IRS inquiry: Do incorrect 1099s need rebuttal?

[ManOntheLand]

I agree that establishing foreign status is vital, especially if "you" are already identified in their system as a "U.S. citizen" or "resident alien" which one presumably is if you ever applied for a SS Card (see 26 CFR 301.6109-1(g): "A social security number is generally identified in the records and database of the Internal Revenue Service as a number belonging to a U.S. citizen or resident alien individual.)

In 26 CFR 301.6109-1(g)(2) it is acknowledged that a SSN can "belong to" a non-resident alien.

According to this provision of 26 CFR, once you have been identified as a U.S. person or foreign person in the records and database of IRS, they will presume that status permanently "until the circumstances change". It also says if your status changes, you must notify the IRS of the change "under such procedures" as the IRS "shall prescribe".

I am not sure what procedure has been "prescribed" exactly. I can tell you that when I stopped filing 1040 with my usual IRS service center and instead filed a 1040NR with the Austin, Texas IRS center, they apparently accepted my foreign status and updated their records (at least for that year).

To be on the safe side, I assume I will need to rebut "U.S. person" status in terms of the IRS database every time a third party sends out a W-2 with my SSN because such form indicates at least an election to be treated as a "U.S. person". I have to make it clear to them that I did NOT voluntarily furnish a SSN or elect to be treated as U.S. citizen or resident (but was coerced into doing so by the employer). Otherwise the IRS may presume my circumstances have changed, and place my SSN back into "U.S. person" status in their database.

With a 1099, I would think that the SSN status is not affected, since it does not necessarily presuppose I am a "U.S. person". But I still have to contest that I had "effectively connected" income if I believe it was NOT effectively connected and do not want it to be treated as taxable on that basis.

I did not, however, go to the IRS with this matter (because, who are they?) Instead I went to the Dept. of State (who handles all matters of citizenship) via a U.S. embassy (who may take citizenship declarations). I told them to inform all their alphabet agencies of my correct status, as it has always been.


The fact that you went to that effort definitely speaks to the sincerity of your belief in your position. But I don't think that will help you for tax purposes, as they treat a U.S. citizen and "U.S. resident alien" basically the same. Given the rules prescribed in 26 CFR, it is probably necessary for you to also communicate your status directly to IRS, unless you want them to presume "U.S. person" status for your SSN. Their false presumptions are where all the hassles begin.

For anyone wondering why this matters: a U.S. Citizen or resident is taxed on his worldwide income--it does not matter where your income came from. A non-resident alien is taxed only on income "effectively connected with a trade or business in the U.S." Of course you have to know what the terms "U.S. citizen" "resident" and "trade or business" really mean for any of that to do you any good. Most Americans assume they are "U.S. citizens", and even some who have figured out they are not will still call themselves "U.S. residents". The widespread ignorance of the meanings of these terms helps keep the myth alive that all Americans are taxed simply for making money.

What citizenship status does "your" IMF show?

Its not a citizenship status per se, since they treat a U.S. citizen and U.S. resident (alien) the same for tax purposes. It is a mail/filing requirement code, which tells them what form they are required to mail to you and what form you are required to file. This code could indicate that a 1040 is required, a 1040NR or even no requirement to file anything.

According to the IRS 6209 manual, the MFR code they have in "my" IMF Specific for 2007 corresponds to a 1040NR non-resident alien return.

Incidentally, there is also a VAL code in the IMF, with a digit of 1 indicating the SSN is "not valid for the person using it", per the 6209 manual. My IMF for 2007 has a VAL-1 code. Apparently most of us have VAL-1 codes in our IMF. Perhaps an indicator that the system treats us as illegal imposters?

In my experience and research, non-resident alien status for Americans seems to be something Auntie will quietly acknowledge but does not want to talk about: I think that is because it makes more clear the jurisdictional aspect of federal income tax. Auntie prefers we all believe the myth of a direct tax on all Americans without apportionment.