'Cracking the Code-...' Warrior Gary Utter's 2002 Federal Refund
CtC warrior Gary Utter had had earnings from two different companies in 2002-- one of which considered Gary to be staff, withheld from him, and created a W-2 about its payments to him; and the other of which viewed Gary as a contractor and issued a 1099 about him. He had originally filed a return for that year of the 'conventional' sort. However, even as a 'conventional' filing, this one had a complication. During 2002, Gary had not made any "self-employment" tax payments in connection with his 'contractor' earnings. Concerned about not having done so, he filed a 'Form SS-8 Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding', and received notification that he could consider himself to have been an "employee" of that company for tax purposes. Gary completed his original 1040 accordingly, using the tax tables to calculate a 'conventional "tax due" based on earnings from both companies and subtracting from that figure only what had been listed by the title "Federal income tax withheld" on the W-2 he had received from the one company which had engaged in withholding.
Then Gary read 'Cracking the Code-...' and learned the truth.
Two months ago, Gary filed an amended return for 2002, reflecting his new understanding of the law. Included was a declaration rescinding his signature on the 'Form SS-8' mentioned above, which Gary now realizes to have been both improper and unnecessary. His amended return-- filed with a rebuttal to the allegations made on the 1099 he had received from the one company; and with a Form 4852 correcting the erroneous "wage" information on the W-2 he had received from the other-- claimed a refund of EVERYTHING actually withheld as "income" tax from Gary during that year, which, as he now knows, includes what is nominally withheld as 'Social Security tax' and 'Medicare' tax.
The government's response? Conformity with the law, and a complete refund to Gary. The evidence of Gary's victory for the rule of law can be seen at www.losthorizons.com/tax/MoreVictories4.htm. What Gary filed can be seen below.
Unfortunately, Gary had filed returns in 1997 and 1998 according to the "861" misunderstanding (those who are not familiar with this subject can learn more here). Penalties had been assessed against him accordingly, and his 2002 refund has been debited for those penalties, as shown below. Gary is taking a philosophical view. He acknowledges that his original filings for those years were indeed in error, and thus the penalties were, within the context of the tax structure, appropriate. But he has recently filed amended returns for those years as well, and is expecting to see the record cleared and his 2002 refund in the form of a check rather than a statement.
Gary's 2004 Arkansas Refund
(Two other 4852's were submitted with this one, identical to this one other than as to the payers and the amounts withheld)
Arkansas briefly balked by way of the notice below. Gary answered as shown.