owes its existence and charter powers to the state; but the individual's [*198] right to live and own property are natural rights for the enjoyment of which an excise cannot be imposed: 26 R. C. L., Taxation, § 209, p. 236; Cooley, Taxation, (4th Ed.), § 1676; Opinion of the Justices, 195 Mass. 607 (84 N. E. 499). Thus when the corporation pays 5 per cent of its net income to the state in obedience to chapter 427, it has not paid an ad valorem tax based upon the value of its intangibles, or calculated upon the return from such possessions, but has discharged an entirely different tax imposed for a very different reason."
[Redfield v. Fisher, 135 Ore. 180 (1930)]
Long v. Ramussen, 281 F 236, 238 (1922):
"The revenue laws are a code or system in regulation of tax assessment
and collection. They relate to taxpayers, and not to non-taxpayers.
The later are without their scope. No procedure is prescribed for
non-taxpayers, and no attempt is made to annul any of their rights
and remedies in due course of law. With them Congress does not assume
to deal, and they are neither of the subject nor of the object of
the revenue law."
[Long v. Ramussen, 281 F 236, 238 (1922), Reaffirmed in Gerth
v. US, 132 F Supp 894 (1955) and in Economy Heating Co. v. US, 470
F2d 585 (1972)]
"Congress may not, under the taxing power, assert a power not
delegated to it by the Constitution."
[Regal
Drug Co v. Wardell, 260 US 386 (1922)]
"The state cannot diminish the rights of the people."
[Hurtado
v. California, 110 U.S. 516 (1884)]
Sherar v. Cullen, 481 F.2d. 945 (1973)
"The See and Reisman decisions, and HN3 the statutory procedures of § 7402(b), reflect the obvious concern that there be no sanction or penalty imposed upon one because of his exercise of constitutional rights."
[Sherar v. Cullen, 481 F.2d. 945 (1973)]
Miller v. US, 230 F.2d. 486 (1956)
"Execution of process and the performance of duty by constituted officers must not be thwarted. But these agents, servants of a Government and a society whose existence and strength comes from these constitutional safeguards, are serving law when they respect, not override, these guarantees. The claim and exercise of a constitutional right cannot thus be converted into a crime."
[Miller v. US, 230 F.2d. 486 (1956)]
Carter v. Commissioner, 784 F.2d. 1006 (1986)
" The assertion that proceeds received for personal services cannot be given a "zero-basis for the purpose of the assessment of taxation," is frivolous. This is a variation of the "wages are not income" theme, which has been rejected repeatedly by this court. See Olson v. United States, 760 F.2d 1003, 1005 (9th Cir. 1985) (per curiam); Gattuso v. Pecorella, 733 F.2d 709, 710 (9th Cir. 1984); [**7] United States v. Romero, 640 F.2d 1014, 1016 (9th Cir. 1981).
[Carter v. Commissioner, 784 F.2d. 1006 (1986) ]
Gattuso v. Pecorella, 733 F.2d. 709 (1984)
"Taxpayers' suit would fail as a refund action because it does not allege that they paid the full amount of the assessed tax liabilities for the years in question. See Flora v. United States, 362 U.S. 145, 4 L. Ed. 2d 623, 80 S. Ct. 630 (1960). Taxpayers' claim that their wages are not income is frivolous. See United States v. Romero, 640 F.2d 1014, 1016 (9th Cir. 1981); United States v. Buras, 633 [**3] F.2d 1356, 1361 (9th Cir. 1980); Funk v. CIR, 687 F.2d 264, 265 (8th Cir. 1982) (and cases cited therein)."
[Gattuso v. Pecorella, 733 F.2d. 709 (1984)]
United States v. Romero, 640 F.2d. 1014 (1981)
"Romero's proclaimed belief that he was not a "person" and that the wages he earned as a carpenter were not "income" is fatuous as well as obviously incorrect. See Lucas v. Earl, 281 U.S. 111, 114-15, 50 S. Ct. 241, 74 L. Ed. 731 (1930); Roberts v. Commissioner, 176 F.2d 221, 225 (9th Cir. 1949); 26 U.S.C. § 61 (1976). The trial judge acted properly with respect to his comments and instructions regarding this matter of law. See United States v. Miller, 634 F.2d 1134 (8th Cir. 1980).
