Home | News | Site Map | Search | Contact


New and Supplemental Appendix Material for Cracking the Code

(The important material on this page is expanded periodically.  Please check here for new additions often.)

To receive the free Lost Horizons 'Newsletter', click here and subscribe to the group. Leave all options in their default settings.

An "Income" Tax Subject Site Map

The Bulletin Board

Join A CtCW Group In Your Home State!


(Much additional content will be found between these main topics.  Be sure to scroll.)


First, A Pleasant Report

A Concise Summary Of The Meaning Of "Income"

Regarding The Legal Meaning Of "State", "Person" And "Individual"

How Section 93 Of The 1862 Revenue Act Is Currently Implemented In The Law

A Little More On The Subject Of 'Includes'

Regarding References In The Law To "Professions, Trades, Employments, Vocations, Etc...

(Things I Like To Keep In Mind When) Dealing With The Beast

Don't Look Behind That Curtain

CtCW Yvonne Wesley's Example Of An Affidavit Of Mailing

Form W-9 Gets A Makeover

About SSNs And Bank Accounts

A Note Regarding the Code Language About Refunds

Some Further Thoughts Regarding Withholding And W-4s

About Interest Received From National Banks

Regarding "Non-resident Aliens", And Citizenship And Residency

Regarding The Discussion Of Money In CtC

Regarding "Income Exempt From Taxation By The Fundamental Law"

Some Notes Regarding The Meaning of "Trade or Business"

An Index To CtC




First, A Pleasant Report


Although 'Cracking the Code-...' contains several warnings that those who stand up and act in accordance with the real requirements and limitations of the law can expect to meet with strenuous and nearly lawless resistance from the government, I have been pleasantly surprised in this regard.  Shortly after the book first went to print, I became the first American in history to secure a refund of Social Security and Medicare ‘contributions’ (along with everything else withheld), when my own federal refund claim for 2002 was properly honored.  Since then, tens of thousands of CtC readers from across America have risen to uphold the law, and the vast majority have also enjoyed law-abiding responses from both the federal and many state governments.  The amounts recovered have ranged from as little as 78 cents to over $134,000.00 in one refund.


Nonetheless, I do not intend to revoke-- or even modify-- that warning.  Some readers have been targeted by obnoxious tax agency efforts to confuse and discourage claimants.  Happily, the number subjected to these efforts is small (and even among this small group it often turns out that the real focus or pretext for the agency attention is some pre-CtC bad practice that resists being undone, or has residual consequences).  This tax agency behavior has remained within the law, but it demonstrates a deliberate, if increasingly frantic, government policy of resistance to the inconvenient truth.


In a few cases these efforts have taken the form of the misapplication of the “frivolous return” statute as discussed in ‘About 1040s And Claiming Refunds’.  A few other readers have been treated to a variety of other, more inventive (if utterly corrupt) efforts to discourage their claims.  For instance, some have received a notice declaring an “appealable disallowance of claim” because, “you based your claim on your [erroneous] view that wages and salaries do not constitute taxable income”.  Of course, nothing could be further from the truth-- readers of 'Cracking the Code-...' are perfectly aware that “wages” are “income”, and would never suggest otherwise.


What these claimants have actually asserted, of course, is that their earnings are not “wages”-- quite a different thing altogether.  Unable to challenge or dispute such assertions, but unwilling to admit defeat, the government is falling back on the childish pretense that it misunderstands what is being said.  In fact, this pretense of misunderstanding and mischaracterization is the foundation for all tax agency efforts to discourage or thwart CtC-educated Americans.


Needless to say, the government’s finding it necessary to mischaracterize the claim it wishes to thwart serves to underscore the accuracy of the knowledge upon which that claim is based.  It is highly significant, and should be lost on no one, that the government’s response is not to simply declare the claimant’s earnings to be “wages”, or to declare those earnings to be “income” (or simply to declare them taxable, regardless of labels), which it certainly would do if these things were true (or would declare regardless of the truth, if possessed of the power to do so).  Although these mischaracterizations are accompanied by a fair bit of bluster, they are devoid of legal substance.  (See this page for extended discussion of this subject.)


Indeed, the nature of these government efforts to prop up the scheme in the face of an informed American public simply validates the aptness of my ‘Alice In Wonderland’ motif.  However corrupt the motivation which informs them, these efforts are those of the paper-thin pack of cards which, in the end, Alice disdainfully recognized her tormentors to be.


Still, and again, the most typical governmental response to the filings of those who have studied CtC is a scrupulously proper capitulation to the requirements of the law.  The concrete manifestations of these pleasing responses can be enjoyed here.

Now, order your 'I Cracked the Code' T-shirt, and help spread the word while looking good!

This handsome, top quality 6.1 oz all-cotton t-shirt, available in 'adult large' to fit most warriors, will start the conversation for you!

Only $19.95!

Click Here To Order




Click here to order the 'Cracking the Code' companion CD


Ok, now on to the real reason you came to this page...

A Concise Summary Of The Meaning of “Income”: 

  • Remuneration (either immediate or deferred) paid by the federal government including-- but not confined to-- “wages” (see below);

  • Benefits paid by the federal government;

  • The proceeds of, and from, federal ("United States") corporations or instrumentalities such as national banks, railroads, etc.;

  • The proceeds of, and from, the conduct of a "trade or business" (the performance of the functions of a public office).

('Proceeds' means any form of related payment or gain, including, for example, dividends paid to stockholders, etc..  To invest in an activity is to engage in that activity.)



  • Remuneration of any kind, and by any name (including ‘salary’, ‘fee’, etc.) paid to any “employee” (see below), and to others in positions in the federal civil or military services.


  • A federal government worker or office-holder;

  • Workers and office-holders of the local governments of the District of Columbia and the territories and possessions;

  • Workers and office-holders of any federal, D.C., or territorial or possessions government agency or instrumentality;

  • Officers of any federal corporation.

For a concise summary of WHY "income" means what it does, see this page.


Some Interesting History On The Current Withholding Provisions


The following excerpts are taken from the transcript of a withholding tax hearing before a subcommittee of the committee on finance, United States Senate, during the 77th Congress, Second Session on data relative to withholding provisions of the 1942 Revenue Act on August 21 and 22, 1942.  The excerpts are of exchanges between Missouri Democratic Senator Bennett Clark, Connecticut Republican Senator John A. Danaher and testifying witnesses Charles O. Hardy of the Brookings Institution and Milton Friedman of the Treasury Department Division of Tax Research.


This material originally came to my attention in autumn, 2005, as some of the vast quantity of unsubstantiated flotsam and jetsam with which the internet is awash.  However, it was intriguing, so I contacted the National Archives and Records Administration in Washington.  Two very helpful and courteous administrative staffers, Rod Ross and Maryellen Trautman, undertook to research it for me, and reported back two interesting things.  The first was that the transcript is legitimate.  The second was that, while they were able to verify these excerpts, they were unable to provide me with a hard copy of the transcript-- because it is, and has always been, classified.  (My correspondents speculate that a copy of the transcript was individually declassified at some point in the past, perhaps for inclusion in the library of one of the hearing participants, and thus was able to find its way into circulation.)


I'm sure some of you will find it as interesting as it is to me:

Senator Clark: "Of course, you withhold not only from taxpayers but nontaxpayers."

Mr. Hardy: "Yes."


Senator Danaher: "I have only one other thought on that point. In the event of withholding from the owner of stock and no taxes due ultimately, where does he get his refund?"

Mr. Friedman: "You're thinking of a corporation or an individual?"

Senator Danaher: "I am talking about an individual."

Mr. Friedman: "An individual will file an income tax return, and that income tax return will constitute an automatic claim for refund."

In the end, of course, the withholding provisions that made their way into the law under the Current Tax Withholding Act of 1943 were confined in their application to 'taxpayers' only, as a matter of legal necessity.  Nonetheless, provisions acknowledging and addressing the possibility that withholding would, as a practical matter, inevitably end up being misapplied were also thoughtfully included; and the mechanism of the 1040 as the remediating instrument, was adopted.  See 'About 1040s, And Claiming Refunds' in CtC for a detailed discussion of these provisions.


Shedding A Little Light On The Meaning Of "State" And "Person" In Some Areas Of Tax Law


Start with this, reading it twice and really letting the words sink in:

"It is unnecessary to lay special stress on the title to the soil in which the channels were dug [Boston, Massachusetts], but it may be noticed that it was not in the United States."

United States Supreme Court, Ellis v. United States, 206 U.S. 246; 27 S.Ct. 600 (1907).

Now continue with the following:

"...the following propositions may be considered as established:


3. That the District of Columbia and the territories are states as that word is used in [tax] treaties with foreign powers, with respect to the ownership, disposition, and inheritance of property;"  United States Supreme Court, Downes v. Bidwell, 182 U.S. 244, (1901).

Revised Statutes, Title XXXV- Internal Revenue, Section 3140 (currently represented by 26 USC 7701(a)(1) and (10), and 26 USC 7651):

“The word “State” when used in this title shall be construed to include the Territories and the District of Columbia, where such construction is necessary to carry out its provisions.

(This usage extends throughout federal law.  42 USC 303, relating to payments to States of old-age assistance grants, serves as a good example:

(a) Computation of amounts

From the sums appropriated therefor, the Secretary of the Treasury shall pay to each State which has a plan approved under this subchapter, for each quarter, beginning with the quarter commencing October 1, 1960—

(1) Repealed. Pub. L. 97–35, title XXI, § 2184(a)(4)(A), Aug. 13, 1981, 95 Stat. 816.

(2) in the case of Puerto Rico, the Virgin Islands, and Guam, an amount equal to one-half of the total of the sums expended during such quarter as old-age assistance under the State plan, not counting so much of any expenditure with respect to any month as exceeds $37.50 multiplied by the total number of recipients of old-age assistance for such month; plus



OK, now, continuing with R. S. 3140 and its "person" definition:

"And where not otherwise distinctly expressed or manifestly incompatible with the intent thereof, the word “person”, as used in this title, shall be construed to mean and include a partnership, association, company, or corporation, as well as a natural person.”

