IRS inquiry: Do incorrect 1099s need rebuttal?

[Topgun]

ind. contractor and 1099s

My status is this: I've been redeeming lawful money since 2010 (thank you David!!) and have been fortunate not to work since then -no bank acct, no employee status, no 1099 contractor, no filing requirements. I am a clean slate, especially for 2013 and beyond. I need to work again, and am able to work in a place of fine dining. My only intent is to do things lawfully.

I have heard that "under the table" work is not legal, but what defines that? Is it a company (entagled in state laws, taxes, etc) that pays the worker, therfore creating undocumented income? What if working for cash tips alone? The company pays you nothing, you are basically getting paid by the public... no different than a beggar or street busker on a subway, no? Can you AND/OR the company get in trouble if you and they agree on "free" work, ie. a volunteer? Must it be via private contract (and via verbage of lawful money for good measure?)

Now, what if that is not agreeable (or legal), and one still wants to work for JUST cash tips, but to keep the fine dining's accountant and owner stress free, you agree to provide a SSN, verbiage of lawful money, and expect the company to issue a 1099 (this has been offered)... How can a company claim on a 1099 they are paying you? Aren't they saying you were paid money by yet several other 3rd parties?

I am trying to place the best course of action over a time sensitive matter. I thank you all!

[Topgun]

Anyone? I am really hoping someone might be experienced in this area.

[Freed Gerdes]

Yours is an interesting situation, Topgun. The employer has some liability issues such that he is unlikely to want you 'working' in his place of business without some sort of contractual relationship, for insurance liabilities purposes at least, but he does not want to pay you minimum wage. If you are not an employee, paid by the employer, there is no way the 'employer' can then issue a 1099 to you for monies paid to you by others. You can probably get an insurance company to sell you a fairly cheap ($100) policy which constitutes a sort of bond, promising to indemnify the 'non-employer' for any problems you might cause. I had a contractor insurance policy for a while when working as a consultant inside a chemical company, which had $1 million umbrella coverage for about $100 (15 years ago, so maybe some inflation, ymmv). You might also want to register your NAME as a fictitious name, dba, so you can perform the service you provide. Then the 'non-employer' could contract with the NAME company for on-site services for a rate other than minimum wage, say $10/month... then when the NAME company obtains money for services provided, you set up a bank account for the dba, and redeem all monies received for lawful money per 12 USC 411, thus you get no 1099's and pay no taxes.

[ManOntheLand]

1099 presumes independent basis for taxation

My status is this: I've been redeeming lawful money since 2010 (thank you David!!) and have been fortunate not to work since then -no bank acct, no employee status, no 1099 contractor, no filing requirements. I am a clean slate, especially for 2013 and beyond. I need to work again, and am able to work in a place of fine dining. My only intent is to do things lawfully.

I have heard that "under the table" work is not legal, but what defines that? Is it a company (entagled in state laws, taxes, etc) that pays the worker, therfore creating undocumented income? What if working for cash tips alone? The company pays you nothing, you are basically getting paid by the public... no different than a beggar or street busker on a subway, no? Can you AND/OR the company get in trouble if you and they agree on "free" work, ie. a volunteer? Must it be via private contract (and via verbage of lawful money for good measure?)

Now, what if that is not agreeable (or legal), and one still wants to work for JUST cash tips, but to keep the fine dining's accountant and owner stress free, you agree to provide a SSN, verbiage of lawful money, and expect the company to issue a 1099 (this has been offered)... How can a company claim on a 1099 they are paying you? Aren't they saying you were paid money by yet several other 3rd parties?

I am trying to place the best course of action over a time sensitive matter. I thank you all!

The 1099 is used to create the illusion of another basis for taxation, apart from the basis that arises from the receipt of FRN's. If the payer insists on collecting an SSN from you, flip around some of the digits in your SSN (you can claim dyslexia if it ever comes up) and consider giving him an alternate address (not one the IRS already has for you). Without the correct SSN and with a different address, the IRS will never be able to track the payment to you.