Romero received a fair trial. He based his defense on his proclaimed belief that the wages he earned were not taxable income and that he was not a person within the meaning of the income tax laws. At trial the judge properly instructed the jury on these matters of law. HN8 The jury's function is to determine matters of fact. HN9 Compensation for labor or services, paid in the form of wages or salary, has been universally, held by the courts of this republic to be income, subject to the income tax laws [**8] currently applicable. We recognize that the tax laws bear heavily on all persons engaged in gainful activity, and recognize the right of a taxpayer to minimize his taxes by all lawful means. But Romero here is not attempting to minimize his taxes; instead he is attempting willfully and intentionally to shift his burden to his fellow workers by the use of semantics. He seems to have been inspired by various tax protesting groups across the land who postulate weird and illogical theories of tax avoidance, all to the detriment of the common weal and of themselves."
[United States v. Romero, 640 F.2d. 1014 (1981)]
[EDITORIAL: This is often quoted obiter dicta, and it is 100% bullshit. This court does not cite even ONE court case that held that "compensation for services, paid in the form of wages or salary" is income]
Olson v. United States, 760 F.2d. 1003 (1985)
Further, Olson's attempts to escape tax by deducting his wages as "cost of labor" and by claiming that he had obtained no privilege from a governmental agency illustrate the frivolous nature of his position. This court has repeatedly rejected the argument that wages are not income as frivolous, see, e.g., Gattuso v. Pecorella, 733 F.2d 709, 710 (9th Cir. 1984); United States v. Romero, 640 F.2d 1014, 1016 (9th Cir. 1981), and has also rejected the idea that a person is liable for tax only if he benefits from a governmental privilege. See United States v. Buras, 633 F.2d 1356, 1361 (9th Cir. 1980). Therefore, the district court properly found that Olson was liable under section 6702 for filing a frivolous tax return. See Davis v. United States, 742 F.2d 171 (5th Cir. 1984); [**5] Holker v. United States, 737 F.2d 751 (8th Cir. 1984).
[Olson v. United States, 760 F.2d. 1003 (1985)]
“The claim that salaries, wages and compensation for personal services are to be taxed as an entirety and therefore must be returned by the individual who has performed the services which produced the gain, is without support either in the language of the Act or in the decisions of the courts construing it. Not only this, but it is directly opposed to provisions of the Act and to regulations of the Treasury Department which either prescribe or permit that compensation for personal services be not taxed as an entirety and be not returned by the individual performing the services. It is to be noted that by the language of the Act it is not "salaries, wages or compensation for personal service" that are to be included in gross income. That which is to be included is "gains, profits and income derived" from salaries, wages or compensation for personal service. Salaries, wages or compensation for personal service are not to be taxed as an entirety unless in their entirety they are gains, profits and income. Since, also, it is the gain, profit or income to the individual that is to be taxed, it would seem plain that it is only the amount of such salaries, wages or compensation as is gain, profit or income to the individual, that is, such amount as the individual beneficially receives, for which he is to be taxed.”
[Lucas v. Earl, 281 U.S. 111, 112-13 (1930)]
Wilcox v. C.I.R., 848 F.2d. 1007 (C.A.9,1988)
"First, wages are income.
Carter v. Commissioner, 784 F.2d 1006, 1009 (9th Cir.1986).
Second, paying taxes is not voluntary. Id. Third, placing
the burden of proof on the taxpayer does not violate due process.
Rockwell v. Commissioner, 512 F.2d 882, 885 (9th Cir.),
cert. denied,
423 U.S. 1015, 96 S.Ct. 448, 46 L.Ed.2d 386 (1975). Finally,
failing to provide a taxpayer with an administrative fact finding
hearing does not violate due process. See
Nunley v. Commissioner, 758 F.2d 372, 373 (9th Cir.1985)
( citing
Cafeteria & Restaurant Workers, Local 473 v. McElroy, 367
U.S. 886, 894-95, 81 S.Ct. 1743, 1748-49, 6 L.Ed.2d 1230 (1961));
see generally
Rockwell, 512 F.2d at 887. Thus, the tax court appropriately
dismissed Wilcox's petition."