The ‘code’ representation of the definition of “person”, which is a consolidation of 10 statutes, leaves out the phrase ‘natural person’.  The draftsmen relied on the term ‘individual’ to express the same meaning.  Nonetheless, the actual language of R.S. 3140 remains the law.  Unfortunately, some theorists-- whose ‘research’ began and ended with nothing more than the code-- have erroneously concluded that “person” in the law only means some kind of artificial entity.  This has led, as might be imagined, to all manner of wild flights of fancy regarding the nature of the “income” tax structure.

Person. In general usage, a human being (i.e. natural person), though by statute term may include a firm, labor organization, partnerships, associations, corporations, legal representatives, trustees, trustees in bankruptcy, or receivers.  Black's Law Dictionary, 5th edition.


Individual. As a noun, this term denotes a single person as distinguished from a group or class, and also, very commonly, a private or natural person as distinguished from a partnership, corporation, or association; but it is said that this restrictive signification is not necessarily inherent in the word, and that it may, in proper cases, include artificial persons.  Black's Law Dictionary, 2nd Edition

(There ARE places in the law where "person" has a more limited meaning.  Such places will furnish a custom definition of the term, and the exclusive range of its application, as in, "For purposes of this subchapter..." )


A Brief Discussion Of The Current Statutory Form Of Section 93 Of The Revenue Act Of 1862


The existing structure of the relevant sections of the IRC directly reflect the key aspects of section 93 of the Revenue Act of 1862, as discussed in 'The Origin Of The Income Tax' and 'About 1040s And Claiming Refunds of 'Cracking the Code- The Fascinating Truth About Taxation In America'.  However, the statutory enactment of those elements is now found in section 3173 of the Revised Statutes (as amended in 1919). That section, like all those of the Revised Statutes, consists of a consolidation of provisions from a number of earlier enactments, all of which are expressed in a slightly modified form, although with the meaning unchanged.  Indeed, the Revised Statutes maintain their derivation specifications in their margins.


The idiosyncrasies of the new formulation merit a brief discussion.  This discussion will focus on the provision establishing that the formal declaration as to the amount of "income" received, once properly made by the person to whom any resulting liability might attach, constitutes the final legal word on the subject.



In section 93 of the 1862 act, the language establishing the exclusive standing of the individual concerned to declare the amount of "income" received was positively expressed:


"Provided, that any party, in his or her own behalf, or as guardian or trustee, as aforesaid, shall be permitted to declare, under oath or affirmation, the form and manner of which shall be prescribed by the Commissioner of Internal Revenue, that he or she was not possessed of an income of six hundred dollars, liable to be assessed according to the provisions of this act, or that he or she has been assessed elsewhere and the same year for an income duty, under authority of the United States, and shall thereupon be exempt from an income duty; or, if the list or return of any party shall have been increased by the assistant assessor, in manner as aforesaid, he or she may be permitted to declare, as aforesaid, the amount of his or her annual income, or the amount held in trust, as aforesaid, liable to be assessed, as aforesaid, and the same so declared shall be received as the sum upon which duties are to be assessed and collected."


In the current formulation, the same meaning is expressed, but is rendered by means of excluding authority for government review, investigation, and challenge of any timely-filed annual "income" tax return.  Only in the case of a failure to file-- specifically after the statutory 10-day notice-and-demand-- is the government authorized to act in an adversarial manner in regard to a return for that person and that year.  The relevant language, which follows the general establishment of the requirements of making a return when one has been 'made liable' (such as by the testimony of others to one's accession of the threshold amount of "income) is as follows:


"And if any person, on being notified or required as aforesaid, [this is a reference to the 10-day notice to be given to anyone who has not filed timely] shall refuse or neglect to render such list or return within the time required as aforesaid, or whenever any person who is required to deliver a monthly or other return of objects subject to tax [this refers to distillers, per section 3307; brewers, per sections 3337 and 3338; tobacco producers, per sections 3358 and 3390; and bankers, per section 3414] fails to do so at the time required, or delivers any return which, in the opinion of the collector, is erroneous, false or fraudulent, or contains any undervaluation or understatement, or refuses to allow any regularly authorized Government officer to examine the books of such person, firm, or corporation, it shall be lawful for the collector to summon such person..." (The statute goes on to authorize the examination of books and records, taking of testimony, etc.; and-- solely in the case of refusal to file, or the filing of a false or fraudulent return, by someone required to deliver a monthly or other return of objects subject to tax, as listed above-- the production of a return by the Secretary.)


This language, insofar as it is relevant to the FIRST "any person" mentioned (that is, one who is not "required to deliver a monthly or other return of objects subject to tax" ) can be usefully condensed to:


"And if any person on being notified or required as aforesaid shall refuse or neglect to render such list or return within the time required as aforesaid, it shall be lawful for the collector to summon such person... (etc., etc.)" 


Only the SECOND "any person" specified in 3173 can be subjected to the provisions of summons, examination, etc. under any other circumstances.


As no relevant authority is granted elsewhere or otherwise, we see that none exists under current law for the government to challenge or dispute the declarations on a properly filed annual return of "income", precisely as was the case under the original enactment of this provision as section 93 of the Revenue Act of 1862.  Also in keeping with the structure of the original version, even the authority to summon and make examination on suspicion of falseness or fraudulence is only granted as regards returns related to 'objects subject to tax'.


The only difference in substance between the two enactments is that in the former, the government was authorized to prospectively create or increase the amounts upon an annual "income" tax return, either of which could be definitively answered by a follow-up return submitted by the person concerned; whereas in the latter and current enactment, an original timely return closes off further governmental action entirely, but if such a timely original return is not made, the door is opened for the government to conduct examinations, etc., toward possible efforts at civil enforcement of any resulting allegation of liability.


By the way, although it is true that the 'codified' reflections of the statutes-at-large are typically misleading, there are exceptions to that rule.  The first codified representation of the statutory language from R. S. 3173 offers a very clear reflection of the statute.  In fact, because it formats the statute's language in a more accessible fashion, the 1939 code representation of R. S. 3173 actually has independent value in displaying the section's provisions.  That representation is as follows:


(a) GENERAL AUTHORITY.—It shall be lawful for the collector, subject to the provisions of this section to summon any person to appear before him and produce books at a time and place named in the summons, and to give testimony or answer interrogatories, under oath, respecting any objects or income liable to tax or the returns thereof. The collector may summon any person residing or found within the State or Territory in which his district lies; and when the person intended to be summoned does not reside and can not be found within such State or Territory, he may enter any collection district where such person may be found and there make the examination herein authorized. And to this end he may there exercise all the authority which he might lawfully exercise in the district for which he was commissioned.

(b) ACTS CREATING LIABILITY.—Such summons may be issued—

(1) REFUSAL OR NEGLECT TO COMPLY WITH NOTICE REQUIRING RETURN.—If any person, on being notified or required as provided in section 3611, shall refuse or neglect to render such list or return within the time required, or

(2) FAILURE TO RENDER RETURN ON TIME.—Whenever any person who is required to deliver a monthly or other return of objects subject to tax fails to do so at the time required, or

(3) ERRONEOUS, FALSE, OR FRAUDULENT RETURN.—Whenever any person who is required to deliver a monthly or other return of objects subject to tax delivers any return which, in the opinion of the collector, is erroneous, false, or fraudulent, or contains any undervaluation or understatement, or

(4) REFUSAL TO PERMIT EXAMINATION OF BOOKS.—Whenever any person who is required to deliver a monthly or other return of objects subject to tax refuses to allow any regularly authorized Government officer to examine his books.

This language is represented in the current IRC with the following (which is also derived from in part from sections 3614 and 3632(a)(1) of the 1939 IRC):


7602(a)  Authority to summons, etc.

For the purpose of ascertaining the correctness of any return, making a return where none has been made, determining the liability of any person for any internal revenue tax or the liability at law or in equity of any transferee or fiduciary of any person in respect of any internal revenue tax, or collecting any such liability, the Secretary is authorized—

(1) To examine any books, papers, records, or other data which may be relevant or material to such inquiry;

(2) To summon the person liable for tax or required to perform the act, or any officer or employee of such person, or any person having possession, custody, or care of books of account containing entries relating to the business of the person liable for tax or required to perform the act, or any other person the Secretary may deem proper, to appear before the Secretary at a time and place named in the summons and to produce such books, papers, records, or other data, and to give such testimony, under oath, as may be relevant or material to such inquiry; and

(3) To take such testimony of the person concerned, under oath, as may be relevant or material to such inquiry.  


(NOTE: Although it is irrelevant to the substance of this discussion, and will be of little interest to most of those reading these words, good scholarship requires mention of the fact that in 1982 Congress expanded the purposes for which the summons and examination authority could be exercised to include investigations into malfeasance in the administration and enforcement of the tax laws on the part of IRS employees (and other government actors) by adding the following language to the law:

(b) Purpose may include inquiry into offense

The purposes for which the Secretary may take any action described in paragraph (1), (2), or (3) of subsection (a) include the purpose of inquiring into any offense connected with the administration or enforcement of the internal revenue laws. )




More on this subject, and a specific discussion of the limitations expressed in the law regarding the summons and examination authority referred to above, can be found at 'Responding To The Assault'.


Those who wish to explore this structure further should see this document.


The acknowledgement of the limitations of the 'Substitute For Return' authority under 26 USC 6020(b), discussed on pages 171 and 172 of CtC has been moved to a new location in the Internal Revenue Manual.  That acknowledgement is now found at section of the current IRM.  This link should open the page containing that section.


Show The World Where You Stand!