You can subtly note duress on the form he forces you to fill out with a "TDC" (for threat duress, coercion) so you can void the instrument later (especially if you are nervous about giving a false SSN, which Supreme Court says is not a crime BTW) but even this is not necessary if you are worried it will cause a problem with the payer. The duress is there whether you note it on the document or not.

Be sure to demand PAYMENT IN LAWFUL MONEY AND sign your name "without prejudice" on all forms he forces you to fill out, so that you cannot be deemed to be voluntarily accepting any undisclosed benefit (such as receiving elastic currency) or be held obligated to any undisclosed terms or obligations (such as the fact that many of the words on these forms you are signing have custom definitions in Federal law, and thus the form creates a presumption that your work is Federally connected, creating a basis for treating the payment as "gross income" received in connection with a "trade or business" within the "United States".

Years ago I declined to give an SSN to a payer, did not report the money he paid me, and never heard anything about it. I don't even know if he issued a 1099, but without an SSN it was pretty useless to the IRS.

[TDL]

... If the payer insists on collecting an SSN from you, flip around some of the digits in your SSN (you can claim dyslexia if it ever comes up) and consider giving him an alternate address (not one the IRS already has for you). Without the correct SSN and with a different address, the IRS will never be able to track the payment to you.

With all due respect, what you suggest is a rather "slippery slope" to go down. Afaik, in general, payors request that you tender a Form W-9 (or a derivative/equivalent form) which must be signed under PoP (Penalties of perjury). Moreover, it also goes to your intent, and intent leads to your character. Could you stand before a jury and swear to your action being the "truth and nothing but the truth"? Don't think so ...

Lastly, there's a special program in play by Auntie [IRiS] called "Identity Theft", which tracks just such activities and has a penalty-escalation provision in place as well. Upshot: don't do it -- you're apt to shoot yourself in the foot.

However, one perfectly legal route I found workable is to demand that the payor produce a fW-9 that bears a valid OMB-Control Number. I'd also state that when s/he does, I'd be glad to comply. Though I could be wrong, after years of looking, I have yet to find such form. Auntie [IRiS] clearly understands the form's deceptive (read:entrapment) nature, but cannot mandate its use for the non-federally-connected business sector. How do I know this? Since IRC Sec. 6109 is the governing statute (mandating SSN-use for all federally-connected purposes), it would be simple to get fW-9 OMB-approved, but it is not (yet).

[John Howard]

Years ago I declined to give an SSN to a payer, did not report the money he paid me, and never heard anything about it. I don't even know if he issued a 1099, but without an SSN it was pretty useless to the IRS.

I also did that once. I was hired on Monday, fired on Friday. But no W2. I decided that it was better to have a job and let them steal SS and medicare than to not have a job.

[David Merrill]

Check out the Diminished Money Counterclaim thread. By notifying the Fed there is really no need to involve the employer at all. And even if redeeming lawful money were to fail to get a Refund you are still better off usually to have a job and career.

[Jethro]

However, one perfectly legal route I found workable is to demand that the payor produce a fW-9 that bears a valid OMB-Control Number. I'd also state that when s/he does, I'd be glad to comply. Though I could be wrong, after years of looking, I have yet to find such form. Auntie [IRiS] clearly understands the form's deceptive (read:entrapment) nature, but cannot mandate its use for the non-federally-connected business sector. How do I know this? Since IRC Sec. 6109 is the governing statute (mandating SSN-use for all federally-connected purposes), it would be simple to get fW-9 OMB-approved, but it is not (yet).

I would avoid such a confrontational approach, particularly since it's unnecessary. Remember, "payers" are typically legal morons. They don't care about OMB numbers; all they care about is "not getting in trouble". So here is what I did recently in a similar situation...

