Once More Into the Breach

[John J. Bulten]

Taking a crack at continuing Fuzzrabbit's thread without reading it:

You seem to believe that:

1. Section 61 uses the words "service" in defining "gross income" and

2. Section 3401 uses the words "service" in defining "wages" and "employer" so

3. Therefore, the *limitations* or *exclusions* from "wages" in section 3401 also apply to limit the definition of "income" in section 61, even though section 3401 does not define or limit the meaning of the word "service" in any way.

That makes NO sense whatsoever.

Sounds winsome, Dan. So payments excluded from 3401 wages are not necessarily payments excluded from 61 gross income.

What about some payments I received for working for a particular workplace, which has no government workers, corporate officers, or other people of like kind and class working for it? They're not excluded from 3401 wages because by definition they are not from a 3401 employer and not 3401 wages at all. Are they 61 gross income for some reason other than 3401?

(FORUM HIATUS NOTICE: Large time lag between posts does not indicate inability to respond meaningfully on the part of the sender; it rather indicates inability to respond meaningfully on the part of the forum veterans. Adoption of humorous banter rather than serious fraud analysis as a composition principle for posts is intended to harmonize with the de facto majority composition principles of this forum rather than its de jure stated principles. No responsibility is assumed for the misreading of satirical imagination as serious reporting or vice versa. Respondents to this post are hereby advised of the risk of generating more of both.)

[Dr. Caligari]

What about some payments I received for working for a particular workplace, which has no government workers, corporate officers, or other people of like kind and class working for it? They're not excluded from 3401 wages because by definition they are not from a 3401 employer and not 3401 wages at all. Are they 61 gross income for some reason other than 3401?

Even assuming I accepted your premise about 3401 (and I don't-- and, more importantly, neither do the courts), section 3401 has nothing to do with section 61. Section 61 doesn't even mention "wages." Section 61 says that, except to the extent otherwise provided in the Code, "gross income means all income from whatever source derived, including (but not limited to) the following items: (1) Compensation for services..."

So, yes, the money you received for working for a particular workplace is, indeed, "gross income."

[jg]

And for a stroll into history, we have LUCAS v. EARL, 281 U.S. 111 (1930)

The Revenue Act of 1918 approved February 24, 1919, c. 18, 210, 211, 212(a), 213(a), 40 Stat. 1057, 1062, 1064, 1065, imposes a tax upon the net income of every individual including 'income derived from salaries, wages, or compensation for personal service ... of whatever kind and in whatever form paid,' 213(a). The provisions of the Revenue Act of 1921, c. 136, 42 Stat. 227, 233, 237, 238, in sections bearing the same numbers are similar to those of the above. A very forcible argument is presented to the effect that the statute seeks to tax only income beneficially received, and that taking the question more technically the salary and fees became the joint property of Earl and his wife on the very first instant on which they were received. We well might hesitate upon the latter proposition, because however the matter might stand between husband and wife he was the only party to the contracts by which the salary and fees were earned, and it is somewhat hard to say that the last step in the performance of those contracts could be taken by anyone but himself alone. But this case is not to be decided by attenuated subtleties. It turns on the import and reasonable construction of the taxing act. There is no doubt that the statute could tax salaries to those who earned them and provide that the tax could not be escaped by anticipatory arrangements and contracts however skilfully devised to prevent the salary when paid from vesting even for a second in the man who earned it. That seems to us the import of the statute before us and we think that no distinction can be taken according to the motives leading to the arrangement by which the fruits are attributed to a different tree from that on which they grew.

See http://caselaw.lp.findlaw.com/scripts/g ... &invol=111 for the full decision.

They said: "There is no doubt that the statute could tax salaries to those who earned them and provide that the tax could not be escaped by anticipatory arrangements and contracts however skilfully devised to prevent the salary when paid from vesting even for a second in the man who earned it." well before there was any section 3401 or a predecessor.

[jkeeb]

What about some payments I received for working for a particular workplace, which has no government workers, corporate officers, or other people of like kind and class working for it? They're not excluded from 3401 wages because by definition they are not from a 3401 employer and not 3401 wages at all. Are they 61 gross income for some reason other than 3401?

