The liberating truth about the "income" tax is turning those who would evade it

Every Which Way But Loose- Part II

Since August of 2003, when the revelations of CtC were first published, the IRS has been engaged in a desperate struggle to regain its hold of fear and confusion over those now equipped with an understanding of the long-hidden secrets of the "income" tax, and to stop that understanding from spreading.  We have seen, for instance:

• two revampings of the Form 4852 during that time-- both attempting to obscure the scope of that form's proper use;

• a carefully inaccurate allusion to a typical CtC-educated filing sit as #1 on the IRS "Dirty Dozen" list for a year (then quietly get relocated to #5 and then #7 as CtC-educated filings merely increased, and continued to prevail, making the misdirection of the listing too obvious for the agency's comfort);

• Mis-directional ploys such as the "Questionnaire" discussed here;

• a multitude of constantly tweaked agency "FAQ" and "Truth About Frivolous Argument" publications seeking to instill doubts about what is taught about the law in CtC in the minds of careless readers, worthy of attention only in order to enjoy the agency's entertaining efforts to imply what it cannot simply declare, but wishes a naive reader to take from the reading.

We have also seen a series of transformations in the means by which the occasional loose-cannon IRS staffer attempts to persuade a CtC-educated filer to stand down.

For a while, fairly brazen declarations that a filing meets the statutory definition of a "frivolous return" was the popular approach.  Brazen or not, of course, these notices were always mere exercises in intimidation, which careful analysis readily revealed to be fallacious.

Everyone must come to his or her own conclusions, but consider: The notices strive hard to give the impression that the tax agency can unilaterally disregard the target's filing, and can tack on a penalty as well.  BUT they say that the agency will generously refrain from imposing the penalty, if only the target withdraws the original filed testimony and replaces it with what the agency wants attested-to (which, remember, the target is simultaneously being told would be legally meaningless, because the agency can unilaterally disregard that original testimony at will...).

What is being implied is that, either way, the amount of tax owed is going to end up being whatever the agency dictates-- the filer's return notwithstanding.  The only optional element is the additional penalty, which the agency is offering to forego out of the goodness of its heart.

Well, if this is true..., WHY SEND THIS "LETTER" AT ALL?  If the agency has the power to unilaterally make these decisions, there is absolutely no point to asking the target to do anything!

If the agency (or its client) has the power it is suggesting, its correspondent would simply get a notice along the following lines: "Dear Mr. XXX: We have calculated your tax liability for 200X, and converted $XXX of your withheld property in escrow to our ownership.  An invoice for the outstanding balance [if any] is attached.  Your filed return was frivolous, and provided us with the authority to add a $XXX penalty to your tax liability.  We have [added or foregone] this penalty." 

After all, if the agency has the unilateral authority it is attempting to suggest that it does, why would it care whether another return was filed?  (Readers of 'Cracking the Code...' will know the answer to that, of course.)

Instead, the agency DOES make this "threatening" request; and/or "proposes" calculated liabilities to which it asks its target's agreement in order to have effect (see examples of this here).  Sometimes it begins sending endless "levy notices" to the unbending filer (which notices, insofar as they concern years when only accurate, educated returns have been filed, only allege liability for a penalty, and not for any tax related to the year in question-- even when the target has received a complete refund of every penny withheld or paid-in in connection with that year...).  The sum of all of this is, of course, that the agency DOESN'T have the unilateral authority which it suggests that it does, and where accurate, educated filings are concerned, its "frivolous letters" are just exactly that: frivolous letters.

Bothke v. Terry, 713 F. 2d 1405, at 1414 (1983)

Nonetheless, as more and more warriors have forcefully pointed out to more and more IRS workers that inappropriately sending such threatening-looking letters cuts very close to the criminal under a variety of federal and state laws, the tax agency has scrambled to adjust.  For one thing, the "frivolous" notices have been carefully and repeatedly modified toward ever-more obvious legal meaninglessness, in order to deflect potential charges of constructive fraud, witness tampering, extortion, etc.