I worked a job and after its completion was presented with a "Form W-9" and told it was "very important" to fill it out "right away". However, I told the lady who gave it to me, "This is the wrong form for me. Are you aware there are many other forms besides the 'W-9'?" She replied that she's heard of other forms before, but didn't know about them, much less have any of them with her. I told her that when I returned home I would supply her with the "most appropriate" form relative to me: a modified W-8BEN. (The "stock" IRS W-8BEN is to be avoided as it's chock full of nasty, presumptuous language repugnant to the rights of We the People.)

So I later sent her the modified W-8BEN form - certificate of foreign status - and told her they will be happy with this form because this is no 1099 reporting or backup withholding required with it. I send a long an excerpt of Publication 515 highlighted with the "Tip" that "Foreign persons who provide Form TIP W-8BEN, Form W-8ECI, or Form W-8EXP (or applicable documentary evidence) are exempt from backup withholding and Form 1099 reporting." The modified form also included a note that as a nonresident alien, I at no time during the year engaged in a "trade or business" in the U.S. I included no SSN or tax ID number. I did not hear a single peep of protest over this form, and I will not receive a 1099 or be subject to any "reporting" from this job.

It's vitally important, though, that before using this form you have proper standing to use it. For that, you need admissible evidence of your nonresident alien (to the "U.S.") status - without that, your form W-8 could be rightly rejected. David's libel of review/evidence repository may be one approach to accomplish that, though I took a slightly different route of publicly recording my status documents, then verifying the notary, and certifying the verification with the State.

[ManOntheLand]

No one can compel you into a contract.

With all due respect, what you suggest is a rather "slippery slope" to go down. Afaik, in general, payors request that you tender a Form W-9 (or a derivative/equivalent form) which must be signed under PoP (Penalties of perjury). Moreover, it also goes to your intent, and intent leads to your character. Could you stand before a jury and swear to your action being the "truth and nothing but the truth"? Don't think so ...

Lastly, there's a special program in play by Auntie [IRiS] called "Identity Theft", which tracks just such activities and has a penalty-escalation provision in place as well. Upshot: don't do it -- you're apt to shoot yourself in the foot.

However, one perfectly legal route I found workable is to demand that the payor produce a fW-9 that bears a valid OMB-Control Number. I'd also state that when s/he does, I'd be glad to comply. Though I could be wrong, after years of looking, I have yet to find such form. Auntie [IRiS] clearly understands the form's deceptive (read:entrapment) nature, but cannot mandate its use for the non-federally-connected business sector. How do I know this? Since IRC Sec. 6109 is the governing statute (mandating SSN-use for all federally-connected purposes), it would be simple to get fW-9 OMB-approved, but it is not (yet).

My intent would simply be to exercise my right to make a living without being compelled into a commercial contract with the United States. I could certainly swear truthfully that I was under duress in furnishing an SSN and submitting the W-9 or W-4 form absent proof that I am required to furnish this information in the first place. Such duress makes these forms voidable and invalid. And it is not "identity theft" to provide an incorrect number if you are not knowingly using someone else's number. Supreme Court ruled just a couple of years ago that it is not unlawful to provide an incorrect SSN, if you are not knowingly using someone else's number.

In a famous case involving Taco Bell years ago, a Federal Court established that a SSN could not be required for working in this country. SSA has admitted this as well. A payer who compels the use of a SSN is in violation of the law and exerting undue influence. You are therefore under duress and the W-9 and W-4 is voidable in any case.

[ManOntheLand]

I also did that once. I was hired on Monday, fired on Friday. But no W2. I decided that it was better to have a job and let them steal SS and medicare than to not have a job.

I agree it is best not to bite the hand that feeds you. To clarify, in the situation I described I was working as an "independent contractor" for the payer, he neglected to get an SSN from me or have me fill out a W-9, so I never had to "refuse" to give an SSN, until after the end of the year, when I no longer worked there. I mentioned this only to illustrate that without a valid SSN, it is much harder for Auntie to track payments made to you. Probably impossible if you give an address to the payer that Auntie does not have on file for you and/or use a slight variation of your name.