[Wilcox v. C.I.R., 848 F.2d. 1007 (C.A.9,1988)]
Adair v. United States, 208 U.S. 161, 172 (1908)
“In our opinion that section, in the particular mentioned, is an invasion of the personal liberty, as well as of the right of property, guaranteed by that Amendment. Such liberty and right embraces the right to make contracts for the purchase of the labor of others and equally the right to make contracts for the sale of one's own labor;”
[Adair v. United States, 208 U.S. 161, 172 (1908)]
15 U.S.C. § 17. Antitrust laws not applicable to labor organizations
The labor of a human being is not a commodity or article of commerce. Nothing contained in the antitrust laws shall be construed to forbid the existence and operation of labor, agricultural, or horticultural organizations, instituted for the purposes of mutual help, and not having capital stock or conducted for profit, or to forbid or restrain individual members of such organizations from lawfully carrying out the legitimate objects thereof; nor shall such organizations, or the members thereof, be held or construed to be illegal combinations or conspiracies in restraint of trade, under the antitrust laws. (Oct. 15, 1914, ch 323, §6, 38 Stat. 731.)
3. What constitutes "labor" Term "labor" as used in federal antitrust laws is not limited to work of manual laborers or of mechanics, but comprises intellectual labor as well. United States v National Asso. of Real Estate Bds. (1949, DC Dist Col) 84 F Supp 802, mod on other grounds 339 US 485, 94 L Ed 1007, 70 S Ct 711.
ARS § 44-1404. Exclusions.
A. Labor of a human being is not a commodity or an article of commerce.
B. This article shall not be construed to forbid the existence and operation of any labor, agricultural or horticultural organization instituted for the purpose of mutual help, while lawfully carrying out its legitimate objects. 1974
CCA § 16703. Exclusion of labor
Within the meaning of this chapter, labor, whether skilled or unskilled, is not a commodity.
CRS 6-4-108. Exemptions(1)
(1) Labor of a human being is not a commodity, service, or an article of trade or commerce.
NMSA § 57-1-4 The labor of a human being is not a commodity or article of commerce.
No law against monopolies or combinations in restraint of trade shall be held or construed to forbid the existence and operation of natural gas marketing, labor, agricultural or horticultural organizations instituted for purposes of mutual help and not having capital stock or conducted for profit to the organization or to forbid or restrain individual members of such organizations from lawfully carrying out the objects thereof; nor shall such organizations or the members thereof be held or construed to be illegal combinations or conspiracies in restraint of trade under any law against monopolies or combinations in restraint of trade. No natural gas marketing organization exempted herein shall be organized in such a manner so as to control more than ten percent of the natural gas market. Nothing in this section shall be held or construed to justify any restraint of trade or restriction of competition except such as is incident to the protection and promotion of the interests of the members of such organizations, in view of their situation and circumstances, but such organizations and their objects and the effectuation thereof shall prima facie be presumed to be in reasonable restraint of trade or restriction of competition.
"Woe to him who builds his house by unrighteousness
And his chambers by injustice,
Who uses his neighbor's service without wages
And gives him nothing for his work,"
[Jer.
22:13, Bible,NKJV]
"You have sown much, and bring in little;
You eat, but do not have enough;
You drink, but you are not filled with drink;
You clothe yourselves, but no one is warm;
And he who earns wages,
Earns wages to put into a bag with holes."
[Haggai
1:6, Bible, NKJV; MORAL: Don't earn "wages"!]
"Now to him who works, the wages are not counted as
grace but as debt. "[Romans
4:4, Bible, NKJV]
"For the wages of sin is death, but the gift of God
is eternal life in Christ Jesus our Lord." [Romans
6:23, Bible, NKJV]
For the Scripture says, "You shall not muzzle an ox while
it treads out the grain," [ Deuteronomy 25:4] and, "The laborer
is worthy of his wages." [1 Tim. 5:18, Bible, NKJV]
Rich Oppressors Will Be Judged
Danger of Riches; Patience and Prayer
"Come now, you rich, weep and howl for your miseries that
are coming upon you! 2Your riches
are corrupted, and your garments are moth-eaten.
3Your gold and silver are corroded,
and their corrosion will be a witness against you and will eat your
flesh like fire. You have heaped up treasure in the last days.
4Indeed the wages of the laborers
who mowed your fields, which you kept back by fraud, cry out; and
the cries of the reapers have reached the ears of the Lord of Sabaoth.[a]
5You have lived on the earth in pleasure
and luxury; you have fattened your hearts as[b]
in a day of slaughter. 6You have condemned,
you have murdered the just; he does not resist you. " [James
5:1-6, Bible, NKJV]
"You shall not oppress a hired servant who is poor and needy,
whether one of your brethren or one of the aliens who is in your
land within your gates. 15Each day
you shall give him his wages, and not let the sun go down on it,
for he is poor and has set his heart on it; lest he cry out against
you to the LORD, and it be sin to you. " [Deut.