If you are working at a particular workplace, you are probably an employee under 3121(d)(2), and therefore, your employer is responsible for withholding 1/2 of your share of SS and Medicare as well as federal tax based on your anticipated tax liability. There are numerous tax court cases regarding the common law principles used to determine employee.

If you are not an employee in the above scenario, then by working to earn the income, you would be considered in "business" and then the compensation is taxable not only for income tax purposes, but also self-employment tax (see IRC 1401, 1402 and regulations.

[Nikki]

John:

Have you reconsidered your guru's position yet, considering the notable lack of success that it's having in the courts and that it's been promoted to one of the IRS' official Dirty Dozen?

Also, now that it's been listed as an officially frivolous position, the ante to play in that game has been raised from $500 to $5,000.

Is CtC still the Gospel According To PH, or are the cracks starting to show in the feet of clay?

[LPC]

Are they 61 gross income for some reason other than 3401?

Not only did you not read the thread, but you didn't even read the entire message you quoted from, because you overlooked the most important legal issue:

The question is how you can use a definition from section 3401 to affect the meaning of section 61 when section 3401 specifically states that its definitions are ONLY for the purposes of section 3401 and its related sections, of which section 61 is not part.

[Florida]

John:

Have you reconsidered your guru's position yet, considering the notable lack of success that it's having in the courts and that it's been promoted to one of the IRS' official Dirty Dozen?

Also, now that it's been listed as an officially frivolous position, the ante to play in that game has been raised from $500 to $5,000.

Is CtC still the Gospel According To PH, or are the cracks starting to show in the feet of clay?

Don't ask him about that, he might get upset.

[wserra]

Is CtC still the Gospel According To PH, or are the cracks starting to show in the feet of clay?

[Brian Rookard]

(FORUM HIATUS NOTICE: Large time lag between posts does not indicate inability to respond meaningfully on the part of the sender; it rather indicates inability to respond meaningfully on the part of the forum veterans. Adoption of humorous banter rather than serious fraud analysis as a composition principle for posts is intended to harmonize with the de facto majority composition principles of this forum rather than its de jure stated principles. No responsibility is assumed for the misreading of satirical imagination as serious reporting or vice versa. Respondents to this post are hereby advised of the risk of generating more of both.)

And yet, isn't it funny how tax protestors will always treat your failure to respond to their verbal diarrhea as some form of tacit admission that they're right.

In other words, people like John are always telling you how your failure to respond means you "defaulted" and admit they're right ... but of course, the reverse is never true with them ... and we can infer nothing from their failure to respond.

lol ... that's pretty funny John ... can I use that "forum hiatus notice" over on Lost Horizons?

[rachel]

What about some payments I received for working for a particular workplace, which has no government workers, corporate officers, or other people of like kind and class working for it? They're not excluded from 3401 wages because by definition they are not from a 3401 employer and not 3401 wages at all. Are they 61 gross income for some reason other than 3401?

If you are working at a particular workplace, you are probably an employee under 3121(d)(2), and therefore, your employer is responsible for withholding 1/2 of your share of SS and Medicare as well as federal tax based on your anticipated tax liability. There are numerous tax court cases regarding the common law principles used to determine employee.

If you are not an employee in the above scenario, then by working to earn the income, you would be considered in "business" and then the compensation is taxable not only for income tax purposes, but also self-employment tax (see IRC 1401, 1402 and regulations.

Jkeeb,
Whats the purpose of the employer obtaining an EIN?

[Red Cedar PM]

Taking a crack at continuing Fuzzrabbit's thread without reading it:

Translation: I don't know what I'm talking about, but I'm going to chime in out of nowhere like I have all the answers.

You seem to believe that:

1. Section 61 uses the words "service" in defining "gross income" and

2. Section 3401 uses the words "service" in defining "wages" and "employer" so

3. Therefore, the *limitations* or *exclusions* from "wages" in section 3401 also apply to limit the definition of "income" in section 61, even though section 3401 does not define or limit the meaning of the word "service" in any way.

That makes NO sense whatsoever.

Sounds winsome, Dan. So payments excluded from 3401 wages are not necessarily payments excluded from 61 gross income.

