Any tax professionals here?

[TheDude]

This is a big forum and I have also posted this in other forums with no real help in what I am trying to do.
Let me set this up a bit, First off I am very much a tax payer. I also do not support anything illegal. At the same time I am always in search of the truth.

That said...

I live in a small town. We have of course have the town elder (family has been here since 1868) who is also somewhat of a nut, or so I thought. He used to carry on about how the government is a private corporation and the IRS and the Federal Reserve or both Private European Corporations. He also went onto to say UNITED STATES and United States were actually two separate entities.

OK, here is my plight. He also went on to say that MOST people don't have to pay taxes, or at least domestic income tax to the government. People pay it out of fear of the IRS that they pay. I old him he was crazy. So he made me a bet, that I could not find anywhere in the tax law that specifically says that "taxable income" is actually domestic labor tax. Now I have been hearing this for years but never actually found anything that to support it.

After about 3 weeks of searching I am about to give up, I can not find it anywhere in the tax law. Not only can I not find it I have found other information the supports his claim. Surely someone here is a Tax pro, or retired tax attorney, someone who knows more then I can find.

This is what i have found so far, and its not supporting my side of paying taxes. I have found Internal Revenue Code 861 which states taxable income
http://en.wikipedia.org/wiki/Internal_Revenue_Code_861 which state only resident aliens, and foreign corporations need pay income tax.
This 861 code was used in court as reason for not filing, and of course he lost, but that doesn't help me in finding my verbiage stating what taxable income is.

In my first search I found this article, http://www.stopthelie.com/taxes.html

This is an actual IRS collection agent speaking about how taxes are collected.
http://video.google.com/videoplay?docid=1658315558785013776&q=IRS

Then in my next search I found this which is actually quite disturbing if its true. this one here is pretty simple once I finish reading the tax law myself =\  http://tree3.com/861/index.html

And of course I have also found many sites that are just way out there.
http://www.freedomtofascism.com/index.html

Anyone have any new insight into this subject?

Thanks,

Tim

 

[Dan Walters]

Tim,

I am a CPA and practiced as such for 15 years before changing over to a Financial Consultant (eg. Financial Planner, Stock Broker).  I can give you something to look up in the Internal Revenue Code that may answer this question for you.  Look first at Title 26, Subtitle A, Chapter 1, Subchapter B, Part I, Section 63 which states (paraphrased) that Taxable Income means Gross Income minus exemptions and deductions allowed in this section.  Now, to define Gross Income, go to Title 26, Subtitle A, Chapter 1, Subchapter B, Part I, Section 61 and look at the definition of Gross Income, which includes Compensation received as an employee.

Hope this helps.

Dan

 

[TheDude]

Hey thanks Dan,

Taxable Income means Gross Income minus exemptions and deductions allowed in this section

Thats my problem ALLOWED in this section? What is allowed and what is exempt.

I have read that recently. I guess my real question is the definition of "Taxable income" Having read so much about this lately and hearing and reading from different CPA's? and Tax attorney's position's to the IRS position no one can seem to answer that question. CPA's that find out about the 861 code to the IRS never answering the question. The stance of the 861 proponents is that the tax law is assumed and not written, and the IRS is just not answering.

Here is another book by a Idaho Legislator


some text:
The issue of direct v. indirect taxes has been debated in Congress beginning not long after the constitutional ink had dried. From page 1898 of The Annals of Congress (the 4th Congress, 1797) Representative Williams from New York was recorded as reminding Congress of the Roman example of direct v. indirect taxation.

Taxes on labor, as currently collected by the IRS as an "income" tax, cannot be described as anything other than a direct tax.

Senator Norris Brown from Nebraska, the man who wrote the 16th Amendment, defined clearly what income was and what the income tax was intended to accomplish. Not once did Sen. Brown mention that Congress intended to pass an amendment that would grant the federal government a new power to directly tax the wages or salaries of working people.

This is like the twilight zone for me.....

I want my "death and taxes" back

 

[Carl L]

The 16th Amendment seems pretty clear and simple.? ?Here is in its entirity:

Article XVI
Sent to the states 12 July 1909; Ratified 3 February 1913

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States and without regard to any census or enumeration.

Surely a tax on the income from labor is included in that power. 

 

[TheDude]

The 16th Amendment seems pretty clear and simple.? ?Here is in its entirity:

Article XVI
Sent to the states 12 July 1909; Ratified 3 February 1913

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States and without regard to any census or enumeration.

Surely a tax on the income from labor is included in that power.? ?

I agree, but there are exemptions under the law like Life insurance benefits etc.. So what else is also exempt is where it gets really vague and as you said "Surely a tax on the income from labor is included in that power" is an assumption, I can not find the text inside the tax code which defines this.

 

[Dan Walters]

Tim,

You may have already read it, but Internal Revenue Bulletin: 2004-12 and Revenue Ruling: 2004-30 dated March 22, 2004 address the Section 861 argument to exclude earned wages from gross income.  This has been debated for years and many who have tried to claim an exclusion under Section 861 have been taken to court and lost.  However, it makes for and interesting discussion.

