Posted on 02/14/2002 10:25:16 AM PST by farmall
My wife and I are both public school teachers. We both teach additional day and after school classes. We both teach summer school and I have another job as a security guard. Combined total we earned @ $119,000 in 2001. IRS has already taken @ $19,000. It looks like they want another $ 3-5,000 on 4-15-02.
You have made me feel much better. Thank You.
PS: I sold that truck several months ago. It was a '94 but I had put about a zillion miles on it. After doing a little research project with the Kelly Blue Book Online (www.kbb.com) I realized that a few more months and a few more miles and the book value of the thing was going to drop through the floor. So off it went. I decided to let the other guy replace the exhaust system, tires, transmission, windsheild wiper motor, etc...
And heck, the minivan is more comfortable, easier to drive, easier to park, cheaper to insure and gets much better gas mileage. No 4WD though, can't have everything - at least not all at once.
So, what's crazy about Joe Clark?
http://www.nj.com/news/ledger/essex/index.ssf?/base/news-0/10130766032709027.xml
The claim is that the Internal Revenue Code does not apply to most of the income of citizens of the United States because the only definitions of "sources of income" apply only to nonresident aliens and foreign corporations. (See I.R.C. section 861 and its regulations.) This argument is completely contrary to the express language of the Internal Revenue Code and its regulations.
Section 61(a) of the Internal Revenue Code states the general rule that "gross income" (which is the starting point for the calculation of taxable income " "means all income from whatever source derived...."
The regulations confirm that U.S. citizens (and residents) are taxed on all of their income, regardless of where the source is located, and so the source of income is irrelevant to U.S. citizens and residents.
"In general, all citizens of the United States, wherever resident, and all resident alien individuals are liable to the income taxes imposed by the Code whether the income is received from sources within or without the United States." Treas. Reg. § 1.1-1(b).
The general rule, therefore, is that all income is included in gross income, and the taxpayer must demonstrate that the income is not taxable.
Even if it were necessary to establish a "source" for income in section 861, there are specific provisions in section 861 that specifically state that the income of most citizens is from sources within the United States.
For example, section 861(a) states that "The following items of gross income shall be treated as income from sources within the United States: ... (3) Compensation for labor or personal services performed in the United States;" (subject to certain exceptions not relevant here).
And the regulations state that "Gross income from sources within the United States includes compensation for labor or personal services performed in the United States irrespective of the residence of the payer, the place in which the contract for service was made, or the place or time of payment;" (subject to the exceptions stated in the statute, which are still not relevant here). Treas. Reg. § 1.861-4(a)(1).
Nonresident aliens and foreign corporations are taxed only on income from sources within the United States, so it is necessary to identify the sources of income (and deductions) for them, which is why there are regulations for them.
Needless to say, the courts have had no problem with the argument that a citizen and resident of the United States is not taxed on income earned within the United States:
"Petitioner also contends that no Federal statute imposes a tax on the income of citizens or residents of the United States that is derived from sources within the United States. Instead, petitioner asserts that Federal income taxes are excise taxes imposed only on the privilege of nonresident aliens and foreign corporations to receive income from sources within the United States. Petitioner's argument is unclear. Apparently, petitioner believes that the only sources of income for purposes of section 61 are listed in section 861, that income from sources within the United States is taxed only to nonresident aliens and foreign corporations pursuant to sections 871, 881, and 882, and that section 1461 is the only section of the Internal Revenue Code that makes anyone liable for the taxes imposed by sections 1 and 11.
"Section 61(a) defines gross income generally as 'all income from whatever source derived,' including, but not limited to, compensation for services and interest. Sec. 61(a)(1), (4). Section 63 defines and explains the computation of section 'taxable income'. Section 1 imposes an income tax on the taxable income of every individual who is a citizen or resident of the United States. Sec. 1.1-1(a)(1), Income Tax Regs.; see Habersham-Bey v. Commissioner, 78 T.C. 304, 309 (1982).
"Under section 61(a)(1) and (4), petitioner clearly is required to include his wages, tokes, and interest in gross income." Aiello v. Commissioner, T.C. Memo. 1995-40.
"The arguments in Kaetz's appellate briefs, which he shrouds in hyperbole and platitudes, do not further his position. Through linguistic gymnastics, Kaetz contorts the relevant sections of the Internal Revenue Code and the Treasury Regulations to deduce that he does not have taxable income for the years 1991-1997. He premises his argument, inter alia, on the belief that United States citizens only earn taxable 'gross income' when living and working outside the United States, and that the 'Foreign Earned Income Form 2555 is the only form required to be filed[ ] by U.S. Citizens.' Appellant's Brief at 16-17, 18. He concludes his intricate deductive argument quite bluntly: 'Goodbye Income Taxes on Citizens with domestic income.' Id. at 18. The problem with his deduction is that it is based on false premises. Income earned in the United States, including salary, is taxable, see I.R.C. section 63, and 'Gross Income' can be quantified." Kaetz v. Internal Revenue Service, 225 F.3d 649, 2000 U.S. App. LEXIS 17068, 2000-2 U.S. Tax Cas. Par. 50,544, 85 A.F.T.R.2d 2183, KTC 2000-312, Docket #99-3346 (3d Cir. 6/7/2000), (unpublished opinion), aff'g 1999 U.S. Dist. LEXIS 8309, 99-1 U.S. Tax Cas. Par. 50,505, 83 A.F.T.R.2d 2536 (M.D.Pa. 1999).
