IRS inquiry: Do incorrect 1099s need rebuttal?

[Jethro]

Jethro, somehow I got some of my replies mixed up with your quote and sadly I am not savvy enough to know how to fix it. Sorry, I am not trying to put words in your mouth! But check out the middle of the quoted section for my replies.

here they are again, extracted from my quote of what you said in your post:

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

True, however 'that' "nonresident alien" is still considered to be a "taxpayer" - "any person subject to any internal revenue tax" - even though that person may have no "effectively connected income". I'm not of the exact implications of that status, but anything that would categorize me as a "person subject to any internal revenue tax" is something I would want to avoid.

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.

Me neither, and they won't tell or give up a form. That reg says the form is one they "may specify". "May" = not mandatory, so it looks like they have opted not to create such a form. How convenient for them?

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).

That's one way of doing it - let me offer another...

When you initiate a "rebuttal" you will have to make statements, and in making those statements the burden of proof is entirely on you to substantiate them. Your rebuttal also presumes their authority in relation to you. However, they are the ones who are alleging you have some legal duty and obligation to perform some act ("file a return", "pay $500 zillion", etc.), so the burden ought to be 100% of them to substantiate their allegation. The best tool I have discovered to that end is utilizing the right of inquiry -- ask questions, don't make statements, in response to legal notices.

The fact that you went to that effort (going to State Dept.) 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.

But it already has helped -- at least from what I have observed -- because now I have standing for my claim of status, and they can't rely on the excuse that they "didn't know" in the event they damage me. I also have admissible evidence of my status.

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.

Agreed. However, I only ask questions in relationship to any presumptions they may have about me... "Who do you think I am?" "What's the evidence for your presumption?" "In what capacity do you believe I am acting?" "Where do you believe I am acting?", etc. This places the burden of proof 100% on them, as it should be.

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.

Yes! Exactly.