Dan

 

[TheDude]

You may have already read it, but Internal Revenue Bulletin: 2004-12 and Revenue Ruling: 2004-30 dated March 22, 2004 address the Section 861 argument to exclude earned wages from gross income.  This has been debated for years and many who have tried to claim an exclusion under Section 861 have been taken to court and lost.  However, it makes for and interesting discussion

Thanks Dan,

Thats what I was afraid of so this guys claim that we essentially pay taxes for fear of reprisal is true..

 

[Dan Walters]

Tim,

I guess you can look at it that way, but I don't think that is entirely true.  The basis for taxing income is in the code sections of the law that I cited.  Section 63 says that Taxable Income is defined as Gross Income minus deductions allowed.  Section 61 defines Gross Income to include wages earned, so that is the basis for the taxation of wages earned.  As stated in the Internal Revenue Bulletin, "The rules of sections 861 through 865 have significance solely in determining whether income is considered from sources within the United States or without the United States, which is relevant, for example, in determining whether a U.S. citizen or resident may claim a credit for foreign taxes paid".  So, the folks who try to use this to exclude wages earned from taxable income are taking this section out of context.  More food for debate. 

Dan

 

[TheDude]

Good point, then we also have someone who actually won in California using this defense.
http://www.stopthelie.com/taxes.html

This is a mess, this is going to take longer then I thought. There are tax credits allowed, now I just need to find out how they apply to this. Refer to this, refer to that caution here caution there. =\

My real curiosity is how in a country designed and built around laws very specific in their intention can this tax code be open for legitimate debate?

There is a very strong rational arguments on both sides of this

Thanks Dan

 

[Dan Walters]

Tim,

Good discussion, thanks for the topic.  You are right about the tax code.  It has long been a cumbersome, hard to understand and hard to interpret set of laws, and a set of laws that keep changing with amendments, additions, IRS rulings, civil court rulings and tax court rulings.  That old saying that "you have to be a Philadelphia Lawyer to understand it", may not even be adequate.  Anyway, enjoyed the discussion.  Thanks.

Dan

 

[TheDude]

Hey thanks Dan for your time, I appreciate it.

This is a long and convoluted topic that surely wont be answered here, but I least you have given me some ammo for a decent rebuttal.

I am going to ask a friend on mine who is an Attorney, he likes pet projects like this.

Thanks again

Tim

In July 2004 almost 2000 Americans filed a landmark lawsuit against the U.S. Government seeking to have the federal Judiciary declare
-- for the first time in history -- the constitutional meaning of the First Amendment Petition clause including the Right of the People to enforce the Right of Petition if Redress is denied.?

We the People believes the Right to Petition
is, in fact, the "capstone" Right of the Bill of Rights and that its effect is the direct exercise of Popular Sovereignty -- the First Principle of the Founding documents that declares government is the servant of Men.? ?


Just give me death and taxes back......

 

[TheDude]

In 1895, a legal controversy arose concerning a federal income tax statute. In that year, the United States Supreme Court struck down, as unconstitutional, the federal Income Tax Act of 1894. The Court concluded the tax imposed by the Act on ?rents or income of real estate? was not significantly distinct from a tax on the property itself. Therefore, the Court classified the tax as a direct tax requiring apportionment among the several States.

Following this ruling, even though the Court did not hold that all income taxes were direct taxes, there was uncertainty as to whether the income tax was a direct or indirect tax. As a result, Congress sought to remove any confusion by passing an amendment to the Constitution. The Sixteenth Amendment, which was ?allegedly? adopted in 1913.

The Congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

Immediately after the Amendment was ratified, Congress enacted another income tax act similar to the 1894 Act. The new law was immediately challenged as unconstitutional. In 1916, the Supreme Court issued two decisions on the scope of the Amendment. These decisions were analyzed in a 1980 Congressional Research Service (CRS) report. The report, prepared by an agency of Congress, discussed the effect of the Sixteenth Amendment on the federal government?s power to tax:

The Supreme Court, in a decision written by Chief Justice White, first noted that the Sixteenth Amendment did not authorize any new type of tax, nor did it repeal or revoke the tax clauses of Article I of the Constitution? Direct taxes were, notwithstanding the advent of the Sixteenth Amendment, still subject to the rule of apportionment and indirect taxes were still subject to the rule of uniformity.

As stated by CRS, the Amendment did not authorize any new type of tax or repeal or revoke the existing clauses. Indirect taxes were still subject to the rule of uniformity and direct taxes were still required to be apportioned among the several States.

If the Sixteenth Amendment did not grant Congress any new taxing power or modify its existing power, then what did the Amendment accomplish? Since the Amendment states that income taxes are not subject to the rule apportionment applicable to all other direct taxes, the Sixteenth Amendment, by its wording, restricted income taxes to the category of indirect taxes. This means Congress can never, by a general statute, constitutionally impose a direct tax on the people of the several States. Direct taxes must be imposed on the several States according to the rule of apportionment.