What I mean by 'Sovereign Citizen'


A Bit More On The Subject Of 'Includes' For Those With Older Editions Of CtC

(The complete in-depth discussion of this subject in current editions of CtC can be downloaded here)


"It [is argued that] the word "including" means "moreover", or "as well as"; but if this was the meaning of the legislature, it was a very embarrassing mode of expressing the idea."  Chief Justice Marshall of the United States Supreme Court, United States v. The Schooner Betsey and Charlotte, 8 U.S. 443 (1808)


The IRS likes to suggest that when the term "includes" is used in a definition in the tax law, it should not be understood as 'limiting'-- citing, of course, 26 USC 7701(c):

“The terms ''includes'' and ''including'' when used in a definition contained in this title shall not be deemed to exclude other things otherwise within the meaning of the term defined.”  

However, were "not limiting" what was really intended to be conveyed by this provision (and if "not limiting" were Constitutionally possible, in this context), Congress would have constructed 26 USC 7701(c) identically to 28 USC 3003:

“Section 3003, Rules of Construction

(a) For purposes of this chapter

(1) the terms “includes” and “including” are not limiting;”

or as in 11 USC 102:

"Section 102, Rules of Construction

In this title-

(3) "includes” and “including” are not limiting;”

But it did not...


Nonetheless, there is a little color to the IRS's representations, even if it is used to deceive...


As is discussed in detail in 'The Law Means What It Says' in CtC, the word "includes" is normally entirely restrictive when used in a statute.  When deployed in the internal revenue law though, the term is actually one of "limited expansion", due to the modification of that normal construction provided by its custom definition.  That modification means that the enumerated list provided in any definition which deploys the term "includes" functions to establish a class in which other things not listed but which share the characteristics of those which are can be legally presumed to be also part of the list.


To briefly review this lesson:

The definition of "includes" which specifies this function of the term is found at 26 USC 7701(c):

“Includes and including: The terms ''includes'' and ''including'' when used in a definition contained in this title shall not be deemed to exclude other things otherwise within the meaning of the term defined.”

The rather tangled language of this statute has been helpfully rendered in related regulations as:

"Meaning of Terms: The terms “includes and including” do not exclude things not enumerated which are in the same general class."  Title 27, at 27 CFR 72.11;

and partakes of the doctrines expressed by the United States Supreme Court as:

“[w]here general words follow specific words in a statutory enumeration, the general words are construed to embrace only objects similar in nature to those objects enumerated by the preceding specific words”  Circuit City Stores v. Adams, 532 US 105, 114-115 (2001)

 “Under the principle of ejusdem generis, when a general term follows a specific one, the general term should be understood as a reference to subjects akin to the one with specific enumeration.”  Norfolk & Western R. Co. v. Train Dispatchers, 499 US 117 (1991)

"…a word is known by the company it keeps (the doctrine of noscitura sociis).  This rule we rely upon to avoid ascribing to one word a meaning so broad that it is inconsistent with its accompanying words, thus giving “unintended breadth to the Acts of Congress.”  Jarecki v. G. D. Searle & Co., 367 US 303, 307 (1961)”  Gustafson v. Alloyd Co. (93-404), 513 US 561 (1995)


"[I]t is a commonplace of statutory construction that the specific governs the general..."  Morales v. TWA, 504 US 374 (1992)

Applying these principles of statutory construction, we see that the language of 26 USC 7701(c) providing for the inclusion of "other things otherwise within the meaning of the term defined" means, under the doctrine of noscitura sociis-- and simple logic-- "the inclusion of other things otherwise within the meaning of the term as defined by the things listed". The unstated things that can be imagined as also included are, here, "general terms" which must conform to the character of those expressly listed.


For instance, consider the definition of "employee" at 26 USC 3401(c):

26 USC 3401(c) Employee

For purposes of this chapter, the term ''employee'' includes an officer, employee, or elected official of the United States, a State, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing. The term ''employee'' also includes an officer of a corporation. [That is to say, a “United States Corporation”, which is defined in Sec. 207 of the Public Salary Tax Act as, “a corporate agency or instrumentality, is one (a) a majority of the stock of which is owned by or on behalf of the United States, or (b) the power to appoint or select a majority of the board of directors of which is exercisable by or on behalf of the United States…”.  However, we are instructed by the IRS in Pub. 15A that even officers of U.S. corporations are only to be considered “employees” if they are paid as a consequence of their positions.]

It is clear that the common characteristic of those things in the enumerated list of "employees" in this special definition (which exists in order to define, in turn, the term "wages" found in the same chapter) is being paid by the federal government or an entity created and controlled by the federal government for services rendered.


When we incorporate the provisions of 7701(c) (and leave out the clarifying note about federal corporations for purposes of brevity), we get:

26 USC 3401(c) Employee

For purposes of this chapter, the term ''employee'' includes an officer, employee, or elected official of the United States, a State, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing. The term ''employee'' also includes an officer of a corporation. The term "employee" also includes "things not enumerated which are in this same general class" (or, "other things otherwise within the meaning of the term as defined").

It is easy to see how and why the provision of 26 USC 7701(c) represents nothing more than the "general words" which can and do "embrace only objects similar in nature to those objects enumerated by the preceding specific words" specified by the court in the Circuit City ruling whenever it is invoked by the use of "includes" in another definition.  That is, the provision of 7701(c) does not allow the term defined to embrace objects NOT similar in nature to (or of the same general class as) those enumerated.


(A helpful emphasis of the fact that it is the enumerated objects themselves that establish the class from which the scope of the defined term can exclusively be expanded is found in the language of 7701(c) itself.  That language reads, "...OTHER things otherwise within the meaning of the term defined."  This construction makes clear that the things listed are to be understood as being within-- and thus expository of-- the meaning intended by the definition, and only other things of the same character can be construed as suitable for presumptive inclusion within the term's meaning.)


By the way, statutorily-defined terms such as those we're discussing here are known as "Words of Art".  This is because using terms which are spelled like common words, and which possess definitional characteristics similar to the meaning of those common words (as in the custom-defined term "employee"-- which still means 'workers', just like the common word 'employee', but only a certain class of 'workers') is an artful mechanism which demands a sophisticated grasp of the subject in which they are deployed by those encountering them.  It is easy for the careless or poorly-educated reader, when encountering such "words of art", to lose sight of the most basic maxim of statutory construction: The common meaning of any word converted to a legal term by virtue of a statutorily-provided definition is automatically stripped away thereby.  The Supreme Court has expressed this very concisely:

"When a statute includes an explicit definition, we must follow that definition, even if it varies from that term's ordinary meaning."  Stenberg v. Carhart, 530 U.S. 914 (2000)


"It is axiomatic that the statutory definition of the term excludes unstated meanings of that term."  Meese v. Keene, 481 U.S. 465 (1987).


"Of course, statutory definitions of terms used therein prevail over colloquial meanings. Fox v. Standard Oil Co., 294 U.S. 87, 95, 55 S.Ct. 333, 336."  Western Union Telegraph Co. v. Lenroot, 323 U.S. 490 (1945)

The simple fact is, Congress doesn't provide statutory definitions for mere words meant to remain mere words and retain their common meanings.  That's why when a definition is provided it is the sole definition that applies; when a definition is provided, the meaning of the thing defined is specialized; and if the thing defined mimics a common word, its meaning will be different from that of the common word.  If, for instance, Congress meant for "employee" as used in 3401 to actually mean the common word with its dictionary definition, and meant that those within that dictionary definition are to be subject to a protocol to which others NOT within that same common-meaning-definition are also subject, a new term embracing both--  such as "affected persons"-- would have been created for that purpose.


(It need hardly be pointed out that the consequence of statutorily defining a term-- that is, its having the common meaning of the mimicked word stripped away thereby-- is not undone by deploying yet another custom-defined term-- such as "includes"-- within the statutory definition.  If the term were meant to be the word, and to not have its meaning restricted, specialized and uncommon, it wouldn't be defined within the statute at all.)


Indeed, the IRS has long exploited the difficulty suffered by those poorly-trained in the law in dealing with the legal nuances of "words of art".  The agency has floated the myth that the list of "included" parties in the definition of "employee" at 3401(c) was provided in order to ADD them to the routine, common meaning of 'employee'.  This story suggests that at first, the related withholding provisions applied simply to 'employees'-- a word, not a term; undefined, and therefore to be taken as having it's common-word meaning.  Then, goes the tale, because questions arose as to whether federal personnel were also subject to those provisions, the enumerated definition was added.


First, it is a simple and easily-demonstrated lie-- the definition at 26 USC 3401(c) has never changed.  The statute creating that section, 'The Current Tax Payment Act Of 1943', contained that definition from day one-- word for word (see the 'Companion CD' for scans of the original enactment, and the section below for a nice illustration of this fact).


Second, this sly falsehood offers some nice cognitive blowback by inviting the obvious question of why "federal employees" would be among the enumerated objects "added" to the meaning, if this little story were true?  That is, if "employee" meant all 'employees' to begin with, why would federal "employees" need to be added to it by use of that descriptor and construction?  IF providing a statutory definition DIDN'T strip away the common meaning of the word mimicked by the term created and "employee" WAS intended to have that common meaning, and the "includes..." language WERE intended to represent a purely expansive clarification as this story proposes and the unsophisticated reader might imagine, the clarifying language would say something like: "The term "employee" includes those holding any appointed or elected office of the United States, a State, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing."  (Since the rules specified in relevant IRS regulations only provide for "officers of a corporation" to be considered covered by the "employee" definition to the extent that they are actually working in paid positions-- which obviously makes them "employees" within the common-meaning of the word-- the language, "The term ''employee'' also includes an officer of a corporation" which is found in the statute as actually written, would also have been left out.)


Further, see a discussion of the "Includes, but is not limited to..." language in the tax law here.