At the same time, these legally dicey threatening-sounding notices have been largely replaced by a comical kind of delay tactic, in which the agency sits on a filing in silence, and when contacted with an inquiry to the effect of "Where the h*ll is my property?!", responds with a claim that the agency can't find the filer's return and a request that the offended filer please send a fresh copy, or a series of "We need 45 days to look into the matter-- please be patient-- don't call us, we'll call you..." notices.

In this series, we take a close look at many of these gimmicks, ploys and dodges in order to accurately perceive their true character, and take in and appreciate the underlying message, which is that efforts like these are engaged in only when the corrupt actor has no real basis for its actions, and is simply being turned every which way but loose by the liberating truth.  The action in these episodes will range from the simply silly one-shot stalls like those in Episode I to the drawn-out, elaborate slap-downs like what you'll see in Episode X, and everything in between.

Enjoy.

EVERY WHICH WAY BUT LOOSE- XIII

CtC Warrior Scott MacNeilage filed a conventional, educated return for 2006 rebutting assertions that he had received earnings from taxable-activities in May of 2007.  Much to his surprise and annoyance, in April of 2008, an IRS stooge, in the apparent hope that Scott lacked complete understanding or confidence in his knowledge of the law, decided to subject him to some hassles.  The stooge issued a "CP2000" proposing that rather than the $0 calculated on his return, Scott owed the federal government more than $26,000.00 in outstanding tax liability for 2006:

As the note on the copy he sent me for posting makes clear, Scott was neither confused nor intimidated.  He responded accordingly, with the following:

 

Non-plussed, the stooge quickly cranked out a "stall letter" while considering its next step:

Eventually that call got made-- and almost within the 60 days promised!  (This may be a new record for "timeliness" in this regard...)  Unfortunately, it was not a good call:

Scott shook his head, and picked up the phone.  He ended up getting offered a ridiculous cock-and-bull "troll ate my homework" story about his CP2000 response having "been misplaced" (I wonder how many "ignorance tax" filers ever hear nonsense like this?).  Nonetheless, Scott patiently responded again:

The IRS response?  ANOTHER "We need time to decide whether to face the fact that you've escaped the fog..." notice:

Happily this time, at long last, the 'service' realized that Scott has moved firmly into the army of illuminated, never-going-back-to-slavery CtC-educated Americans.  Not even three weeks later the white flag got hoisted and the 'service' reluctantly turned its dark attention to other targets:

EVERY WHICH WAY BUT LOOSE- XIV

CtC Warrior D. Young's educated, proper and oh-so-inconvenient to the IRS "bring in all possible revenue by whatever means necessary" mission has prompted a brand new variety of tax agency obfuscation, as the truth turns the 'service' every which way but loose.  This new notice, "LTR 2893C", is of the "We're pretending to not understand what your filing means" "fog" class of dodges, and really is a piece of work.  Let's read it through:

(The entire notice is a bit longer than the portion presented above, also explaining interest additions that apply when an actual tax goes unpaid, and giving options and instructions for contacting the 'service'...)

Now, keeping always in mind that the object of this "notice" is to give the 'service' cover for its failure to honor D.'s filing and return her property while preserving plausible deniability against possible criminal charges for fraud and simultaneously sowing a little confusion...

First of all, the "notice" invites the reader to imagine that the amounts listed as Social Security and Medicare withholdings (from the "wrong box(es)") aren't "federal withholdings"!  (Maybe those withheld amounts were sent to France?)

The "notice" goes on to support this invitation to fantasy by describing the numbers in those "wrong box(es)" as not referring to amounts withheld at all, but rather as being "record[s of] charges to your income to provide for your future Medicare and Social Security benefits..."

Really?  Congress thinks differently.

When we look at the rules under which these "wrong box(es)" on W-2s are to be filled out we find this specification: "(6) the total amount deducted and withheld as tax under section 3101 [of 26 USC]".  Pretty unambiguous.