If you had bothered to read the thread you would have known that Dan was not trying to say that there were exclusions from 3401, he was saying *if there was*, which is why he used the emphasis in number 3. There aren't, but he was just trying to point out the inherent fallacy in Rachel's argument that even if 3401 provided an exclusion that it would in no way apply to section 61.

(FORUM HIATUS NOTICE: Large time lag between posts does not indicate inability to respond meaningfully on the part of the sender; it rather indicates inability to respond meaningfully on the part of the forum veterans.

Translation: I left for a long time, which does not mean I don't know how to respond, it means you don't know how to respond.

Do you know how hypocritical you sound? You were the one that came here and made the assertion that a common worker's wages are not taxable. Since that is contrary to what 99.9% of people in this country think, the burden of proof lies on you to support your theory. You didn't do a very good job of it, and left. Somehow you think that because of that fact, that automatically means it was our failure to respond to you. Why don't you instead try making your assertions in court and see how they respond. It worked like a charm for PH, didn't it?

[rachel]

What about some payments I received for working for a particular workplace, which has no government workers, corporate officers, or other people of like kind and class working for it? They're not excluded from 3401 wages because by definition they are not from a 3401 employer and not 3401 wages at all. Are they 61 gross income for some reason other than 3401?

If you are working at a particular workplace, you are probably an employee under 3121(d)(2), and therefore, your employer is responsible for withholding 1/2 of your share of SS and Medicare as well as federal tax based on your anticipated tax liability. There are numerous tax court cases regarding the common law principles used to determine employee.

If you are not an employee in the above scenario, then by working to earn the income, you would be considered in "business" and then the compensation is taxable not only for income tax purposes, but also self-employment tax (see IRC 1401, 1402 and regulations.

Jkeeb,
Your post does not make sense.
John, even though wrong about 3401(c) in referrence to federal and state employee's, is refering he is an employee.
Under the common-law rules one cannot possibly be an employee and be considered as a business to be in a business all at the same time. Its one or the other for the liability rates.

Furthermore,
Regulation 20CFR 422.112 specifically states that a proprietor is not required to obtain the EIN if one or more employee's do not make "wages".
Being this is a regulation pertaining to Social Security it is confined to and referring to 3121(a) Social Security wages for the purposes thereof.
All 3401(a) "wages" are is those statutorily "employed" for purposes of Social Security and those federal and state individuals combined.
422.112 is a Social Security regulation administering the use of and purposes of federal EIN's for the reporting amounts of statutory "wages" and related deductions.
Do you care to comment on why the law allows a proprietor who does not pay statutory "wages" (3121 and 3401) to obtain an EIN?
Also Jkeeb,
Do you care to explain why the Social Security Administration says a SSN is not required to live and work in the United States. Its not even required for an individual to have a SSN for just merely having one.
Theres no reason according to the Social Security Administration to even have a ssn unless its for the purpose of acquiring SS benefits.

Kjeeb you perport that somehow or someway everything is taxable under the code, but under and code particularly 3401(a), "CASH" is not taxable nor is it defined anywhere within the code. Its not even included in gross income!
I'm safely concluding that since 20CFR 422.112 allows the employer to disregard the requirement of obtaining an EIN for reporting purposes in respect to statutory "wages" then the employer must be paying the employee "cash".

[Brian Rookard]

Under the common-law rules one cannot possibly be an employee and be considered as a business to be in a business all at the same time.

Sigh ... Rachel, at what point will you actually support your statements with concrete legal authority?

An employee is in business ...

"t seems to be settled that salaried employees are occupied in the operation of a trade or business within the meaning of section 122 [of the IRC of 1939]." -- Batzell v. C.I.R., 266 F.2d 371

"We start with the assumption that every person who works for compensation is engaged in the business of earning his pay, and that expense which is essential to the continuance of his employment is deductible under section 23(a)(1)(A) of the Internal Revenue Code of 1939. [citations omitted] Salary has been treated as business income within the meaning of section 122 of the Internal Revenue Code of 1939." -- Noland v. C.I.R., 269 F.2d 108, 111 (1959)

"[W]hen a taxpayer does expect to be paid for his work, it is assumed that he is in the business of earning his pay." -- Rev. Rul. 72-86, Cum. Bul. 1972-1, citing Noland v. C.I.R., 269 F.2d 108 (1959)

And that would be because employees are in business for themselves.

