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You are correct Tauzero. The case didn't mention the fact she paid her FICA taxes, pays sales taxes, pays gasoline taxes, excise taxes, etc.

Now, while I don't think she's correct on the actual paying of income taxes, the IRS doesn't really have the authority to force us to WITHHOLD those taxes on their basis. The case revolved around her filing a W-4 and claiming enough exemptions to stop the FIT withholding. In theory, the IRS says you have to have 90-92% of your tax liabilty "withheld" on the pay basis (weekly, semi-monthly, etc.). But they don't have legal authority, or the true enforcement capability to audit all W-4 filings which are not sent to any government agency and not enforced and held only by employers for tax table purposes.

Thus, they created the 90% "rule" to try and force people into withholding. Since they can't audit all the W-4's, which is nothing but another useless government waste of time like the I-9 form, they randomly check the amount you withhold against what your liability.

When someone like this pilot shows up as paying their liabilty completely by April 15th of the next year, they will flag you. But she never paid anything.

So to have the IRS lose on the issue of a W-4 makes me think they just argued the wrong case. Those that pay nothing don't normally win. So I think either the IRS messed up or the news reporting on this story is horribly uneducated.

One reason is I heard on a talk show today that her defense also used an argument that corporate income taxes are based on net profit and not income and she claimed she had "no profit" either since she spent most all of what she made.

I'm still looking into this, but it doesn't seem like a traditional 16th amendment case.

Of course, all the IRS has to do is threaten FedEx simply because, through the use of the W-4 (and the I-9 and other forms) are semi-responsible for it's enforcment. Thus, they should have known a pilot with her income couldn't declare enough exemptions to stop the FIT withholding. If they are brought into the case on appeal, they could just tell her to pay up are lose her job.

This is just based on the law and not the principle. I hate withholding and forcing business to police for the government. But I'd rather not the IRS go from a tax collecting agency to an accounts receivable agency. You think they are brutal now?