24:14-15, Bible, NKJV]
"You shall not cheat your neighbor, nor rob him. The wages
of him who is hired shall not remain with you all night until morning.
" [Lev.
19:13, Bible, NKJV]
United States v. Hopkins, 329 F.R.D. 285, 309 (D.N.M. 2018)
“The United States noted that the particular argument that a person has a basis in his or her labor equal to the fair market value of the compensation received -- and the many variations of that argument -- in addition to having been rejected by multiple Circuit courts and district courts, "have officially been identified ... as legally frivolous federal tax return positions for the purposes of the $5,000.00 frivolous tax return policy ... [found at] 26 U.S.C. section 6702(A)." Tr. at 14:8-20 [*309] (Lena). The United [**67] States pointed out that, while the United States Constitution explicitly allows Congress to impose duties and taxes, the Constitution provides no exemptions or exceptions. See Tr. at 14:24-15:3 (Lena).
The United States referred the Court to federal cases from around the country that have rejected the argument that compensation from labor is exempt from wages. See Tr. at 15:6-21:24 (Lena)(citing Funk v. C.I.R., 687 F.2d 264 (8th Cir. 1982); Lonsdale v. C.I.R., 661 F.2d 71 (5th Cir. 1981); Lonsdale v. United States, 919 F.2d 1440 (10th Cir. 1990); United States v. Lawson, 670 F.2d 923 (10th Cir. 1982); United States v. Connor, 898 F.2d 942 (3d Cir. 1990); United States v. Francisco, 614 F.2d 617 (8th Cir. 1980); Broughton v. United States, 632 F.2d 706 (8th Cir. 1980); United States v. Russell, 585 F.2d 368 (8th Cir. 1978); Perkins v. C.I.R., 746 F.2d 1187 (6th Cir. 1984)). The United States pointed out that the United States Court of Appeals for the Fifth Circuit in Lonsdale v. C.I.R., and then subsequently the Tenth Circuit, in Lonsdale v. United States, rejected the same arguments from the plaintiff that the Hopkins are asserting in this case. See Tr. at 15:21-17:10 (Lena). The United States noted that in Funk v. C.I.R., where the taxpayers filed zero income tax returns, as the Hopkins did here, the United States Court of Appeals for the Eighth Circuit found that the tax returns were invalid and that the taxpayers' argument that their income from their labor was not taxable was without merit. See Tr. at 18:14-19:10 (Lena). The United States referred the Court to United States v. Lawson, wherein the Tenth Circuit held: "[T]he defendant[']s wages [**68] for personal services are income under the Internal Revenue Code. The Congress has specifically provided that gross income means all income from whatever source derived, including, but not limited to, the following items. Number one, compensation for services, including fees, commissions, and similar items." Tr. at 19:20-20:1 (Lena)(citing United States v. Lawson, 670 F.2d at 925). The United States noted that, in United States v. Connor, the United States Court of Appeals for the Third Circuit stated that every court that has considered the issue has "unequivocally rejected the argument that wages are not income." Tr. at 20:13-18 (Lena)(citing United States v. Connor, 898 F.2d at 943-44). The United States pointed out that in United States v. Russell the Eighth Circuit rejected the taxpayer's argument that it was unconstitutional to tax his common-law right to work. See Tr. at 21:8-16 (Lena).
The Court stated that it believes the Hopkins' argument to be that there is an inherent conflict in Supreme Court precedent, with a handful of older cases saying that there is a protected, fundamental right to work, and the power to tax such a right in light of Justice Marshall's statement, in McCulloch v. Maryland, 17 U.S. 316, 4 L. Ed. 579 (1819), that a right to tax is a right to destroy. The Court inquired of the United States [**69] whether any court has analyzed the issue whether taxing income is constitutional in light of these apparently conflicting constitutional propositions. See Tr. at 21:25-23 (Court). The United States responded that, in its experience, the courts have looked to the Constitution providing Congress the power to tax and thus the power to enact statutes to carry out that power, and to whether 26 U.S.C. §§ 61 and 62, providing for taxation of compensation for labor and services, is within Congress' power. See Tr. at 22:16-23:16 (Lena). The United States stated that it could not, however, provide the Court with a case on point at that time. See Tr. at 23:19-25 (Lena).
[United States v. Hopkins, 329 F.R.D. 285, 309 (D.N.M. 2018)]
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