"In the interpretation of statutes levying taxes it is the established rule not to extend their provisions, by implication, beyond the clear import of the language used, or to enlarge their operations so as to embrace matters not specifically pointed out. In case of doubt they are construed most strongly against the government, and in favor of the citizen. United States v. Wigglesworth, 2 Story, 369, Fed. Cas. No. 16,690; American Net & Twine Co. v. Worthington, 141 U.S. 468, 474 , 12 S. Sup. Ct. 55; Benziger v. United States, 192 U.S. 38, 55 , 24 S. Sup. Ct. 189"

Gould v. Gould, 245 US 151 (1917)


On The Meaning Of "Employee" as reflected at 26 USC 3401(c)-- An Illuminating Flash From The Past


CtC Warrior Carl Collicott keeps his eyes open.  Having learned that it is in the earliest renderings of the law and associated materials that the truth is most often plainly presented, Carl undertook to study the very first regulatory expression of "The Current Tax Payment Act Of 1943", (the act by which the withholding and W-2 certification first deployed in section 86 of the Revenue Act of 1862 was revived).


Carl looked at the Federal Register published three months after the new enactment, when the potential of this revived section of law was not yet understood by the beneficiaries of ignorance about the "income" tax.  Carl's sharp eye caught the careless (and subsequently deleted) use of the word "specifically" in this first innocent regulatory exposition on the meaning of and scope of the newly-coined legal word-of-art "employee" (as currently deployed in 26 USC 3401(c)), and he promptly sent me a copy to share with you all.


FEDERAL REGISTER, Tuesday, September 7, 1943, Page 12267



I'm sure it will escape no one that private-sector workers are NOT "specifically included"...

Click here for a detailed discussion of the statutory meaning of "employee".


Regarding References In The Law To "Professions, Trades, Employments, Vocations, Etc..."

Occasionally, a provision of law or a judicial ruling will make a reference to "professions, trades, employments, vocations, etc." in connection with the "income" tax, leading the non-CtC-educated to imagine (or contend) that the tax applies to anyone engaging in any profession, trade, occupation, and so forth.  This misunderstanding appears to result from a general ignorance of the detailed specifications in the law, and a related failure to take context into account:

"Words having universal scope, such as 'every contract in restraint of trade,' 'every person who shall monopolize,' etc., will be taken, as a matter of course, to mean only everyone subject to such legislation, not all that the legislator subsequently may be able to catch.”  United States Supreme Court, American Banana Co. v. United Fruit Co., 213 U.S. 347 (1909).

It is also supported by widespread ignorance of the fact that the federal government is well- and thoroughly-stocked with workers in every imaginable "profession, trade, employment, or vocation" (all of whose federally-connected earnings are, of course, subject to the tax, and are, of course, those being considered in the relevant references discussed above).  Visit this page to see what I mean.




BTW, to address another misunderstanding that can arise in regard to this subject: The reference in the Pollock and Brushaber rulings (the latter quoting the former) to Congress not intending that the burden of the income tax be borne by professions, trades, employments, or vacations:

"The whole law was, however, declared unconstitutional on the ground that to permit it to thus operate would relieve real estate and invested personal property from taxation, and "would leave the burden of the tax to be borne by professions, trades, employments, or vacations, and in that way what was intended as a tax on capital would remain, in substance, a tax on occupations and labor" (id., p. 158 U. S. 637) -- a result which, it was held, could not have been contemplated by Congress."

... is not a declaration that privileged work activities, such as those discussed above, were not meant to be taxed.


Such privileged work activities are explicitly subject to the tax in the law and always have been.  Indeed, the Pollock court observes that the tax thus applied has always been upheld in the past by the court as a proper excise.


What is being said by the courts with the reference to who is intended to bear the burden of the tax is simply that the tax is not meant to be entirely and only borne by those engaged in these particular taxable activities. Rather, it is also meant to be borne by those engaged in taxable activities involving rent and dividends, as well.


(Things I Like To Keep In Mind When) Dealing With The Beast


Before any judicial body can take more than preliminary cognizance of a dispute, the issue must have been meaningfully put into controversy.  That is to say, competing allegations must be in the record.  If an allegation is made and no competing allegation (such as a denial or rebuttal) is on record, there is no dispute, and the unchallenged allegation will be presumed true and sufficient.  The decision-making body will still act, but only to validate the claim of the party whose allegation is before it.


For instance, if a claimant (plaintiff) petitions a court, and presents an allegation of a duty owed-- which might take the form of no more than an assertion stating a claim and a reason or two purported to validate it, the court will give notice to the affected party of an established period during which established procedures must be followed in order to dispute that allegation.  If that disputation is not presented-- in conformity to the specifications of acceptable form, and within the time period provided-- a default judgment will be granted to the plaintiff.


Various rules govern the forms and procedures sufficient and appropriate for various controversies or forums, but one thing is consistent in all of them: the initiating claim need not possess objective legitimacy.  In other words, just because a claim would seem (in the eyes of the defendant) to have no credible basis in law or nature doesn’t mean that it doesn’t have to be defended against.  A defense might require no more than moving the decision-making body to dismiss the complaint, but action must still be taken.


Administrative agencies, and particularly their decision-making bodies, work on the same principles as regular judicial courts; furthermore, a judicial court which ultimately rules on issues involving administrative procedures may well consider or treat those procedures to have been effectively a part of its own procedural and temporal protocol.  Thus, it is best to think of any controversy with an administrative agency as being a trial, calling for the same competition between bodies of evidence as would a judicial proceeding involving the same matter.


Indeed, the process at work in any dealings with an administrative agency are precisely those of a trial.  Such dealings arise because someone presents allegations to an administrative agency that some other particular person is within its (or its principal’s) jurisdiction/authority, and owes a duty.  If that person disagrees, it is incumbent upon him or her to present evidence challenging one or more of these allegations-- just as in a judicial contest.  Failing to do so is to surrender the contest.




Make no assumptions, and always put the burden of proof on the other guy.  For instance, if one is being treated by one’s adversary as if subject to a protocol which is undesirable, questionable, or unfit, one should never assume or endorse that protocol as proper or applicable.  Response is appropriate, but it should be a response such as to oblige the other party to make all of the assertions as to that propriety or applicability.  As an example, consider the following language from a response to an IRS ‘Final Notice Of Intent To Levy And Notice Of Your Right To A Due Process Hearing’ (concerning an alleged 'civil penalty' liability): 


We request and demand any and all due process to which we are entitled or which is in any way appropriate and/or available to us under any provision or practice of common, statutory, and/or administrative law or protocol-- including, but not limited to, that to which your notice refers; and incorporate by reference into this request and demand all relevant information included on or in that notice, a copy of which is attached.  Be advised that it is our intention to audio-record any and all proceedings for which such an option is lawfully available to us.  We declare that we make no admissions as to our status, the legitimacy of your implicit or explicit assertions, or the fitness of any particular legal or administrative protocol by responding to your notice or by requesting and demanding the due process referenced above.  Prior to any due process hearing, whether formal or informal, we expect and require meaningful clarification as to the nature of-- and reason for-- the alleged assessment, the process by which any and all relevant determinations reflected in and by your notice were arrived at, and anything else pertinent to the matter.


By this response, the issuer of the notice is obliged to determine-- and is responsible for asserting-- the propriety or applicability of both the initial  procedure, and any which follow.  If an invitation to participate in a ‘Collections Due Process Hearing’ were to result from this response, it would be because the notice-issuer decided that such a procedure applied, rather than because the respondent endorsed the proposition that he or she is subject to the jurisdiction or protocol within which such hearings occur or apply-- an endorsement which could compromise an effective challenge to the underlying allegations.


Should the matter proceed to a hearing, the statutory structure of the ‘civil penalties’ referenced in this example (which arise in connection with allegations of filing a ‘frivolous return’), explicitly requires the notice-issuing agency to bear the burden of proof therein (or, if denying the applicability of the following provision, to acknowledge the limited meaning and effect of "includes", due to the specifications of Sec. 6671 -Rules for application of assessable penalties [including "frivolous" return]: (b) Person defined- The term “person”, as used in this subchapter, includes an officer or employee of a corporation, or a member or employee of a partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs):

Sec. 6703. - Rules applicable to penalties under sections … 6702 [frivolous return]

(a) Burden of proof

In any proceeding involving the issue of whether or not any person is liable for a penalty under section 6700, 6701, or 6702, the burden of proof with respect to such issue shall be on the Secretary.


Sec. 7491. - Burden of proof  [applicable to the 'failure to file' civil penalty]

 (c) Penalties

Notwithstanding any other provision of this title, the Secretary shall have the burden of production in any court proceeding with respect to the liability of any individual for any penalty, addition to tax, or additional amount imposed by this title

(‘Burden of production’ means that the Secretary must present a prima facie case establishing the liability being alleged, the elements of which are subject to challenge and rebuttal.)


* By the way, ‘The Collection Due Process Handbook’, (Notice CC-2003-016) by the IRS Office of Chief Counsel-- which, among many other things, explains how to demand a hearing without the use of the IRS-preferred, but assumption-laden, Form 12153-- has now been added to the ‘Cracking the Code Companion CD’.




A Few Words About "Deficiencies"


When someone submits information returns to the Internal Revenue Service asserting the payment of “income”, such as W-2s or 1099s, the law requires that person to also send copies to the "payee".  The reason for that requirement is to afford the payee notice-- so that he can affirm, dispute, and/or correct, such assertions.  If the payee does not do one of these things, the IRS will act according to the unchallenged assertions (since they are the only evidence on the record), treat them as correct, and send the payee a prospective bill for what it calculates the proper resulting tax to be.


