Who is Liable?
Summary

There is no law that requires most citizens to file and pay federal income taxes. The following summarizes the key steps of this argument.

There is a federal law that imposes a requirement upon some citizens and foreigners to file and pay an income tax. The big question is, of course: to what proportion of citizens does the requirement apply? Does it apply to most citizens, or just to a small, specifically defined subset of citizens? To answer this, we must follow a disjointed trail of statutes and regulations to see where they lead. It is a difficult trail to follow; it is easy to take a wrong path; and there have been few directions or signposts supplied by the IRS.

[This explanation does not deal with the 16th amendment question and the constitutional problem of a direct tax without apportionment or the view that the income tax is in the nature of an indirect excise tax, which, of course does not have to be apportioned. The approach is not dependent on the resolution of those questions one way or the other, as it avoids them altogether.]

The statutory trail starts with 26 USC 1, which imposes the income tax on "taxable income," and with 6001, 6011, and 6012, which the IRS uses as the all-encompassing filing-requirement statutes. 6001 says: "Every person liable for any tax imposed under this title...shall keep such records...make such returns...and comply with such rules and regulations as the Secretary may prescribe." [Secretary refers to the Secretary of the Treasury or, more realistically, to the IRS Commissioner]. 6011 says: "When required by regulations...any person made liable by any tax imposed by this title...shall make a return." 6012 says: "Returns...shall be made by...[e]very individual having...gross income which exceeds the exemption amount..."

Now we take the trail to find out what "taxable income" and "gross income" are. 63 says that the term "taxable income" means "gross income minus the deductions allowed by this chapter..." So the definition mainly depends on the definition of "gross income." We then see in 61 that "gross income" is income from "whatever source," and we see a list of 15 items which we take to be the sources and that we have been led to believe we must pay taxes on, such as: compensation for services, fees, commissions, benefits, gross income from business, interest, rent, dividends, gains from property dealings, etc. It is crucial to be aware, however, that the term "item" does not mean the same as "source." Therefore, the list does not identify any sources upon which we must pay a tax. This is most deceptive.

Another stop on the trail towards finding out what gross income is and the sources of it that can make one liable is at 861, which lists "items" of gross income which are to be treated as income from sources within the U.S. There is no other part of the Internal Revenue Code that deals with tax based on income from sources within the U.S. (We can assure ourselves of this by using a computer search engine to look through the code.) Therefore, all else not on the list must be excluded as being outside the purview of the law.

If one wonders how, given the wording of 861, one can avoid equating "items" and "sources," take note that 861 is a statute and that the IRS is bound by the regulations promulgated by the Secretary (or Commissioner), which actually implement the statutes. The pertinent regulation is CFR 1.861-8(f)(1), which contains the only list of "sources," from within or without the U.S, from which income must derive in order to be taxable. The list consists of: overall limitation to the foreign tax credit, DISC (Direct International Sales Corp) and FSC (Foreign Sales Corp.) taxable income, non-resident alien individuals and foreign corporations engaged in business within the U.S., foreign base company income, and other operative sections (the list of which consists of 13 sources outside the U.S.).

Note well that one source in the list under "other operative sections" applies to U.S. citizens, albeit only to citizens who are entitled to the benefits of 931 and 936 tax credit (which pertain to Guam and Puerto Rico). This inclusion of a group of U.S. citizens here is very important, because it must therefore include all citizens with taxable sources of income from within or without the U.S. In other words, if there were any other citizens whose sources of income were taxable, they'd have to be included on this list, and there are no others listed.

As you can see, none of this liability applies to the vast majority of citizens, who have been misled into believing they must file and pay income taxes on the "items" of income noted in 61, above. Instead, it applies to U.S citizens only insofar as they have foreign earned income. The tax also applies to aliens and foreign companies doing business in the United States. In fact, only a few years ago, the Secretary acknowledged that Form 2555 was the form most frequently required to be filed by citizens under 1, and only if they had foreign income as noted above.

Now let's go back and review 6001, 6011, and 6012. We can see now who these sections are talking about when they refer, respectively, to "Every person liable," "any person made liable," or "every individual having...gross income..." We can see that the government, by means of such a circuitous and disconnected trail of rules and regulations, has made it extremely difficult for most ordinary people to figure out that they are not liable for the income tax. We can see that the government is duping most people into voluntarily filing returns, assessing themselves, waiving their 5th amendment rights, and erroneously paying an income tax for which they are not liable. By comparison, the statutes and regulations for excise taxes are straight-forward, clear, and unambiguous, proving that the Congress and IRS are capable of making the rules simple and easy to understand if they want to. This trickery and deception serves a function of avoiding violations of the Constitution which would be more transparent otherwise. But beyond the deception there is also the practice of illegal misapplication of the laws and regulations and denial of due process, which we will look at in a few minutes, after discussing a couple of other aspects of tax liability.

First, let's look at the withholding aspect of tax liability to see whether it reinforces or adds anything further to our understanding of tax liability or what kind of income is taxable. If withholding is applied properly, it should reveal what is taxable. Will an examination of withholding yield results consistent with the conclusions drawn above?

26 USC 3401(a)(8)(A)(1) defines "wages" for purposes of withholding as all remuneration for services performed by an employee for his employer; except that such term shall not include remuneration paid for services for an employer performed by a citizen of the U.S. if it is reasonable to believe that such remuneration will be excluded from gross income under Section 911. And pursuant to CFR 1.861-8(T)(d)(2)(ii)(A), all income that is excluded or not listed is exempt. So the only sources of income U.S. citizens earn that is "gross income," and thus taxable and subject to withholding, are found under 911, which relates to U.S. citizens living abroad or foreign earned income, the same conclusion we came to above. So withholding law, properly applied, reinforces our earlier conclusion. It is apparent that employers are being duped into submitting false information about most employees, withholding their money, making it appear they are liable, and thereby putting them on the defensive, since they must then dispute that their wages are taxable.

Next, if we look at the laws regarding liability for the Social Security tax, we will find that they derive from the International Labor Agreement of the 1930s, and that once again, they do not apply to most U.S. citizens, but to aliens and to some citizens based on foreign income or income from U.S. overseas possessions.

So, three sets of statutes and regulations all lead to the "foreign liability" conclusion, not to liability by most citizens.

So, why are you paying it?


[ Who has to pay taxes? ]
[ A Conspiracy, or is it Fraud? ]
[ We do not live in a Democracy! ]
[ 12 Step program to become President ]


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