Looking at section 3101 itself, we find:

§ 3101. Rate of tax

(a) Old-age, survivors, and disability insurance

In addition to other taxes, there is hereby imposed on the income of every individual a tax equal to the following percentages of the wages (as defined in section 3121 (a)) received by him with respect to employment (as defined in section 3121 (b))—

 

In cases of wages received during:	The rate shall be:
1984, 1985, 1986 or 1987 1988 or 1989 1990 or thereafter	5.7 percent 6.06 percent 6.2 percent

 

(b) Hospital insurance

In addition to the tax imposed by the preceding subsection, there is hereby imposed on the income of every individual a tax equal to the following percentages of the wages (as defined in section 3121 (a)) received by him with respect to employment (as defined in section 3121 (b))—

(1) with respect to wages received during the calendar years 1974 through 1977, the rate shall be 0.90 percent;

(2) with respect to wages received during the calendar year 1978, the rate shall be 1.00 percent;

(3) with respect to wages received during the calendar years 1979 and 1980, the rate shall be 1.05 percent;

(4) with respect to wages received during the calendar years 1981 through 1984, the rate shall be 1.30 percent;

(5) with respect to wages received during the calendar year 1985, the rate shall be 1.35 percent; and

(6) with respect to wages received after December 31, 1985, the rate shall be 1.45 percent.)

Plainly, the amounts listed in those "wrong box(es)" are amounts of federal withholding (and are withheld as payments of the "income" surtax imposed and arising when [and if] "wages (as defined in section 3121 (a)) [have been] received by [an individual] with respect to employment (as defined in section 3121 (b))" ).

(Further, and without regard to the issue of whether D. actually had any "income" against which they could have been "charged", they AREN'T "charges... ...to provide for [D.'s] future Medicare and Social Security benefits", as is flatly declared by the United States Supreme Court in Helvering v. Davis 301 US 619 (1937):

"The proceeds of both [employee and employer FICA] taxes are to be paid into the Treasury like internal-revenue taxes generally, and are not earmarked in any way."

...and in Flemming v. Nestor 363 US 603 (1960):

"The noncontractual interest of an employee covered by the Act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits are based on his contractual premium payments."

The court explains, also in Flemming v. Nestor, that:

"To engraft upon Social Security system a concept of 'accrued property rights' would deprive it of the flexibility and boldness in adjustment to ever-changing conditions which it demands..."

It's that simple.  There is no legal relationship of any kind between what is withheld under the auspices of the "Federal Insurance Contributions Act" (FICA) and the receipt, or possible future receipt, of Social Security or Medicare benefits-- and this is true even for those whose earnings really are "wages" as that term is defined in the law.)

BUT THAT WAS ALL just the warm-up.  The real thrust of this obfuscation-by-notice is the rest of the line debunked above: "...[these charges] may not be used as deductions to your Income Tax.  Only the amount in Box 2 of a W-2 may be used to reduce or eliminate tax."  (As an aside, I am struck by the capitalization of "Income Tax".  Is the tax now an object of worship for these folks?)

Where do we start?!  First of all, amounts withheld under the protocols involved here don't get used as "deductions"-- they are credits against a tax liability, if any tax is owed.  The (doubtless) bullet-sweating IRS staffer tasked with drafting this verging-on-mail-fraud "notice" knows this, of course.  My guess is that he is trying to work some plausible deniability into the picture by suggesting that a provision in the FICA to the effect that any amounts properly withheld can't be deducted from one's total amount of "income" declared as having been received-- even though one hasn't actually received those amounts-- was on his "confused" mind, and is the cause of the ...  (That provision, which, in the original enactment of the Social Security Act of 1935 reads:

SEC. 803. For the purposes of the income tax imposed by Title I of the Revenue Act of 1934 or by any Act of Congress in substitution therefor, the tax imposed by section 801 shall not be allowed as a deduction to the taxpayer in computing his net income for the year in which such tax is deducted from his wages.

is entertainingly reflected in the following language from the FICA chapter in the current IRC (chapter 21), which I suppose might put anyone into a state of honest confusion:

§ 3123. Deductions as constructive payments

Whenever under this chapter or any act of Congress, or under the law of any State, an employer is required or permitted to deduct any amount from the remuneration of an employee and to pay the amount deducted to the United States, a State, or any political subdivision thereof, then for purposes of this chapter the amount so deducted shall be considered to have been paid to the employee at the time of such deduction.

Anyone who has persisted in harboring doubts about the fact that these tax protocols only apply to federally-connected persons who have voluntarily, deliberately and knowingly accepted them by, for instance, joining the civil service should be disabused of that mistake after reading provisions of this kind...)