[ManOntheLand]

I would avoid such a confrontational approach, particularly since it's unnecessary. Remember, "payers" are typically legal morons. They don't care about OMB numbers; all they care about is "not getting in trouble". So here is what I did recently in a similar situation...

I worked a job and after its completion was presented with a "Form W-9" and told it was "very important" to fill it out "right away". However, I told the lady who gave it to me, "This is the wrong form for me. Are you aware there are many other forms besides the 'W-9'?" She replied that she's heard of other forms before, but didn't know about them, much less have any of them with her. I told her that when I returned home I would supply her with the "most appropriate" form relative to me: a modified W-8BEN. (The "stock" IRS W-8BEN is to be avoided as it's chock full of nasty, presumptuous language repugnant to the rights of We the People.)

So I later sent her the modified W-8BEN form - certificate of foreign status - and told her they will be happy with this form because this is no 1099 reporting or backup withholding required with it. I send a long an excerpt of Publication 515 highlighted with the "Tip" that "Foreign persons who provide Form TIP W-8BEN, Form W-8ECI, or Form W-8EXP (or applicable documentary evidence) are exempt from backup withholding and Form 1099 reporting." The modified form also included a note that as a nonresident alien, I at no time during the year engaged in a "trade or business" in the U.S. I included no SSN or tax ID number. I did not hear a single peep of protest over this form, and I will not receive a 1099 or be subject to any "reporting" from this job.

It's vitally important, though, that before using this form you have proper standing to use it. For that, you need admissible evidence of your nonresident alien (to the "U.S.") status - without that, your form W-8 could be rightly rejected. David's libel of review/evidence repository may be one approach to accomplish that, though I took a slightly different route of publicly recording my status documents, then verifying the notary, and certifying the verification with the State.

Nicely done Jethro! I have been considering the W-8BEN myself. Thanks for sharing the success story. I believe SEDM Family Guardian has a modified W8BEN. You might want to send a copy to auntie as well, specifically to Director of Foreign Operations District in DC.

For those who might want to try this if your payer refuses to accept a W-8BEN, you may want to request in writing an explanation for their refusal, default them when they inevitably fail to provide a satisfactory explanation, then attach the W-8BEN and proof of their refusal to honor it to whatever form they are forcing you to fill out--providing an incorrect SSN and noting the duress with a TDC on the form (also noting your attachment and perhaps noting your payer's refusal to accept it.

If it seems too confrontational and you feel it may threaten your job, you can skip the asking for an explanation part. You should keep a copy of the W-BEN they refused and the W-9 and or W-4 for your records and/or place into evidence repository.

Re: proof of foreign status. The "admissible evidence" can be the W-8BEN itself. The instructions for the form state that "a payer of the income may rely on a properly completed W-8BEN to treat a payment associated with the form W-8BEN as a payment to a foreign person who beneficially owns the amounts paid." Unless they have firsthand personal knowledge that you are a "U.S. person" (as well as the competence and authorization from you to make such a legal determination on your behalf) they have no choice legally but to accept your status as you give it to them. After all, if they were allowed to just do whatever they want with us and our money, why have us sign anything in the first place? They need the illusion of yoru consent!!

BTW I began filing 1040NR (non-resident alien return) a couple years ago, and the IRS completely accepted it no problem. I have a good friend who submitted a 1040NR to the Bankruptcy Court to comply with the requirement of being current on tax filings. The Trustee obviously thought the 1040NR was odd, and asked a question about it at the hearing. But the bankruptcy went through a few days later, no problem.

After obtaining my IRS Individual Master File through FOIA request, I saw that my mailing/filing requirement code reflects that they expect a 1040NR return from me not a 1040. To auntie it really doesn't seem to matter what I call myself; if they receive a 1099 or W-2 they will still presume I have a tax obligation. Nonetheless, I think it is important to get your foreign status established so that any debate can be properly focused on whether or not your payment received was income that was "effectively connected to a trade or business in the U.S." or from a "U.S. source". Since auntie would prefer that Americans think the tax falls on all of us "just because",I believe the declared non-resident alien status of an American living in America is valuable in that auntie does not want a discussion of this topic in court. I think it is good insurance from auntie's harassment in terms of staying out of court.

