15
Jan
09

You Don’t Owe Taxes – I Challenge You

As some of you may well know, I recently won against Arizona in the claim that I do not owe them any income taxes (see here) for 2007. Do you owe taxes on what you make? Have you read the law and seen where it requires you to pay them?

I would like to challenge you to do the same. To make the deal sweet, I challenge you to go to LostHorizons.com and buy Cracking the Code – The Fascinating Truth About Taxation In America. It costs $24.95 + S & H. This is not a scam. This is not tax evasion. This is not finding a loophole. This is about reading the (confusing) tax law and understanding it. US Supreme court cases support this book and this idea. $9Million+ dollars have been recovered so far by readers of this book.

This is a win-win deal for you. This is why.

If you don’t like the book and think that it is unfounded, unsupported, and totally bunk… then write me back on this post and I will I will buy the book from you. You can go on paying your taxes like you always have.

If you like the book, then keep it and fight for your property back. The book will pay for itself when you uphold the law and regain your rightful property.

If you decide to take me up on this offer, please reply to this thread and tell me that you are buying the book and taking me up on my offer. I want to know how many people are taking the challenge just in case 10,000 people take me up on this challenge and I am in over my head. (I am not rich, but I do believe that if I can use some of my money to encourage people towards the truth, then it is worth it. The truth is priceless.). With that said, if there becomes too many, I will repost here that the offer is [temporarily] closed.

It is time to do what is right. The truth is out there.

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45 Responses to “You Don’t Owe Taxes – I Challenge You”


  1. 1 DJ
    15 January 2009 at 00:20

    I bought the book! I read the book I now understand the law and filled correct and lawful documents. I have received all the property improperly withheld from me for 2007! WOOT!

  2. 2 Ecclesiastes
    19 January 2009 at 11:37

    You do know, don’t you, that the author of “Cracking the Code,” Peter Hendrickson, has already lost in court against the IRS (and was fined $4,000 by the court of appeals because his arguments were so ridiculous), and has now been indicted for willfully filing false tax returns?

    Not someone I’d want to follow.

  3. 19 January 2009 at 18:49

    Personal Attack logical fallacy much?

    You do know, don’t you, that the author of “Cracking the Code,” Peter Hendrickson, has already lost in court against the IRS (and was fined $4,000 by the court of appeals because his arguments were so ridiculous), and has now been indicted for willfully filing false tax returns?

    Not someone I’d want to follow.

    What exactly is so ridiculous and what did the court rule that Henrickson do since he is such a “bad apple”?

  4. 4 Ecclesiastes
    19 January 2009 at 21:05

    Did you read the opinion?

  5. 5 Ecclesiastes
    20 January 2009 at 06:53

    The opinion in Hendrickson’s appeal is unpublished, but a copy can be found at http://www.cheatingfrenzy.com/hendrickson_app37.pdf

  6. 6 Ecclesiastes
    20 January 2009 at 06:55

    And it’s not a “personal attack” to point out that the arguments in a book have already been tested in court by the author of the book and have lost.

  7. 20 January 2009 at 12:24

    If we are referring to the same case, then yes. Can you link the specific one that you are referring to so we can debate the same thing?

  8. 20 January 2009 at 17:48

    When the first thing you post on my blog is, “You do know, don’t you, that the author of “Cracking the Code,” Peter Hendrickson, has already lost in court against the IRS…” then yes that is a personal attack. You are surely not attacking his positions because you list none. If you had listed his positions and then refuted them, then maybe it would not be a personal attack. Instead, you said, “He lost in court, therefore his claims are false.”

    Wrong. Is it not possible to have the right lawful position but have crappy representation, a bad judge, or some of your evidence was not allowed… and thusly making you lose your case?

    Onto the case though. I am not seeing where his “arguments were so ridiculous” though. They say that he is a “tax protester” and that tax protesters get fined $4,000. The linked document makes no reference to any of his arguements and shows no evidence. They only say that they are “plainly baseless tax protestor arguements” but that is nothing more than a blanket statement to sweep something under a rug. In fact, I wonder if they even heard his case or if they just labeled him as a “tax protestor” before he even walked in.