This leads into the second complex pretense deployed in this "notice", because what ARE properly used as deductions involve provisions of law by which portions of what DOES constitute "income" are subtracted from the gross amount of "income" declared, resulting in a net amount which ends up being the measure of any resulting tax (against which tax credits can then be taken, when available).  That is, deductions have no purpose or effect unless there is "income" in play.

This exercise of craft is emphasized by the careful wording of the next line: "Only the amount in Box 2 of a W-2 may be used to reduce or eliminate tax."  The fact is, the "amount in Box 2 of a W-2"-- the nominal "federal income tax withheld" amount-- CAN'T be used "to reduce or eliminate tax"; it is a PAYMENT of the tax, when and if it is subsequently determined that a tax is actually owing for the period in question.  Only reducing the amount of "income" being taxed can "reduce or eliminate tax" (such as by taking an available deduction-- see how this clever nonsense goes full circle?).  But wording the line the way it has been done blends it with the morass of prior disinformation into a comprehensive fog, if you'll pardon the incongruity of the expression.

Now we come to the heart of the whole exercise, because everything discussed about this "notice" so far has been part of an elaborate effort to dodge the simple fact that, like the "amount in Box 2 of a W-2", the amounts in boxes 4 and 6 of a W-2 (the famous "wrong box(es)") are only lawfully retainable by the government AS PAYMENTS OF TAX, and can ONLY be retained when "wages (as defined in section 3121 (a)) [have actually been] received by [an individual] with respect to employment (as defined in section 3121 (b))".  If such "wages" HAVE NOT been received, the government simply has no claim to the withheld amounts, no matter what kind of nonsense it cares to suggest about their character or the reason for their appearance in a filing. 

There's the bottom line on this bogus "notice".  The 'service' is seeking to evade the substance of D.'s filing, and, secondarily, to discourage D. from proceeding with her claim for the return of her property by trying to baffle her with b*llsh*t-- because that's all its got to work with.

EVERY WHICH WAY BUT LOOSE- XV

"FRIVOLOUS!"  "WE PROPOSE...!"  "WE CHANGED YOUR ACCOUNT!"  CtC Warrior Justin_ heard all of that from the IRS in its effort to thwart his filing for 2006.  First there was this:

...to which Justin responded with this:

 

...and this.

 

The 'service' then trotted out this:

 

...to which Justin responded with this.

Then this arrived in the mail:

...but before Justin even got around to responding to this nonsense (which seeks to recapture Justin's "telephone tax" refund-- the only thing he had claimed and received for the year), the 'service' grimaced and abandoned the exercise with the following admission that the more-than-$130,000.00 he earned during 2006 in his perfectly normal, non-federally-connected activities simply doesn't qualify as "income" and that, although he had paid in nothing, had had nothing withheld, and had no credits to apply, he owed no "income" tax for the year (even the variety called "Social Security and Medicare contributions"):

EVERY WHICH WAY BUT LOOSE- XVI

"WE PROPOSE...!"  "WE CHANGED YOUR ACCOUNT!"  "YOU OWE US A LOT OF MONEY!!!"  CtC Warrior K. T. heard all of that from the IRS in its effort to thwart his filing for 2006.  K. had filed an educated return, including rebuttals to a variety of ignorant payer allegations that money paid to him was a result of his engaging in taxable activities, in April of 2007.  A year later, the IRS decided it'd have a go at scaring K. into reversing (and perjuring) himself.  This effort took the form of a "disputation" with K.'s reported "income" totals, and a proposed balance due of more than $44,000.00, based on the agency's self-serving preference for the allegations of K.'s payers:

K. was not impressed, and not intimidated, having a complete, CtC-solid knowledge of the law.  He responded accordingly:

 

 

 

...and the 'service', being squarely faced with confirmation that it was dealing with a serious, dedicated, no-going-back-to-the-farm warrior for the truth, did likewise:

This is K.'s SECOND such victory on behalf of the truth and the rule of law.  His first, putting to rest an assertion of a $43,000.00+ balance for 2005 last year, can be enjoyed at www.losthorizons.com/tax/MoreVictories23.htm.