There are at least two mechanisms by which this "billing" can happen in practice: One involves the ‘service’ creating and signing a return pursuant to 26 USC 6020(b), based on the assertion that a required return is false or fraudulent if one was filed, or that a required return was not filed (which could be based on the assertion that even though a return really WAS filed, it met the statutory definition of "frivolous", and thus can be treated as "unfiled").  However, such service-created returns are only prima facie good and sufficient-- meaning that they can be rebutted.  In addition (and more significantly), only a limited list of return types can be created this way under the current regulatory regime, and 1040s are not among them.  (Furthermore, no one in the ‘service’ is equipped with the personal knowledge needed for executing such a return about a private-sector individual, even if 1040s could be created in this way.)


The other way is the creation of a "shadow return"-- unsigned, with no independent legal standing; just a form, or ‘module’ on which the assertions made on the information returns can be entered (that is, amounts of “income” received and amounts withheld).  Such a module is CALLED a "Substitute For Return", or "SFR", and its use is also predicated on the failure of the targeted individual having filed a real return (or the pretense that no real return has been filed), or an allegation of a math error in calculating the self-assessment on a filed return, or an improper claim of a deduction or other such option affecting the "tax due" calculation.


Once created, the module is then used as the basis for calculating a prospective “deficiency”-- that is, the difference between the correct amount of tax that would be due if the "income" assertions on the module are taken as correct, and the amount shown on the module as having been paid-in by the person for whom liability is being alleged.  The “deficiency” is then “billed” by way of a scary-sounding ‘Notice of Deficiency’.  Legally, such “billings” may be shots in the dark, hoping to spook the target into surrender; pretexts for a government counter-claim against a claim-for-refund lawsuit (pursuant to 26 USC 7422(e)); or an effort to confuse the situation enough to hope for an eventual judgment against a victim who persists in failing to answer the original evidentiary documents (the information returns).


In any event, the key to dealing with a "deficiency" allegation is in understanding that in the face of an actual filed return, the "deficiency" authority is limited to two things and two things only: the accuracy of how the correct rate of tax has been applied to the amount of "income" reported by the filer on his or her own real, signed return; and the accuracy with which deductions, credits and other statutorily-permitted adjustments to the amount of "income" reported on a real return are claimed, applied and calculated (if any are at all).


See pp. 182 - 184 in CtC for more on this, and this page for a great deal more.  Also see the FAQ pages for some related information.  Read them through completely, as several different aspects of what is discussed above are touched on in several different places and ways throughout those pages.


The case concerning FICA collection earmarks (or, more accurately, the lack thereof) at the end of 'Withholding The Truth' began as Davis v. Boston I. M. R. Co., 89 F2nd 368, eventually being addressed by the Supreme Court as Helvering v. Davis, 301 U.S. 619 (1937). 


Don't Look Behind That Curtain!!!

  (Be sure to read this through to see the 2009 update...)


The IRS has just circulated its 2006 tax season "Dirty Dozen"-- one of the agency's annual 'Rites of Spring'.  The "Dirty Dozen" is a list of certain practices that the agency disfavors for one reason or another, usually ranging in character from misunderstandings about aspects of the law to outright frauds.  The presentation of the list (which is treated as a press release) is avuncular in demeanor, as the content is intended to be taken as "a word to the wise".  Most years that demeanor is actually legitimate, in light of the practices listed (the agency's self-interest in the matter, and, typically, a rather annoying archness, notwithstanding).


This year, however, marks a departure.  The new list contains-- and not just somewhere among the ranks, as is typical for any item making its first appearance, but right at the very top, fresh out of the gate-- an entry referencing a practice the IRS does intensely wish to discourage, but not out of any kindly regard for the interests of the tax-paying public.  Instead, this practice is suddenly at the very top of the IRS's hit list because it is recognized as the ultimate threat to the agency's long-standing, lucrative exploitation of fear and ignorance in carrying out its core mission-- which is, not to put too fine a point on it, the collection of every penny on which it can get its hands by hook, or by crook.


Needless to say, the headline item to which I refer is a carefully-constructed attempt to frighten and stigmatize CtC-educated Americans who exercise their right to due process and decline to mindlessly endorse erroneous assertions made about their receipts by other filers, in complete accordance with all relevant provisions of the law, and by way of forms and practices designed by the tax agency itself explicitly for this very purpose.  Although the entry doesn't mention 'Cracking the Code-...' by name (far be it from any tax agency to direct attention to the book), it contains brief, fragmentary descriptions of certain elements typical of a filing which responds to inaccurate information returns-- something often called for when creating a return in complete knowledge of the intricacies of the relevant law.  Indeed, language included in these fragments might have been copied word-for-word from each and every one of my own tax returns of the last five years:

1. Zero Wages. In this scam, new to the Dirty Dozen, a taxpayer attaches to his or her return either a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 that shows zero or little wages or other income. The taxpayer may include a statement indicating the taxpayer is rebutting information submitted to the IRS by the payer.  An explanation on the Form 4852 may cite "statutory language behind IRC 3401 and 3121" or may include some reference to the paying company refusing to issue a corrected Form W-2 for fear of IRS retaliation. The Form 4852 or 1099 is usually attached to a “Zero Return.” (See number four below.)

The craft behind the attempt is marked, among other things, by its failure to actually specify any flaw in the practices referenced, even while gratuitously describing it as a 'scam'.  Further, the entry pointedly addresses a '"taxpayer" engaging in the practices described, in what is likely a subtle attempt to legitimize the entry's intended implication.  The use of that term permits the explanation that since someone subject to the internal revenue laws (the statutory definition of a "taxpayer"-- see 26 USC 7701(a)(14)) is so due to the receipt of "income" above the current individual exemption amount, such a person could, indeed, not properly indicate "zero or little wages or other income" in his or her filing.  Additionally, there is the statement at the end regarding "a Zero Return", described as,

4. Zero Return. Promoters instruct taxpayers to enter all zeros on their federal income tax filings. In a twist on this scheme, filers enter zero income, report their withholding and then write “nunc pro tunc”–– Latin for “now for then”––on the return. They often also do this with amended returns in the hope the IRS will disregard the original return in which they reported wages and other income.

No CtC-educated filer simply "enters all zeros" on anything.  Certainly, it often happens that -0- is the correct entry here and there in a filing, however much the tax agencies dislike that number on the "income" portions of the forms.  But such entries are not made by anyone knowledgeable about the law simply as a matter of policy-- they are made as a matter of accuracy, each being individually determined by the proper application of all relevant provisions of law.  The fact is, to the degree that it is not simply an escape hatch from the inappropriateness of the entry in which it is placed, this reference to "Zero Returns" is nothing more than a cheap effort to smear the inconvenient filings which the IRS so desperately wishes to discourage, by suggesting that they are of a kind with returns filed in years past by adherents of various misunderstandings who did indeed fill in 1040s as described above.  (The "nunc pro tunc" thing is a new one to me, by the way.  I have no idea if what is described in that regard actually typifies any variety of "zero return"; or, if so, why it would be imagined that this procedure would serve any useful purpose.)


As noted earlier, one of the the purposes of this "Dirty Dozen" listing is the intimidation and discouragement of the increasingly large number of Americans becoming educated as to the truth about the "income" tax.  In particular (judging by the details this listing includes), it is intended to suggest to those folks that, somehow, they actually do not have the right to introduce their own testimony into the record, and controvert the testimony introduced by information return preparers (which, if left uncontroverted, just happens to entitle the tax agencies to keep the filer's money...).  Thus, a few random thoughts on that subject:

"...a statute which imposes a tax upon an assumption of fact which the [presumed] taxpayer is forbidden to controvert is so arbitrary and unreasonable that it cannot stand under the Fourteenth Amendment."  United States Supreme Court, Heiner v. Donnan 285 U.S. 312 (1932)


"...irrebuttable presumptions have long been disfavored under the Due Process Clauses of the Fifth and Fourteenth Amendments." United States Supreme Court, Vlandis v. Kline, 412 U.S. 441 (1973)

"A fundamental requirement of due process is "the opportunity to be heard." Grannis v. Ordean, 234 U.S. 385, 394 . It is an opportunity which must be granted at a meaningful time and in a meaningful manner."  United States Supreme Court, Armstrong v. Manzo, 380 U.S. 545 (1965)

The exchange of evidence by way of returns (information returns and 1040s, etc..) IS the "meaningful time and manner" involved in the "income" tax, so much so that a concrete penalty-- a $500 fine-- can be imposed on one about whom an information return is created should that person fail to file their own evidence in response.  Further, the government proceeds to impose all manner of onerous, burdensome, and often expensive legal infirmities and harassments upon those who do not introduce evidence by means of a return-- the object of which is the severance of the target's rights to his or her own property.  Consequently, it is worth remembering that,

"The right to be heard before being condemned to suffer grievous loss of any kind, even though it may not involve the stigma and hardships of a criminal conviction, is a principle basic to our society." United States Supreme Court, Joint Anti-Fascist Comm. v. McGrath, 341 U.S. 123, 168 (1951)

(See this page for a much more comprehensive discussion of this subject.)


 The other purpose for the inclusion of the #1 tax agency nightmare in the #1 slot of the "Dirty Dozen" is, of course, the generation of a reflex reaction of dismissal in the minds of those who still accept the presentations of the IRS at face value (due to either innocent or stubborn ignorance, or a corrupt congruence of interest).  It is, in other words, a cynical ploy calculated to erect a mental "barrier to entry" against those who do not yet know the truth, which is being furnished by, and to, those with a financial interest in keeping such people in ignorance.


P. S. In 2007, the carefully-crafted "Dirty Dozen" dis-information discussed above was moved to position #5 on the list, perhaps out of embarrassment at the fact that those acting on actual CtC-educated understanding of the law and facts continue to secure their complete refunds and other victories without interruption...


Continuing this pattern, in 2009 the dis-informational listing was moved to #10.  The "listing" got a bit more elaborate:

Filing a phony wage- or income-related information return to replace a legitimate information return has been used as an illegal method to lower the amount of taxes owed. Typically, a Form 4852 (Substitute Form W-2) or a "corrected" Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer also may submit a statement rebutting wages and taxes reported by a payer to the IRS. Sometimes fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any of the variations of this scheme.