"Plaintiff argues further that his remuneration is exempt from taxation under 26 U.S.C. § 861(a)(3)(C)(ii), and thus excludable under 26 U.S.C. § 61 and, by reference, excludable under Wisconsin law. Suffice it to say that if plaintiff wished to avail himself of § 861( a)(3)(C)(ii), he would have to show that his work was done for a foreign office, or an office in a United States possession, of a domestic business entity. He has not alleged this, and it is clear from the record that he performed his work in the State of Wisconsin for Wisconsin employers." Peth v. Breitzmann, 611 F. Supp. 50 (E.D.Wis. 1985), 1985 U.S. Dist. LEXIS 21509, 85-1 U.S.T.C. ¶9321, 55 AFTR2d 1280.
"At the hearing on respondent's Motion For Summary Judgment, petitioner also claimed that 'all of my gross income was received without the United States as defined in Subchapter N of 26 CFR 1.861-1', and 'I am not a citizen of the federal U.S. I make a living in the state of Illinois as a right, and I am not subject to the jurisdiction of the federal United States.' "We find no support for petitioner's position in the authorities he cites. ... "[P]etitioner's position is not bolstered by the regulations under section 861. To the contrary, section 861(a)(1) and (3) provides that interest from the United States and compensation for labor or personal services performed in the United States (with exceptions not applicable here) are items of gross income which shall be treated as income from sources within the United States." Solomon v. Commissioner, T.C. Memo 1993-509.
"As a citizen of the United States during the years at issue, petitioner is subject to United States Federal income tax on his worldwide income. Sec. 1; Cook v. Tait, 265 U.S. 47 (1924); sec 1.1-1(a)(1) and (c), Income Tax Regs. It is unnecessary to determine whether that income was from sources within or without the United States since petitioner is not a nonresident alien. See sec. 861." Norman F. Dacey, T.C. Memo 1992-187.
"[Defendant's] argument in favor of vacating judgment is almost incomprehensible, and, to the extent it is understandable, is meritless....
"Defendant on unnumbered pages five and six [of Defendant's Memorandum in Support of his Motion to Vacate Judgment] analyzes several tax regulations, after which he contends: 'Nonresident aliens and foreign corporations are liable for income tax from sources within the United States, where Citizens and residents of the several States are liable only for gross income from foreign sources and insular possessions of the United States.' (Id. at 5.) ....
"Defendant's arguments appear to boil down to the following: the judgment against Defendant is void because (1) the federal government has no power to impose income tax on him; and (2) the federal government did not comply with certain requirements found in the tax regulations when it acted against him to secure payment from him for unpaid taxes. Neither contention has merit. The first is tax protester rhetoric that contradicts over fifty years of tax law in this country. Plaintiff must pay income taxes; the federal government has the right to pursue him for unpaid taxes." United States v. Bell, 86 AFTR2d ¶2000-5209; CIV F 95-5346 OWW SMS (U.S.D.C. E.D.Ca. 7/24/2000).
On September 26, 2000, George and Dorothy Henderson, of Roseville, California, were convicted in the U.S. District Court for the Eastern District of California of conspiring to defraud the IRS, aiding in the presentation of false tax returns, and other charges arising out of their sale of bogus trust schemes to generate false deductions for clients, as well as helping clients to hide income by routing monies through a variety of domestic and foreign accounts. According to an article in the New York Times, Mr. and Mrs. Henderson decided to argue at their sentencing that "they were exempt from tax under Section 861 of the Internal Revenue Code, contending that the statute excludes most Americans from income taxes." Mrs. Henderson's lawyer, Donald Dorfman, tried to discourage his client, but said that "She insisted on speaking and telling the judge about the 861 position and how as a sovereign citizen of California the federal courts had no jurisdiction and all sorts of gibberish." After listening to their arguments, Judge Garland E. Burell Jr. added five months to Mrs. Henderson's prison sentence and added eight months to Mr. Henderson's prison sentence. See, "California Couple Sentenced for Helping Clients Evade Taxes," by David Cay Johnston, New York Times (2/23/2001).
Please explain what part of the above analysis you disagree with.
I assume you are going to ignore section 63. Its amazing the gymnatistics a TP'er does to arrive at their conclusion. Two questions regarding your interpretation. Why go all the way down to section 861 to get definition of income when you have one at 63. Second question...assuming you rationalize why 63 doesn't apply to you, who does it apply to ?
No, it looks to be a FAQ output. It talks about everything BUT the code which is the SOLE determinant of who pays taxes and what is considered taxable income.
Why would you assume that?
Its amazing the gymnatistics a TP'er does to arrive at their conclusion.
I'm not a tax protestor. Hope that helps.
Two questions regarding your interpretation. Why go all the way down to section 861 to get definition of income when you have one at 63. Second question...assuming you rationalize why 63 doesn't apply to you, who does it apply to ?
Since you're so knowledgable of the code (NOT) you should already know the answer to this question shouldn't you? But I'll give you a hint. Section 63 basically indicates the math required in order to establish the amount of taxable income. It still doesn't tell you what part of your "gross income" is taxable.
The top five percent of workers (including me) pay 95% of all income taxes.
Not quite accurate. The top 50% of income earners pay 95% of the income tax. Here are the 1999 (most recent data available) numbers:
The top 1% (> $293,415), ranked by adjusted gross income, earned about 19.5% of the income and paid 36.2% of total federal personal income taxes.
The top 5% earned 34% of the income and paid 55.5% of total personal income taxes.
The top 10% paid 66.5% of the taxes, and the top half paid 96%.
The general point, that there are too many people in the wagon and not enough people doing the pulling, remains a good one.
Most of the cuts are phased in over the next 9 years. (They are then scheduled to disappear, due to stupid Senate rules). The cuts are also generally capped, or pased out so that the "rich" don't benefit from them. And there is also the AMT to worry about.
No, the final say is the judge that has the power to make you pay or put you in jail.
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