EVERY WHICH WAY BUT LOOSE- XVII

Warrior Bill Granger, who has won several victories so far but also has a couple of corrections-of-the-record filings being strenuously resisted by the IRS, has been getting a particularly sustained run-around by an agency desperate to dodge reality in regard to Bill's filing for 2004.  Just a few weeks ago, the dodging got truly surreal.

On November 7, that agency sent Bill the following "ignore that man behind the curtain" scary-paper (of the sort dissected in detail in episode VII of this series):

Note the reference to "the information you filed as a return of tax, or purported return of tax, on Apr. 18, 2008", which, it is alleged, has been "determined" to be "frivolous" and has thus prompted this "notice".

Now, Bill hadn't filed anything related to 2004 last April, but he HAD sent something concerning that year to the 'service' that would have arrived in an IRS office around the 18th of that month.  What Bill had sent was a response to this:

(This is a compilation of material from the front and back of the original.)

Here is that response, which was mindlessly characterized by the Robot as "the information you filed as a return of tax, or purported return of tax, on Apr. 18, 2008", about which a "determination" is alleged to have been made by someone.  Read it with sympathy for Bill for his having to put up with this extended tax agency evasion, but also with amusement, and appreciation of how plainly the entirely fictional nature of these IRS scary-paper assaults is exposed by this particular example.

Nothing more needs to be said, I think, except,

EVERY WHICH WAY BUT LOOSE- XVIII

Warrior Bruce G. got run through the whole gamut of IRS dodges and balkiness revealed (and debunked) in this series, the Lost Horizons Newsletter 'Tax Tip' feature, the FAQ pages and elsewhere on this site before finally prevailing with his filing for 2004.  This all began with an IRS "Proposed Assessment" for 2004, a year for which Bruce, being at the time not yet CtC-educated, had never filed:

Having gotten that belated education, Bruce responded on February 5, 2008 with an original return, which rebutted "information returns" created about him by others, and declared that none of his earnings met the legal definition of "income".

Bruce had the misfortune of being selected for a sustained "frighten/confuse him back into the pen" campaign, however...

First came a Notice of Deficiency (see episode XIII of this series, and many of the Highlight victories posted here):

Bruce responded with the following:

Meanwhile, a "LTR 3176" for the same year had also shown up in Bruce's mailbox (see episode VII of this series):

Bruce responded with a personalized version of this.

The IRS wasn't going to give up that easily, though...  In August, this upgraded version arrived (see episode VIII of this series):

Bruce again responded in a straightforward, educated (if understandably exasperated) manner:

Crossing his response in the mail came the next salvo of increasingly desperate B.S. (see episode X of this series):

Are we having fun yet?!

Bruce once again rapped out a cogent, pointed reply:

The bad actors at the agency still weren't quite ready to give up...

This came next (see episode IV of this series):

Bruce, probably really straining by now to keep his temper, delivered this in response:

Finally, responsible parties at the 'service' had had enough.  Throwing up their hands, they shrugged and did what should have been done eight months prior (see hundreds of places throughout this site):

Bruce, having seen the agency's manic and corrupt obstinacy in action for so long in this case, didn't let it rest at that.  He promptly FOIA'd for a transcript of his IRS "account" for 2004, just to verify that reality has indeed been properly acknowledged.  It has:

(Note that the $5000 Frivolous Penalty "charged" to Bruce back in August makes no appearance on the transcript, having obviously been a completely fictitious assertion...)

Way to hang tough and tight, Bruce!

But,

EVERY WHICH WAY BUT LOOSE- XIX

CtC Warrior Cathy Walsh learned the truth about the tax just a year ago or so, and wasted no time in putting her new knowledge to work.  On April 16, 2008, Cathy notified the IRS that she had woken up and moved out of the barn:

 

The 'service' ruminated for awhile, and then replied that Cathy's views were all very well, but nothing could be done without an appropriate return:

 

 (Reference is made here to both 2004 and 2005, each of which Cathy has acted to address-- her claim for the latter year appears to STILL be turning the agency every which way but loose, and will doubtless find it's way onto this page at a future date...)

 

Cathy responded as requested:

 

 

Click here to see Cathy's amended return.