[jkeeb]

1) Rachel, first, I think it is Mr. Bulton’s premise that he is not an employee. All I am saying is that under 3121(d)(2) he and PH and other CtCer’s are employees. Months ago, I also wrote that even if we accept his premise that 3401 had something to do with being an employee, 3401 deals with employer withholding and not the taxability of the income. 3121(d) (1)(3) and (4) are employees due to more specific criteria. Given, that 3121(d) is a statute, all are technically statutory employees, however, the term “statutory employee” has become to be known more specifically for individuals who fall under 3121(d)(3). This designation allows them to report wages on Schedule C and directly deduct work expenses.

Proprietors may obtain an EIN for any reason. An EIN is required, generally, for paying employment taxes. If I had a Limited Liability Company as an individual and choose to be taxed as a Schedule C entity, I may want to get an EIN, and certainly must get one if in the same situation I chose to be taxed as a corporation.

I did not know that a SSN is not required to work in the US. Living in the US is another matter. Please cite your source.

Not everything is taxable under the IRC. However, the Glenshaw Glass case by the Supreme Court states that income is considered a broad term and reinforces that all income is taxable--unless specifically included. There are still arguments about what comprises “income“--See Murphy v US, but the courts have uniformly held that wages are income. Cash may or may not be income. The cash I give my son weekly as allowance is not income. If I prepare returns for a client for a fee, and the client pays me cash, that is certainly income and taxable. I had a few years examining people who did not report “cash” received and many of those now wish they had. It is true that cash is harder to discover by an examiner later. But that does not mean it is not income.

[Brian Rookard]

And rachel's posts continue to show that she will continue to believe her silliness no matter how many times it is pointed out that she is blatantly misreading the law.

[rachel]

And rachel's posts continue to show that she will continue to believe her silliness no matter how many times it is pointed out that she is blatantly misreading the law.

And this is in contrary to your interpretation that 422.112 says that the proprietor who is not paying statutory "wages" doesnt have one or more employee's....Hahahah!!
Talk about blatant misreading....sheesh!
Come on brian, get with the program! Quit trying to fit your round interpretive pegs into statutory square holes.

[John J. Bulten]

Whoa whoa let's don't all talk at once!

33 USC 2902(10) The term "State" means the States of Alabama, Alaska, California, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Texas, Virginia, Washington, and Wisconsin, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, the United States Virgin Islands, American Samoa, and Guam.

[Randall]

And this is in contrary to your interpretation that 422.112 says that the proprietor who is not paying statutory "wages" doesnt have one or more employee's....Hahahah!!
Talk about blatant misreading....sheesh!

Well, duh, if an employer has no employees, he has no wages to pay.

[rachel]

And this is in contrary to your interpretation that 422.112 says that the proprietor who is not paying statutory "wages" doesnt have one or more employee's....Hahahah!!
Talk about blatant misreading....sheesh!

Well, duh, if an employer has no employees, he has no wages to pay.

Thats what Rookard wants everyone to beleive.
The regulation says if a proprietor who doesnt pay "wages" to one or more employee's then the employer isnt required to obtain the EIN.
The only reason I can come up with why the proprietor is refered to as a proprietor and not a statutory "employer" is because the proprietor is not an EIN holding "employer" who is not engaged in statutory 3121(b) "employing" for the purposes of Social Security.
And Danny boy Evens with his personal interpretations to 422.112 suggests that 3121 is not related to 3401 at all. Spite his interpretational round peg beleifs. 3401(a) recognizes those not in 3121(b) "employment" as not earning 3401(a) wages for the 3402 deductions for federal income taxes.
And he along with Rookard intrepret themsleves as experts in this field......................why?

[rachel]

Whoa whoa let's don't all talk at once!

33 USC 2902(10) The term "State" means the States of Alabama, Alaska, California, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Texas, Virginia, Washington, and Wisconsin, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, the United States Virgin Islands, American Samoa, and Guam.

John,
What does this have to do with anything?