    Even more interestingly so, on page two it states that Hendrickson must “amend his 2002 and 2003 returns.” So, the court can fine you for a label they give you – a tax cheat – but they cannot redo your taxes. What happens if he never does it? They just fine him $4,000 until he finally does it? Or, is that double-jeapoardy? It just seems very weird that they seemingly don’t have the jurisdiction to just change the “hacks” protestors return as they see fit. What is wrong with this picture?

  9. 9 John
    21 January 2009 at 05:54

    Looks the magistrate judge granted the government’s motion for summary judgment, and the reviewing court affirmed. Each one of Hendrickson’s arguments against the district court ruling were handled in turn. The judge dismissed each one at meritless and provided a cite to precedent that made it clear that Hendrickson’s arguments had already been dealt with by the courts. As for a crappy attorney, Hendrickson was pro se – likely because any lawyer bringing such arguments into court would be sanctioned and/or lose their license.

  10. 21 January 2009 at 08:26

    As for a crappy attorney, Hendrickson was pro se – likely because any lawyer bringing such arguments into court would be sanctioned and/or lose their license.

    Wow. I’ve never heard of any lawyer getting sanctioned or barred due to something like that. Laughed at? Sure, I can see that. Ruined reputation? Sure, I can see that too.

    As for pro-se, I can see that too. Everyone has their hands in the IRSs pocket and/or they are too scared to stand up to them. So I can see why he went pro-se. I can also see why a layman going pro-se would loose in court – because we are not trained in the courts ways.

    I would like to see a comprehensive list of what Hendrickson said and what they said to refute him. I have a feeling that you two are taking this case out of context and not fully understanding what was said on either side.

    So before you knock the man, please show the court case and the entire ruling. And you seem to have ignored my last post, last paragraph.

  11. 11 John
    21 January 2009 at 09:20

    How can I take the case out of context when the entire thing is linked? The court refuted every one of his arguments with citations.

    As for your last paragraph – the IRS does not know everything. However, they do receive W-2s and 1099s from employers and payors. If Hendrickson does not pay the $4000 judgment, interest is added until it is paid. Eventually the IRS will either garnish his pay or seize his property in satisfaction of his debt. There is no double jeopardy because they are different tax years. There is no reason to sue again – all the IRS has to do is enforce the judgment.

  12. 21 January 2009 at 09:39

    The link is not the entire case. Can you tell me any specific position that Hendrickson took from that link? I can’t. All it says is that he was found to be wrong. That doesn’t tell me much as far as specifics go.

    So the IRS gets W-2s and 1099s… and if those received W-2s and 1099s are wrong… then what?

    You just take it in the pooper?

  13. 13 John
    21 January 2009 at 10:01

    I don’t have access to Hendrickson’s brief to the court, if that is what you are asking. However, the court does note his arguments. For example, “First, the Hendricksons contend
    that the district court improperly weighted the evidence in favor of the government when it found that Peter E. Hendrickson was an “employee” who had been paid “wages,” and that Doreen M.
    Hendrickson had received “non-employee compensation.” However, this contention is tantamount
    to a typical tax protester argument that the income at issue is not taxable. Cf. Weston v. Comm’r, 775 F.2d 147, 147-48 (6th Cir. 1985).”

    The court then asks the reader to Cf. = compare Weston v. Commissioner which deals with the same issue.

    If the W-2s and 1099s are incorrect, the taxpayer can try to work it out with the payor or allege to the IRS that he did not actually receive the amount recorded on the W-2 or 1099. But the burden is on the taxpayer to resolve such issues. The courts have already ruled on the “employee” and “wage” definitions Hendrickson argument asserted. Hendrickson is not arguing that the amounts included on his W-2s and 1099 are incorrect, but that he is not an “employee” and does not earn a “wage.”