...but no more relevant to actual CtC-educated filings.  This listing only refers to, and concerns, folks who try to scam their way around "legitimate information returns" (as opposed to simply rebutting inaccurate-- and therefore illegitimate-- assertions on such returns).  Similarly, it refers to doing what it describes in order to "improperly reduce taxable income to zero."  CtC-educated filers don't do anything to "reduce taxable income" (at least nothing out-of-the-ordinary)-- they simply ensure that "gross income" is carefully and accurately reported, and then proceed from there.  This listing ends with the admonition, "Taxpayers should resist any temptation to participate in any of the variations of [the scheme described]."  I heartily agree.


P. S.  On June 11, 2008, the Sixth Circuit Court Of Appeals declared that the government can't be prohibited from "suggesting" that CtC "promotes false or fraudulent tax schemes" (at least not simply because the the DOJ itself shut down three prior IRS efforts to declare the book to do so in three different courts across the country in 2004 and 2005).


Click here for a comprehensive history of government efforts to suppress CtC.


Yvonne Wesley has contributed the following sample Affidavit of Mailing, which is a nice optional supplement to the comprehensive witnessing procedure discussed on page 180.




State of Texas                          )

                                                )           ss.

County of Tarrant                    )


I am over 18 years of age and not a party to the within action; my business address is:


            Jane Doe

            1930 W. Public Highway

            Anywhere, TX 75220


On the 12th day of October 2004 I mailed one copy of the following:


  • John Q.Public’s IRS Form 1040 for the calendar year 2002, two (2) pages in length with Schedule D, one (1) page in length and Form 4852, one (1) page in length attached.


A total of four (4) pages mailed herewith, including all attachments (not including the Affidavit of Mailing) by United States Postal Service Certified Mail, Article No. 7000 1670 0007 7946 5986, Return Receipt Requested, in a sealed envelope with postage pre-paid, properly addressed to INTERNAL REVENUE SERVICE CENTER, as follows:



Austin, TX 78767-0048


I declare under penalty of perjury under the laws of the State of Texas that the above is true, correct, and complete, and that this Affidavit of Service was executed on October 12, 2004 at Grand Prairie, Texas.



Jane Doe


Click here to see another affidavit of mailing, this one from Joy Ferguson


CtC reader Jason Hihn dug up and forwarded this pretty little gem...


William Blackstone   -   Commentaries on the Laws of England

Of the King's Revenue


VIII. THE eighth and last branch of the king's extraordinary perpetual revenue is the duty upon offices and pensions; consisting in a payment of I s. in the pound ( over and above all other duties) out of all salaries, fees, and perquisites, of offices and pensions payable by the crown. This highly popular taxation was imposed by statute 31 Geo. II. c. 22. and is under the direction of the commissioners of the land tax.


See a complete discussion of this highly relevant material in the "NOTES" section of this paper.


New Lipstick On An Old Pig


The IRS has issued a new, revamped Form W-9 recently (which can be viewed here).  Although the content of the form has been shuffled around, and expanded a bit, nothing has changed in regard to its limited applicability.  As continues to be clearly and properly acknowledged right on the instrument's face,

Purpose of Form

A person who is required to file an information return with the IRS, must obtain your correct taxpayer identification number (TIN) to report [payments made for various reasons]...

Thus, anyone bright enough to actually read legal instruments before signing them is properly put on notice that the form is only to be submitted to "A person who is required to file an information return with the IRS" (and who therefore "must obtain your correct taxpayer identification number).


That said, it IS a shame that the overall construction of the paragraph in which this language is found continues to risk misleading even the careful reader into imagining that the list of payment types which follows this language-- including rents, royalties, goods, payments to a non-employee for services, etc.-- -- serves to define the class of "persons required to file an information return (inadvertently, I'm sure).  That is, there is a danger that it will be imagined that anyone making "payments to a non-employee for services", for example, BECOMES a "person required", and one to whom the submission of a W-9 is legally appropriate, simply by virtue of making that sort of payment.  There is a similar danger that those making payments of the sort listed will be misled into imagining themselves to be "persons required" to demand the execution of the form, and, in the face of refusal, to short-pay their creditors and divert the balance owed to the voracious gullet of Uncle Sam.  (The real nature of 'payments of the sort listed' is itself a matter of some legal nuance, but delving into that is not necessary for the purpose of this discussion.)


Nothing could be further from the truth, of course.  The "persons required" are explicitly defined in the law; and the paragraph explaining the purpose of the Form W-9 is properly read as explaining that it is when such persons are making payments of the types listed that they are to request the execution of the form, or withhold in its absence.


However, as is the curious custom of tax bureaucrats, those responsible for designing the Form W-9 place the information regarding where the reader will find the relevant list of "persons required" in the furthest possible place from the opening paragraph in which the requirements laid upon those persons are presented.  Thus, it is not until the very last paragraph of the four page form-and-instructions instrument (and a paragraph unhelpfully formatted as though it is a footnote) that the reader learns that a W-9 is only appropriate pursuant to the provisions of 26 USC 6109, in which, further investigation will reveal, the brief list of "persons required" is spelled out.

"Section 6109 of the Internal Revenue Code requires you to provide your correct TIN ("Taxpayer Identification Number") to persons who must file information returns with the IRS to report [payments of various kinds]."


It would be nice if this awkward and confusing construction were rectified during one of the periodic revisions of the W-9.  It wouldn't be hard-- indeed, it would go a long way to accomplishing this just to alter the opening paragraph of the instruction portion of the form to the effect of,

Purpose of Form

A person who is among those required to file an information return with the IRS under the provisions of section 6109 of the IRC, must obtain your correct taxpayer identification number (TIN) if making payments to you of...

Maybe next time...


(Detailed discussion of 26 USC 6109, and related areas of the law, will be found in 'W-9s And Other Alien Notions' in CtC.)


P.S. Interestingly, since CtC appeared in 2003, LOTS of new versions of hoary old IRS forms have been appearing.  Some are being revised yearly, and all of the revisions feature changes intended to make them more confusing and/or more vague... Coincidence?


P. P. S. Warrior Brian Harriss has created an instrument meant for use in response to improper demands for the submission of a W-9 which some might find to be of interest. Find it here.


A nice, concise declaration regarding the legal status of the USC (particularly Title 26 USC- Internal Revenue):

NOTE: Of the 50 titles, only 23 have been enacted into positive (statutory) law. These titles are 1, 3, 4, 5, 9, 10, 11, 13, 14, 17, 18, 23, 28, 31, 32, 35, 36, 37, 38, 39, 40, 41, 44, 46, 49, 51 and 54. When a title of the Code was enacted into positive law, the text of the title became legal evidence of the law. Titles that have not been enacted into positive law are only prima facie evidence of the law. In that case, the Statutes at Large still govern.



For some related material, see this.

Think You Need A SSN To Open A Bank Account?

The American Banking Association acknowledges that furnishing a Social Security number, or TIN, is not required to open a bank account.  See the association's discussion of the subject here.





Most of Public law 93-579, otherwise known as the Privacy Act of 1974, is codified at 5 USC § 552a.  That code section starts out with: 

Records maintained on individuals

(a) Definitions.— For purposes of this section—


(1) the term “agency” means agency as defined in section 552 (f)  of this title




(f) For purposes of this section, the term—

(1) “agency” as defined in section 551 of this title includes any executive department, military department, Government corporation, Government controlled corporation, or other establishment in the executive branch of the Government (including the Executive Office of the President), or any independent regulatory agency;)

It proceeds to address a variety of record-keeping and public disclosure issues.


However, for some unexplained reason, the code rendering of this law leaves one section of P. L. 93-579 out.  Instead, although still a fully-functioning part of the law, this inconvenient section is buried in the "notes" portion, out of ready view:


(1) It shall be unlawful for any Federal, State or local government agency [as defined above -PH] to deny to any individual any right, benefit, or privilege provided by law because of such individual's refusal to disclose his social security account number.


(2) the provisions of paragraph (1) of this subsection shall not apply with respect to--


(A) any disclosure which is required by Federal statute, or


(B) any disclosure of a social security number to any Federal, State, or local agency maintaining a system of records in existence and operating before January 1, 1975, if such disclosure was required under statute or regulation adopted prior to such date to verify the identity of an individual.


Any Federal, State or local government agency which requests an individual to disclose his social security account number shall inform that individual whether that disclosure is mandatory or voluntary, by what statutory or other authority such number is solicited, and what uses will be made of it.

Because the only banks covered by the requirements of USC 31, including the requirement that a Social Security number be requested, are the government-controlled corporations known as "national banks", this whole statutory regime descends to farce, in practice.  What it means is that although your local, state-chartered bank may well refuse to issue you an account without a number, and will point out that 7(a) does not apply to it-- while nonetheless imagining itself to be subject to the requirements of title 31, the local branch of any federal bank will know that it IS subject to the provisions of 7(a), and should open that account without serious argument.


By the way, some might point to provisions of the "USA PATRIOT" Act, and argue that 7(a) has been modified.  However, the implementing regulations for the relevant 'PATRIOT ACT' provisions include the following:

31 CFR 103.121(b)(2)

 (4) Identification number, which shall be:
    (i) For a U.S. person, a taxpayer identification number; or
    (ii) For a non-U.S. person, one or more of the following:

a taxpayer identification number; passport number and country of issuance; alien identification card number; or number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photograph or similar safeguard. (Gee, that sounds just like a driver's license, doesn't it?)


What appears to be a complete list of all "national banks" can be found here.


A Bit More About ‘Liability’ 


Here are a couple of additional examples of the form in which legal liability for an internal revenue tax is established.  (Remember, as noted in ‘W-9’s And Other Alien Notions’, the only person specifically identified as 'made liable' by statute in regard to the “income” tax is a “withholding agent”):

Sec. 5005. - Persons liable for tax


(a) General

The distiller or importer of distilled spirits shall be liable for the taxes imposed thereon by section 5001(a)(1).