[ManOntheLand]

FRN use is not the only income tax nexus.

Check out the Diminished Money Counterclaim thread. By notifying the Fed there is really no need to involve the employer at all. And even if redeeming lawful money were to fail to get a Refund you are still better off usually to have a job and career.

David, I don't understand your reasoning that simply notifying the Fed that you are redeeming lawful money makes it unnecessary to involve the employer. Please correct me if I am wrong but my understanding is the following:

Your use of FRN's is only one basis for taxation--a contractual or quasi-contractual one--but it is certainly not the ONLY basis. The use of the SSN and federal "employment" indicated by a W-2, or "trade or business within the U.S." indicated by a 1099 form creates at least TWO other independent nexuses for taxation. Because of these two other nexuses, it does not matter if you demand that your payer pay you in lawful money or if you redeem the payment in lawful money (although I think doing at least the latter is necessary to avoid that particular nexus). The two other nexuses are as follows:

1) The use of the SSN in connection with your work performed connects your payment to the United States through the contractual FICA nexus. By "voluntarily" agreeing to have deductions made and paid into FICA, you are participating in the insurance program under the Federal Insurance Contributions Act. You thereby accept a "benefit" of being one of the "insured" through the United States in bankruptcy, which obligates you as a surety for the U.S. debt and to pay income tax for those "wages"as defined in I.R.C. 3121.

This is, in truth, a compelled contract and compelled benefit. But you have no right to complain if you keep giving "your" SSN to "employers" who demand it from you without at least asking somebody why this is required and at some point recognizing and calling this what it is: threat, duress, coercion and FRAUD. Followed by disputing this "wage" reporting on the basis of said threat duress coercion and fraud.

This dispute of "wage" reporting must be made and resolved FIRST before you can claim you are not subject to income tax, and certainly before you can claim any refund without possibly causing yourself serious problems with auntie--this is where Peter Hendrickson got it wrong and still gets it wrong: he just includes the refund of FICA in the amount he reports for "federal tax withheld" on the 1040, while failing to adequately rebut the W-2 form.

As we all know, though Pete and his followers got 100% refunds for years this way, Pete eventually went to prison for filing false documents. The same thing could happen to lawful money folks who file returns trying to claim a lawful money deduction without recognizing the other nexuses for taxation. Auntie will not explain such nexuses to you. They are contractual--it is assumed you already KNOW. Auntie will simply hammer you with frivolous penalties and perhaps even criminal prosecution for filing "false" documents. I think this lawful money redemption is the real deal. Eventually, therefore, auntie will look for any way to shut it down it by discrediting it publicly--probably by sending somebody (or a few people) to prison who fail to use it properly in dealing with auntie.

PLEASE PLEASE get auntie to update her records first (or at least default auntie) to reflect that you were NOT paid "wages" as defined in Subtitle C, before you go claiming any refund of FICA with auntie. If you are not a "U.S person" the IRS requires that you go to the employer first to claim a refund for excess FICA withholding. If you do not receive such refund, then you may claim a refund from IRS on Form 843. I have no idea if that would work or not. If you are afraid to make the demand for refund from your employer, perhaps you could just tell the IRS that on your 843 form. Otherwise you have to just kiss that money goodbye. But you still don't have to agree to this compelled benefit.


Every time you voluntarily use "your" SSN (which is not "yours" but is property of SSA) you are presumably doing so to receive a federal benefit of some kind, making all payments connected to that number federally taxable, whether you redeem lawful money or not.