  14. 14 John
    21 January 2009 at 12:02

    Here’s the district court opinion:

    Not Reported in F.Supp.2d, 2007 WL 2385071 (E.D.Mich.), 100 A.F.T.R.2d 2007-5395

    United States District Court,
    E.D. Michigan, Southern Division.
    UNITED STATES OF AMERICA, Plaintiff,
    v.
    Peter Eric HENDRICKSON and Doreen M. Hendrickson, Defendants.
    No. Civ.A. 06-11753.
    May 2, 2007.

    Robert D. Metcalfe, Stephen J. Schaeffer, U.S. Department of Justice, Washington, DC, William L. Woodward, Assistant U.S. Attorney, Detroit, MI, for Plaintiff.

    Peter Eric Hendrickson, Commerce Township, MI, pro se.

    Doreen M. Hendrickson, Commerce Township, MI, pro se.

    AMENDED JUDGMENT AND ORDER OF PERMANENT INJUNCTION [23, 24]

    EDMUNDS, J.
    *1 Upon consideration of Plaintiff’s Motion to Amend Judgment, and any response thereto, good cause appearing, it is hereby

    ORDERED, that Plaintiff’s Motion to Amend Judgment is GRANTED; and it is ADJUDGED and ORDERED that Defendant Peter Hendrickson and Defendant Doreen Hendrickson, (collectively, “Defendants”) are jointly indebted to Plaintiff for erroneous refunds for the 2002 and 2003 tax years as shown below:

    2002 Tax Year

    $10,152.96, plus interest accruing on the amounts of the erroneous refunds or credits from April 15, 2003, pursuant to 26 U.S .C. §§ 6602 and 6621(a)(2) until paid.

    2003 Tax Year

    $7,055.70, plus interest accruing on the amounts of the erroneous refunds or credits from April 15, 2004, pursuant to 26 U.S.C. §§ 6602 and 6621(a)(2) until paid.

    $3,172.30, plus interest accruing on the amounts of the erroneous refunds or credits from October 4, 2004, pursuant to 26 U.S.C. §§ 6602 and 6621(a)(2) until paid.

    PERMANENT INJUNCTION

    In accordance with Rule 65 of the Federal Rules of Civil Procedure, the Court makes the following findings of fact and sets forth the following conclusions of law.

    1. Plaintiff commenced this action on April 12, 2006, to recover the federal income tax refunds made to Defendants for the 2002 and 2003 tax years, and to obtain a permanent injunction (1) requiring Defendants to amend their 2002 and 2003 federal income tax returns; and (2) prohibiting Defendants from filing or continuing to file federal income tax returns that falsely claim that they received “zero” or no taxable income.

    2. Defendants are residents of Commerce Township, Michigan, within this judicial district, and were properly served with process on April 12, 2006.

    3. During 2002 and 2003, Defendant Peter Hendrickson was employed by Personnel Management, Inc., and earned wages of $58,965 and $60,608, respectively, during those years.

    2002 tax year

    4. As required by law, Defendant Peter Hendrickson’s employer withheld federal income taxes ($5,642.20), social security taxes ($3,655.83) and Medicare taxes ($854.93) from his wages in 2002 and paid over those amounts to the IRS. Also, as required by law, Mr. Hendrickson’s employer issued him a Form W-2 Wage and Tax Statement that correctly reported his wages and those withholdings.

    5. Defendant Doreen Hendrickson received $3,773.00 in non-employee compensation from Una E. Dworkin in 2002. As required by law, Dworkin provided her with a Form 1099 that correctly reported this non-employee compensation.

    6. Defendants’ 2002 Form 1040 tax return, which was filed with the IRS in August of 2003, falsely reported “zero” wages on line 7. An IRS Form 4852 attached to the return falsely reported that Defendant Peter Hendrickson received no wages during 2002. The Form 4852 did report that federal income taxes ($5,642.20), social security ($3,655.83) and Medicare taxes ($854.93) totaling $10,152.96 had been withheld from his wages during 2002.