(b) Domestic distilled spirits

(1) Liability of persons interested in distilling

Every proprietor or possessor of, and every person in any manner interested in the use of, any still, distilling apparatus, or distillery, shall be jointly and severally liable for the taxes imposed by law on the distilled spirits produced therefrom. 


Sec. 5703. - Liability for tax and method of payment


(a) Liability for tax

(1) Original liability

The manufacturer or importer of tobacco products and cigarette papers and tubes shall be liable for the taxes imposed thereon by section 5701.


(2) Transfer of liability

When tobacco products and cigarette papers and tubes are transferred, without payment of tax, pursuant to section 5704, the liability for tax shall be transferred in accordance with the provisions of this paragraph. 


However, there IS a structure within the law by which persons NOT made specifically liable by statute can become personally liable for "income" taxes.  Click here to learn how this works.


A Note Regarding the Code Language About Refunds


No one should be misled by the fact that in certain sections of the IRC representation of the law only “taxpayers” are mentioned in regard to filing a claim for refund.  Like much of the code, the relevant sections are compilations of several different statutes-in-force, a couple of which specify that they only apply to “taxpayers”, and others of which do not.  In the interests of brevity (or misdirection-- you decide), the code draftsmen wrote these sections so as to make them appear to apply only to ‘taxpayers.  26 USC 6511 is a good example.  It (pertinently) reads as follows:

(a) Period of limitation on filing claim
Claim for credit or refund of an overpayment of any tax imposed by this title in respect of which tax the taxpayer is required to file a return shall be filed by the taxpayer within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever of such periods expires the later, or if no return was filed by the taxpayer, within 2 years from the time the tax was paid. Claim for credit or refund of an overpayment of any tax imposed by this title which is required to be paid by means of a stamp shall be filed by the taxpayer within 3 years from the time the tax was paid.


However, the refund statutes pertinent to most private-sector persons-- which are among those compiled in 26 USC 6511(a), and which remain the relevant statutes-in-force-- are sections 319(b) of the Revenue Act of 1926:

(b) All claims for the refunding of the tax imposed by this title alleged to have been erroneously or illegally assessed or collected must be presented to the Commissioner within three years next after the payment of such tax.


…as amended by the Revenue Act of 1932


(a) Section 319(b) of the Revenue Act of 1926 is amended to read as follows:

"(b) All claims for the refunding of the tax imposed by this title alleged to have been erroneously or illegally assessed or collected must be presented to the Commissioner within three years next after the payment of such tax. The amount of the refund shall not exceed the portion of the tax paid during the three years immediately preceding the filing of the claim, or if no claim was filed, then during the three years immediately preceding the allowance of the refund."


and section 3228 of the Revised Statutes, as amended by both the Revenue Act of 1926:

SEC. 1112. Section 3228 of the Revised Statutes, as amended, is amended to read as follows:

"SEC. 3228. (a) All claims for the refunding or crediting of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected, or of any penalty alleged to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected must, except as provided in sections 284 and 319 of the Revenue Act of 1926, be presented to the Commissioner of Internal Revenue within four years next after the payment of such tax, penalty, or sum.


and the Revenue Act of 1928:

(c) Section 3228 of the Revised Statutes, as amended by section 1112 of the Revenue Act of 1926, is amended by striking out "except as provided in sections 284 and 319 of the Revenue Act of 1926" and inserting "except as otherwise provided by law in the case of income, war-profits, excess-profits, estate, and gift taxes".


…none of which say anything whatsoever about “taxpayers”.


By the way...


Once a return has been filed declaring (or acknowledging) the receipt of enough "income" for a tax liability to arise, any amount that has been withheld or paid-in in connection with that year up to the amount of that potential liability is barred from forcible recovery by any judicial process.  That amount will be deemed to have been 'voluntarily' paid, and no suit against the collector to claim its recovery as 'erroneously or incorrectly paid or collected, etc.' will be sustained in court.  (See Fox v. Edwards, and Treasury Decision 3445 on the Companion CD for the details.)  The bottom line is: One's legal standing to sue (to recover amounts withheld or paid in in regard to which an affirming return was originally filed) is not restored by the filing of an amended return, even when that amended return reduces the amount of "income" involved, and even when it is thus made clear that the amounts withheld or paid-in were erroneous or incorrect.  Standing to sue is dependent on the accuracy of one's first filed return for any given year.


(This doesn't mean that the legitimacy of any 'liability' which may have been presumed on the basis of an erroneous original return, including associated penalties, interest, etc., isn't subject to the effects of the evidence-on-record being changed through the filing of an amended return, however.)


By the way, II...


Two federal district courts ruled in different cases during 2005 that in cases in which no tax was actually ever owed, claims for refund of amounts erroneously, illegally, etc. collected as tax were subject to the six-year statute of limitations which is the generic standard for claims against the federal government (see 28 USC 2401), rather than the shorter period provided within the "income" tax statutory scheme.  Perfectly reasonable rulings.


A U. S. Congressman's statement regarding the 'Notice of Levy'


Some Reassuring Admissions From The Social Security Administration


A U.S. Senator's statement regarding what is taxable under the "income" tax. 


The Legal Information Institute's indexed and searchable Internal Revenue Code


Pollock v. Farmer's Loan and Trust Decision #1


Pollock v. Farmer's Loan and Trust Decision #2


Indexed and searchable Code of Federal Regulations


The University of Chicago's 'Founder's Constitution'


Click here for brief comments regarding some common tax law misunderstandings


An Interesting Admission By The IRS (or an intriguing hoax...)




Some Further Thoughts Regarding Withholding And W-4s


Many companies have courageously stopped withholding from their workers.  Indeed, the IRS acknowledges that at least 1,500 companies across America now uphold the law, and that at least one congressional report puts the number at 7500.


Many other American businesses make no effort to ascertain the proper application of the relevant law and simply insist that all new hires either execute W-4's, or see an extra-large portion of what is owed to them withheld and turned over to a third party-- even when this protocol is inappropriate.  This creates an obvious problem for someone who wants the job but doesn't want to allow any misunderstandings or assumptions to be entertained regarding his or her own status or that of any related earnings.  If I were facing this dilemma, I would attach something like either of the two examples which follow to the demanded W-4 before signing and submitting the form, and make reference to it on the face of the W-4.


(Those who have already inappropriately executed and submitted a W-4 prior to learning the truth about the law might wish to consider withdrawing authorization as recommended in 'W-4's- The Blind Leading The Blind Down A Primrose Path', and/or attaching an appropriately modified version of what follows.)


W-4 Qualifying Declaration


The Form W-4 to which this statement is attached is executed in order to provide for appropriate withholding if and when, and only if and when, I am actually paid "wages" as defined in 26 USC 3401 and 3121 by the entity to which it is furnished.  My executing the form is not to be taken as an indication that I believe that what I will be paid does or will constitute such “wages”, nor that I am such a person or in such a situation as to make my completion and submission of this form appropriate or required.


The form is executed under the good-faith presumption that no law precludes its execution or provides for the impairment of any right or other legal infirmity of any kind, either as a consequence of its being executed by one who is not an officer, employee, or elected official of the United States, a State, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing or an officer of a federally taxable corporation; or as a consequence of its being subject to the qualifications specified in this statement.  In the event that such preclusion, impairment or infirmity is provided for by law, the Form W-4, and my signature thereon, are hereby declared rescinded, null, and void.


My execution of the Form W-4 to which this statement is attached is not to be construed as authorizing the withholding of anything of or from any payments owed to me which do not constitute "wages" as defined at 26 USC 3401 and 3121; nor as my accepting, acknowledging, declaring or establishing my status as an officer, employee, or elected official of the United States, a State, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing or as an officer of a federally taxable corporation; or that of the entity to which it is submitted as an "American employer" as relevantly defined at 26 USC 3121(h).



(Signed and dated, copy retained)


Here's a simpler alternative statement:


W-4 Qualifying Declaration


If it is true that my earnings qualify as "wages" from which any kind of withholding as provided-for in 26 USC Subtitle C is proper and required then I believe I would be entitled to the number of exemptions indicated on the Form W-4 to which this statement is attached. If withholding is done I would like it done in accordance with that number of exemptions.


 However, my completion and signing of the attached Form W-4 is not to be taken as my agreement that my earnings qualify as "wages" from which any kind of withholding as provided-for in 26 USC Subtitle C is proper and required, or are in any other way relevant to any federal or state or local income tax. Nor is my completion and signing of the attached Form W-4 to be taken as my authorization for any withholding to take place.



(Signed and dated, copy retained)


BTW: No one should have unrealistic expectations about the effect of this sort of instrument.  I doubt that anyone in the country has yet managed to forestall or halt withholding because of the attachment of any declaration qualifying the execution of a W-4.  Companies which are so misled about the law as to demand a W-4 in the first place are not likely to simply change their ways due to being presented with a qualifying declaration.


However, the main point of such a declaration is the securing of the legal standing of the submitter-- by putting the company to which it is submitted on notice as to who is taking responsibility for what; and by ensuring that the act of submitting the form with which it is associated cannot be used in the future to support an illegitimate presumption about the submitter, or the meaning of the submission.


BTW II: Choosing the "exempt" option on a W-4 does not accomplish the important legal effect of the disclaimers/qualifying declarations above. (Nor does it stop the withholding of all income taxes. FICA income surtaxes will continue to be withheld, making clear that the "exempt" option is not a means for establishing that one is not an "employee", or not subject to the tax, nor is it a means of making clear that any conclusions that one is subject to withholding and related protocols are being made by the withholder, without the filer's agreement.)