2) Your signature on W-4 and/or W-9 along with providing a SSN, creates the presumption that you are engaged in federally privileged "employment" or "effectively connected with a trade or business within the U.S." OR that you have elected to have your payments treated that way (SAME difference as far as auntie is concerned). For most of us, of course, we are not actually federally employed or engaged in a trade or business within the U.S., but are "voluntarily" electing (under duress usually) to have our payments treated as federally connected "wages".) See the voluntary withholding agreement provision under IRC 3402. Who is this provision supposed to be for, if all employers everywhere are already required to withhold tax?

The withholding of income tax from "wages" and reporting of payments as "effectively connected to a trade or business" is based not ONLY on the tax nexus of the transfer of FRN's to you (which can be dealt with by demanding payment in lawful money and/or redeeming in lawful money) but is independently based on the power Congress has always had to lay an excise upon federally-connected privilege (or on anyone who chooses to have their payments treated as such, since Congress cannot impair a "contract" by which you "agree" to allow withholding from your paychecks and "agree" to have it treated as federally connected.

You are presumed to know what it is you are agreeing to when you put your signature to W-4 or W-9 or 1040 for that matter. Why should auntie have to explain it to you? if you don't understand what you are agreeing to then why are you signing it? Oh yeah, because you "have to" to work and have a career. Just like you "have" to file a 1040. Also known as threat duress coercion and FRAUD.

Regardless of what form in which your payment comes to you, the activity that generated the payment is presumed taxable, as measured by the amount of income it produced, solely due to your providing a SSN and agreeing to treat your payments as federally connected. It is "income" on that basis, regardless of what you do with the income after that. They don't care whether you bond your paycheck into the Fed Reserve or not if these other contractual nexuses are in place. The W-2 or 1099 is all the proof they need to presume you received FRN's AND that you received "wages" or other "effectively connected" income.

[Jethro]

BTW I began filing 1040NR (non-resident alien return) a couple years ago, and the IRS completely accepted it no problem. I have a good friend who submitted a 1040NR to the Bankruptcy Court to comply with the requirement of being current on tax filings. The Trustee obviously thought the 1040NR was odd, and asked a question about it at the hearing. But the bankruptcy went through a few days later, no problem.

After obtaining my IRS Individual Master File through FOIA request, I saw that my mailing/filing requirement code reflects that they expect a 1040NR return from me not a 1040. To auntie it really doesn't seem to matter what I call myself; if they receive a 1099 or W-2 they will still presume I have a tax obligation. Nonetheless, I think it is important to get your foreign status established so that any debate can be properly focused on whether or not your payment received was income that was "effectively connected to a trade or business in the U.S." or from a "U.S. source". Since auntie would prefer that Americans think the tax falls on all of us "just because",I believe the declared non-resident alien status of an American living in America is valuable in that auntie does not want a discussion of this topic in court. I think it is good insurance from auntie's harassment in terms of staying out of court.

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.) 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.

What citizenship status does "your" IMF show?

[David Merrill]

[doug555]

I like and agree with David's post.

I did NOT tell my employer anything, or notify the bank.

Just writing "lawful money is demanded for all transactions 12 USC 411" on all checks and deposits slips was enough "substantive evidence" for me for the past 2 years to get refunds, via principal/agent doctrine and Federal Rules of Evidence 803 (6).

YOU are the one that determines whose "image" you are using on the "money" (FRN vs USN), NOT the employer, in accord with Mt 22:19-21. I believe this taxation account defines the "red line" that the Creator will not let Satan violate, much like the line drawn for Satan in his dealings with Job. This "red line" is 12 USC 411.

Satan learned this "red line" lesson well from violating the Creator's "title" to His People in Egypt, resulting in the Exodus and the setting up of the "Holy Nation"... a matter promised to be repeated today in the supernatural fulfillment Holydays #2 and #3.

I am now adding "full discharge is demanded 12 USC 95a(2)" as well (the insurance policy for the transaction) on bills that are turned into money orders, in preparation for a Tort claim if the obligation is not discharged, in accord with Ex 3:7-22.

Douglas Raymond