 

[TheDude]

Recent rulings
On August 22, 2006 the United States Court of Appeals for the District of Columbia Circuit ruled in Murphy v. Internal Revenue Service[13] and United States [Murphy v. United States]) that 26 U.S.C. ? 104(a)(2) is unconstitutional under the Sixteenth Amendment to the extent that the statute purports to tax, as income, a recovery for a non-physical personal injury for mental distress and loss of reputation not received in lieu of taxable income such as lost wages or earnings. The Court stated:

At the outset, we reject the Government?s breathtakingly expansive claim of congressional power under the Sixteenth Amendment -- upon which it founds the more far-reaching arguments it advances here. The Sixteenth Amendment simply does not authorize the Congress to tax as ?incomes? every sort of revenue a taxpayer may receive. As the Supreme Court noted long ago, the ?Congress cannot make a thing income which is not so in fact.?
The Court also stated:

In sum, every indication is that damages received solely in compensation for a personal injury are not income within the meaning of that term in the Sixteenth Amendment. First, as compensation for the loss of a personal attribute, such as well-being or a good reputation, the damages are not received in lieu of income. Second, the framers of the Sixteenth Amendment would not have understood compensation for a personal injury -- including a nonphysical injury -- to be income. Therefore, we hold ? 104(a)(2) unconstitutional insofar as it permits the taxation of an award of damages for mental distress and loss of reputation.

The Murphy ruling is mandatory precedent only in the District of Columbia.

 

[Dan Walters]

Tim,

Wow!  You've done a lot of research on this topic.  I have never heard of some of the information that you have shared, but it is very interesting if you are into tax law.  The August 22, 2006 Court of Appeals Ruling could be very important for anyone who has been awarded damages in a civil lawsuit, because in the past, the IRS viewed anything over and above compensation for direct damages (eg. lost wages, property loss, etc.) as taxable.  This would make at least some of the punitive damages (mental distress, loss of reputation or non-physical injury) awarded in lawsuits non-taxable.  Even though this ruling is a mandatory precedenet only in the District of Columbia it will, no doubt, be used as a defence against IRS claims to tax that sort of income in all jurisdictions.  Thanks for the info.

Dan

 

[TheDude]

What a long strange trip it has been!
Its been Like Alice in wonderland from long days past...

If you get a minute look at this trailer for a movie that i stumbled on in my research about taxes.
Film Trailer

Let me preface this just a bit, I was extremely skeptical about this kind of film. This is a production from Aaron Russo who also produced "The Rose" with Bette Middler, and "Trading Places" with Eddie Murphy.
Also I want to also say this has nothing to do with Republican & Democrat this I believe is an American issue, although I traditionally vote republican - traditionally
That being said I found it very strange that while most people who hate this movie are Republican are also the folks who support tax cuts, and tax relief are so adamant about there might actually be something to this about not having to legally pay taxes. I find that very ironic.

Anyways, i am done with this little project - my conclusion is Income tax is not legal as it is direct tax and must be apportioned as stated in the constitution. Also "income" was defined under the constitution as profit or gaines and a wage was a trade of services - labor/wage. A wage should not be taxed as it is your body and labor. Also found that the Supreme court has ruled that the 16th amendment does not grant congress any new taxing power. Everything I just stated is documented.

Now I really wish I was 20 again....kind of =\

Tim

 

[Kenneth]

I know of two individuals who "were" part of a very large group of people, that did not pay income taxes. One filed the wrong form one year and opened up the door for the IRS to send him to the big house for two years. The other did absolutely everything by the book and settled this year with the IRS, only having to pay back the last three years,and promise never to attempt to do this again.

The first one lost everything and the second one is running scared.

 

[woodartist]

I don't have the time or money to fight the IRS...so I just play by the book. I keep good records and pay my taxes on time. I sleep well and in an odd way figure I have done my civic duty. Can't say I enjoy supporting some programs and spending, but I do get some benefits :

 

[TheDude]

I am with you, I should have also said although it is illegal I believe - I am still going to pay my taxes.

As far as "Civic duty" its is my responcibilty as an American to try and keep Government in check. They are supposed to work for me, although I know they dont I wish they did.
Also my "Civic duty" is to understand both sides of any arguement that is in Politics. I feel that unless I truly understand what the other guy is saying then I truly have no idea what I am voting for. At least thats just me..

I was last reading a case where Mr. Schif i believe his name was got 13 years for income tax fraud. I had a chance to read clips of the court transcripts where Mr. Schif? tried to quote the Supreme Court ruling from I believe 1953 as it pertained to his case and was told it was irrelevant.

WOW, the Supreme court is irrelevant!

Death & Taxes!

Tim

 

[woodartist]

Well, I agree Tim. I have seen seminars offered, to teach you have to pay zero taxes and that the income tax is illegal. A few months later there are arrests and the folks go to jail. Not my idea of a happy experience.  Don't want to be an example for the government ;D

 

[TheDude]

Here is another angle..



Dan,
question: do you have any experience with CRT's, FLP and "C" corp tax setup? Tax code 664D and 77-137

CRT= Charitable Remainder Trust
FLP= Family Limited Partnership

I have been reading on this tax setup for lawsuit protection as well as agressive tax relief. Very interesting stuff.

You dont have to answer..

Film Clip