About Interest Received From National Banks


While the identification of national banks as 'federal instrumentalities' presented at the beginning of 'W-9's And Other Alien Notions'-- along with the routine inclusion of 'interest' in the list of "income" forms to be included in gross "income" under the federal revenue laws-- might suffice to make adequately clear to a reader that interest from a national bank is "income", enough questions on the subject have come to me that I feel obliged to re-iterate this more plainly:  Interest (or investment gains of any other kind) paid by any federal (or federal possession) instrumentality-- including national banks-- is "income".


Regarding "Non-Resident Aliens"...


Some will have found it significant that I do not make any truly direct reference to the issue of who is a "non-resident alien" and who is not within 'Cracking the Code', leaving the drawing of appropriate inferences from the definition of "United States" to those who are so inclined (and reminding those so inclined that any inferences that they DO care to draw should not be promiscuously extended outside the context to which that definition applies).  In part this is because to address the issue directly would be terminally confusing to a reader new to the "income" tax subject in general; but mostly it is because the issue is almost entirely moot.  Whether any given receipts constitute a measurement of "income" is dependent upon the nature of the activity which produces them, not the citizenship status of the recipient.


Citizen, resident, or non-resident alien alike, if one's receipts are connected with the exercise of federal privilege/authority, they amount to "income", and are treated as such by the law.  Money which is not so connected is not "income", regardless of citizenship or residency status-- and the law reflects this, as well.  While methods of distinguishing certain portions of "income" as taxed, and others as not, are available within the law for the use of non-resident aliens and "United States" citizens and residents with predominantly territories- and possessions-based "income" (based upon whether they are received from "within" or "without" the "United States"), they are superfluous.  Upon contesting the allegations that one's earnings are federally connected, the issue of personal status becomes immediately irrelevant.


...And Citizenship And Residency


It is an unfortunate reality that the provisions of the law mentioned above, the residual effect of widespread, longstanding (and erroneous) "theorizing" on the subject within the 'tax-honesty' community, the somewhat complicated nature of the statutory definition of "U.S. Person", the fact that certain aspects of the FICA and FUTA taxes invoke U. S. territorial and possessions residency in their application and, I'm sorry to say, the wording of a few portions of my own text (which, when I become aware of the need, I endeavor to clarify during re-printing), have caused some readers to imagine that U. S. territorial and possessions citizens and/or residents are subject to the "income" tax in some unique way.  This is not so.


The "income" tax is a tax on the performance of taxable activities, period.  It does not apply to anyone merely because of where they live, or because of their citizenship.  One could have been born in D.C., live in the White House (as a guest), and earn scads of money every year without becoming subject to the "income" tax.  By the same token, one could be a Frenchman living in Paris and yet be subject to the tax, if having earnings related to a taxable activity.  A person of any citizenship and any residency could have some receipts which do represent “income” and other receipts that do not, depending on the provenance of each.  There are, as noted above, aspects of the FICA and FUTA provisions which involve territorial and possessions residency-- but only insofar as the persons involved have engaged in taxable activities.


Regarding The Discussion Of Money


The treatment of the subject of paper money in 'The Supreme Court And The Meaning Of "Income"' leaves a good deal unsaid regarding inflation and other infirmities and peculiarities, both innocent and venal, which are natural to the use of scrip (unredeemable paper money) and central banking.  The purpose of that portion of the book is solely to illustrate the meaning of ‘profit’ within the provided context, not to analyze another subject which is, in some respects, similar in dimensions to that of the “income” tax.


I hope that readers knowledgeable of that subject will be untroubled by the degree to which those peculiarities are glossed over, but I make no apologies.  To have properly addressed money beyond what was required for purposes of the context in which the subject arises here would have doubled the size of this book while really adding nothing pertinent to its larger focus.


Regardless of the true nature of the pieces of paper treated as legal tender in America today, this remains true: As long as they are accepted by your grocer and your realtor, how many of them YOU have matters for its own sake.  In that practical respect, the significance of the “income” tax scheme, particularly as it affects any given individual, is independent of the inherent character of the medium by which such purchasing power is represented.


(I have addressed the subject of government scrip in more detail elsewhere, though.  I recommend the attention of those interested in this subject to the essay 'Fiat Money, And The Formless Fed' in my book 'Upholding the Law And Other Observations'.)


Regarding "Income Exempt From Taxation By The Fundamental Law"


Statutory and regulatory references to "income exempt from taxation by the fundamental law", cited on p.21 in pre-eighth-edition copies of CtC, were almost certainly meant by Congress solely to address the Constitutional prohibition on the diminishment of the pay of federal judges and the president during their tenure in office.  A Supreme Court decision in the 1930's declared that the tax did not have that effect (legally speaking), but jurisprudence before that decision had held otherwise, making the acknowledgement of the exclusion in the law necessary to keep it from being struck down.  It was probably preserved even after that decision as a backstop in case another such controversy was entertained by the court.


I did not clarify this in early editions of CtC because my confidence in this being the complete explanation was less high than it has become.  I was also mindful of the fact that the Supreme Court did not explicitly declare "income" to be Constitutional term outside the power of Congress to define until the Eisner ruling-- well after the passage of the 1913 revenue act; thus the term might possibly have been being used more broadly early on, if only in non-authoritative expressions.   Nonetheless, and despite that ambiguity, such statutory and regulatory references still serve to usefully illustrate and emphasize the important point that, within the context of the tax law, "income" does not mean "all that comes in", and never has.


Some Notes Regarding The Meaning of "Trade or Business"


It will be observed that section 1402, the ‘Definitions’ section of Subtitle A, Chapter 2- Tax on Self-Employment Income, contains a somewhat customized definition of “trade or business” for application when the term is “...used with reference to self-employment income or net earnings from self-employment...”  I do not discuss this distinction in ‘Crafting A Trade Or Business Plan: A Guide For The Self-Employed’ because it is one without a meaningful difference from the broader, code-wide definition at 7701(a)(26).  The version at 1402(c) still confines its meaning to “the performance of the functions of a public office”-- it simply restricts the application of provisions incorporating the term, within the specified context, to certain and particular public offices, and certain performers.  This restriction serves primarily to differentiate between ‘staffers’, meant to be treated as “employees” under the law, and ‘contractors’, meant to be treated as “self-employed”.  It does not introduce any expansion of the term to embrace purely private-sector persons.


On the other hand, it is important to note that the term “trade or business” DOES have an historical meaning beyond “the performance of the functions of a public office”, although only in a highly specialized context.  The term made its first appearance in federal revenue law in reference to federally licensed activities, of which there were many in the early days of the “income” tax-- dozens and dozens, in fact.  Today, the list of such activities is now confined to only a few, chiefly involving alcohol, tobacco and firearms.  (It is worth noting that the statutes concerning these original "trade or business" activities freely used the terms “avocations”, “employment”, and “professions” as references to those with whom they were concerned, a usage which contributes to a further understanding of the context within which these and similar terms are used elsewhere in the internal revenue laws.)


The code representation of the current version of these laws is compiled into Subtitle E.  This is where the code-wide definition of “trade or business” as “the performance of the functions of a public office” might arguably be described as “manifestly incompatible with the intent thereof”, and the meaning of the term for purposes of procedural requirements etc. be expanded to included those involved in the licensed activities.  Those holding such licenses should keep this specialized distinction in mind.


That said, the phrase “trade or business” IS explicitly defined as solely “the performance of the functions of a public office” in the Revenue Act of 1938.  It is this statute to which the relevant section of the IRC derivation tables exclusively points.




The .pdf files below are formatted to fit your book. Read the appropriate file as is, or, if you wish, print it out, crop to 8.5" high by 5.4" wide (centering the text appropriately), and slip it into the back of your book for convenience.


First Printing Errata


Second Printing Errata


Third Printing Errata


Fourth Printing Errata


Fifth Printing Errata


Sixth Printing Errata


Subsequent printings: No Errata

(While every print run from the first edition on has enjoyed upgrading with the addition of more authorities in support of the text, and thus has changed in that manner, no errors have needed correcting since the sixth.)


Which Printing Do I Have?


First printing copies show 'First Printing July 2003' on the copyright page (obverse of the title page).  There are no 'Reader's Comments' on the second page (immediately before the title page).


Second printing copies show 'First Printing July 2003' on the copyright page (obverse of the title page); have 'Reader's Comments' on the second page (immediately before the title page); and have my handsome mug on the last page.


Third printing copies show 'First Printing July 2003', 'Second Printing April 2004', 'Third Printing December 2004' on the copyright page (obverse of the title page); have 'Reader's Comments' on the second page (immediately before the title page); and have my handsome mug on the last page.


Fourth printing copies show 'First Printing July 2003', 'Second Printing April 2004', 'Third Printing December 2004', Fourth Printing March 2005 on the copyright page (obverse of the title page); have 'Reader's Comments' on the second page (immediately before the title page); and have my handsome mug on the last page.


Fifth printing copies show 'First Printing July 2003', 'Second Printing April 2004', 'Third Printing December 2004', Fourth Printing March 2005, Fifth Printing July 2005 on the copyright page (obverse of the title page); have 'Reader's Comments' on the second page (immediately before the title page); and have my handsome mug on the last page.


Sixth printing copies show 'First Printing July 2003', 'Second Printing April 2004', 'Third Printing December 2004', Fourth Printing March 2005, Fifth Printing July 2005, Sixth Printing December 2005 on the copyright page (obverse of the title page); have 'Reader's Comments' on the second page (immediately before the title page); and have my handsome mug on the last page.


NOTE: Every printing incorporates updates to a greater or lesser degree. Some involve additional legal citations, some involve a re-wording of a given portion of the book for greater clarity, some involve expanding the content slightly. Generally speaking, the substance of these updates will be found posted as part of this appendix page, or among the Q & A's on the FAQ pages. But the best source is a fresh copy of the most current CtC.

My Best Wishes Are With You As You Uphold The Law