 

Three-and-a-half months of delay ensued before the 'service' finally responded with a what proves to be a desultory, perhaps even reflexive, "disallowance" notice:

 

 

Shortly afterward, it appears that some responsible party actually checked a calendar and did a little arithmetic:

 

 

 

Way to go, Cathy!  The air is nice outside that barn, isn't it?

 

***

 

Watch out for that robot!  I THINK IT'S GOING TO EXPLODE!!

***

 

Isn't it too bad everyone hasn't done like Cathy, and read CtC-- the exclusive source of the complete, accurate and liberating truth about the "income" tax?  You can help change that, and thereby help transform America.  Click here to learn how.

EVERY WHICH WAY BUT LOOSE- XX

CtC Warriors Chris and Janis Ortwein had the briefest encounter with the robot on record so far, I think...  In April of 2007, Chris and Janis filed a routine, educated return rebutting erroneous payer assertions.  It was much to their surprise that nearly a year later, the IRS deposited a smelly little present in the Ortwein mailbox:

 

Chris and Janis were surprised and annoyed at this baseless flailing about by the agency, but ended up not even having to bother with a reply.  Someone at the IRS apparently recognized the agency's faux pas, and two days before the indicated response date, a friendly (or at least, polite) "closing notice" arrived:

 

 

Total turn-around time: 28 days...

 

Watch out for that robot!  I THINK IT'S GOING TO EXPLODE!!

***

 

Isn't it too bad everyone hasn't done like Chris and Janis, and read CtC-- the exclusive source of the complete, accurate and liberating truth about the "income" tax?  You can help change that, and thereby help transform America.  Click here to learn how.

EVERY WHICH WAY BUT LOOSE- XXI

CtC Warrior "Anonymous in Illinois" had to deal with a few speed-bumps thrown in his path by the state of Illinois before getting back all of the property that had been withheld from him and put into the state's keeping during 2007 against the possibility that his economic activities throughout that year might've been "income"-taxable.  Anon. stuck to his guns, though, and while Illinois' efforts to evade the law delayed the satisfaction of his claim for almost a year, when that satisfaction came, it came with appropriate interest added...

We begin with Anon.'s Illinois refund claim, filed on March 20, 2008 (see it here).  Illinois responded on June 16 with the following disingenuous dodge:

 

Note that Illinois alleges that Anon. submitted an IL-4852, and that the problem was that the IL-4852 wasn't substantiated as to the amount withheld by (among other possibilities) a federal Form 4852 (such as the one that WAS attached to Anon.'s IL-1040).

 

 

Anon. promptly responded with Page 2 of the notice, as requested, and both the federal form originally submitted and an Illinois version of the same form (after substituting "payer" on the latter form where "employer" had inappropriately appeared by default):

 

 

Almost a full six moths later-- it apparently taking the state DOR that long to settle on its next evasion-- Anon. received an acknowledgement of his response, but with yet another demand for more substantiation:

 

 

Keep in mind that it is a virtual certainty that the state has complete information on the amounts withheld from Anon. from the person that did the withholding...  Nonetheless, Anon. played along one more time (albeit a bit impatiently):

 

 

That was it-- the state had emptied its bag of tricks.  Less than a month later, Anon.'s property was returned, with interest:

 

 

Watch out for that robot!  I THINK IT'S GOING TO EXPLODE!!

***

 

Isn't it too bad everyone hasn't done like Anon. in Illinois, and read CtC-- the exclusive source of the complete, accurate and liberating truth about the "income" tax?  You can help change that, and thereby help transform America.  Click here to learn how (while you still can-- see below...).

Are You Ready For More Power?

"Peter Hendrickson has done it again!  'Upholding The Law' does for individual liberties what 'Cracking the Code' did for tax law compliance: exposes the reader to the unalienable truth!"

-Jesse Herron, Bill Of Rights Press, Fort Collins, Colorado

AND DON'T MISS

NEW

from Pete Hendrickson,

the man who Cracked the Code of the United States "income" tax;

became the first American in history to recover EVERYTHING withheld from him, Social Security and Medicare "contributions" included;

and has ever since been the target of unrelenting assaults by a government willing to do just about anything to thwart the spread of the truth!!

In this new volume, you'll learn about: