SSN's And EIN's: What Does The Law Say?
The Employer Identification Number (EIN) and the Social Security Number
(SSN) are both types of taxpayer identification numbers (TIN). Under
section 301.6109-1 of the Code of Federal Regulations for Title 26
(Internal Revenue Code) a TIN is required by law of a foreigner only.
There is no law which requires a TIN (SSN or EIN) of a Citizen. Given
this fact, it is not surprising that no law can be found which requires
an employer to apply for or use an EIN. The employer who volunteers to
obtain and use an EIN may make application for one on IRS Form SS-4
"Application For Employer Identification Number". With regard to the
SSN, Title 42 of the United States Code at section 405(c)(2)(B)(i)(II)
states that a SSN will be assigned to an applicant for federal benefits,
however there exists no legal requirement for a citizen to apply for
or use a SSN.
The citizen who volunteers to number himself by making application for
a SSN on SSA Form SS-5 "Application For Social Security Account Number"
does so presumably because he wishes to build credits towards
participation in social security and other federal welfare
entitlement schemes. Because the 5th Amendment to the Constitution
protects against private property being taken for public use without
just compensation, all social engineering (wealth redistribution,
"entitlement", etc.) programs must be strictly voluntary, and in fact
Article 1, Section 10 of the Constitution states that "No State
shall pass any Law impairing the Obligation Of Contracts", thereby
guaranteeing the right of one citizen to contract out his labor
(unarguably the most personal of property) to another citizen, as
long as there is no intent to commit fraud. For this reason, any
citizen can start his own business and contract out the labor (private
property) of any another citizen with no taxes (private property)
withheld and no lawful interference by or "partnership" with government
To Be Or Not To Be: A Covered Employer
The citizen who voluntarily applies for and uses an EIN thereby converts
his status from common law employer (natural status) to statutorily
defined "covered employer" (artificial status), thereby required by law
to withhold social security tax from "covered employees" (i.e., those
volunteering to use a SSN). To wit, the Code of Federal Regulations for
Title 20 at section 404.1001 states under paragraph (a)(2): "If you are
an employee, your covered work is called employment" while section
404.1003 states: "Employment means, generally, any service covered by
social security performed by an employee for his or her employer." By
volunteering to use an EIN, the covered employer imposes upon himself
the requirement to withhold payroll taxes from covered employees, thereby
inflicting upon himself the unwelcome role of uncompensated bookkeeper
Covered Employment Spells "Voluntary Servitude"
For The Unwary Business Owner
In this new, artificial capacity, the covered employer self-imposes the
burdens and costs of payroll bookkeeping, bank deposits and filings of
state and federal tax forms, none of which make him any money. As a
covered employer, he must match each participating (covered) employee's
50% F.I.C.A. contribution, currently 7.5% of his wages. If the covered
employee is earning $30,000 annually, this 50% co-matching amounts to
$2,250 which the covered employer must pay out of his own pocket.
Multiplied by, say, 5 workers in a typical small business, this amounts
to an extra $11,250 out of the covered employer's pocket yearly!
Of course, if his employees choose not to be covered for social security,
Medicare or other government welfare entitlement programs (i.e., are not
using a SSN), think of what the employer could spend this extra $11,250
on - advertising, seeking new markets and generally expanding his business!
Covered Employment: It Gets Even Worse!
The covered employer must estimate his payroll for the year ahead and pay
Worker's Compensation on the entire amount. If his 5 employees each work
2,000 hours per year (10,000 hours total) at an average pay rate of $10
per hour each, his annual payroll will be $100,000. If his Worker's
Compensation tax is assessed at a rate of 5.1%, he must pay $5,100 at the
beginning of the year. If, to save money up front, he underestimates his
annual payroll, upon audit at years' end he must immediately pay the
difference. If his employees ended up working 15,000 total hours for the
year, those extra 5,000 hours mean the employer will have to pay an extra
$1,700 at year's end, then add those extra 5,000 hours to the next year's
estimated payroll and pay an additional $1,700 next year as well!
Another disadvantage to the covered employer is the many legal landmines
he may encounter if he fails to adhere to a myriad of state and federal
regulations. These increasingly draconian "rules" dictate what he may or
may not do or say to his employees without becoming the target of a
lawsuit over sexual harassment, discrimination in the workplace,
compliance with OSHA guidelines and a mess of other "red tape". For many
a self-enumerated (i.e., using an EIN) small businessperson with just a
few covered employees, having to take on these financial burdens has meant
the end of the business - regulated to death and taxed out of existence.
And the onerous burden of all the associated, nightmarish paperwork has
often meant the difference between burning the midnight oil and having a
family life. With all this in mind, it's easy to understand why many smart
American business owners have begun taking an active role in teaching
their employees the law and stopped withholding!
With the increasingly widespread awareness of this information,
that number may soon vastly expand.