    *2 7. Defendant Peter Hendrickson also claimed on his Form 4852 that he had asked his employer to “issue forms correctly listing payments of ‘wages as defined in [sections] 3401(a) and 3121(a),’ but that his company had refused for ‘fear of IRS retaliation.” ’

    8. Defendants requested, on line 70 of their joint 2002 tax return, a refund of the $10,152.96 in federal income, social security, and Medicare taxes that had been withheld from Defendant Peter Hendrickson’s wages during 2002.

    9. Because Defendants reported that they had no income, the IRS, unaware that Defendants’ report was false, treated the withheld federal taxes as a tax overpayments and applied them on April 15, 2003 to (1) Defendant Doreen Hendrickson’s unpaid 2000 tax liability ($1,699.86); and (2) the outstanding tax balances owed by Defendant Peter Hendrickson for 2001 ($6,521.11) and 2000 ($1,931.99).

    10. The refunds or credits described above were erroneous within the meaning of IRC § 7405(b). Defendants were not entitled to refunds of federal income taxes for 2002 because their federal income tax liability for that year-$6,327.00-exceeded the amount of the federal income taxes withheld from Defendant Peter Hendrickson’s wages by his employer ($5,642.20), which constituted the only tax payments made by Defendants in 2002. Furthermore, Defendants were not entitled to a refund, under any circumstances, of the social security and Medicare taxes that had been withheld from Defendant Peter Hendrickson’s wages during 2002.

    2003 tax year

    11. As required by law, Defendant Peter Hendrickson’s employer withheld federal income taxes ($5,620.02), social security taxes ($3,757.60) and Medicare taxes ($878.72) from his wages in 2003 and paid over those amounts to the IRS. Also, as required by law, Mr. Hendrickson’s employer issued him a Form W-2 Wage and Tax Statement that correctly reported his wages and those withholdings.

    12. Defendant Doreen Hendrickson received $3,188.00 in non-employee compensation from Una E. Dworkin in 2003. As required by law, Dworkin provided her with a Form 1099 that correctly reported this non-employee compensation.

    13. Defendants’ 2003 Form 1040 tax return falsely reported “zero” wages on line 7. An IRS Form 4852 attached to the return reported that Defendant Peter Hendrickson received no wages during 2003. The Form 4852 did report that federal income taxes ($5,620.02), social security ($3,757.60) and Medicare taxes ($878.72) totaling $10,256.34 had been withheld from his wages during 2003.

    14. Defendant Peter Hendrickson also claimed on his Form 4852 that he had asked his employer to “issue forms correctly listing payments of ‘wages as defined in [sections] 3401(a) and 3121(a),’ but that his company had refused for ‘fear of IRS retaliation.” ’

    15. Defendants requested, on their joint 2003 tax return, a refund of the $10,228.00 in federal income, social security, and Medicare taxes that had been withheld from Defendant Peter Hendrickson’s wages during 2003.

    *3 16. Because Defendants reported that they had no income, the IRS, unaware that Defendant’s report was false, treated the withheld federal taxes as tax overpayments and applied them on April 15, 2004 to (1) Defendant Peter Hendrickson’s unpaid 2000 tax liability ($5,551.44); and (2) three frivolous return penalties that had been assessed against Defendants under IRC § 6702 ($515.66, $553.17 and $529.18). The IRS also sent a refund check sent to Defendants on October 10, 2004 in the amount of $3,172.30.

    17. The refunds or credits described above were erroneous within the meaning of IRC § 7405(b). Defendants were not entitled to refunds of federal income taxes for 2003 because their federal income tax liability for that year-$6,061.00-exceeded the amount of the federal income taxes withheld from Defendant Peter Hendrickson’s wages by his employer ($5,620.02), which constituted the only tax payments made by Defendants in 2003. Furthermore, Defendants were not entitled to a refund, under any circumstances, of the social security and Medicare taxes that had been withheld from Defendant Peter Hendrickson’s wages during 2003.

    18. Defendants contend that their Forms 4852, as described above, accurately reported that they received no wages or other compensation in 2002 and 2003. Defendants base their contention on theories contained in a book entitled Cracking the Code, which was written by Defendant Peter Hendrickson. On page 76 of Cracking the Code ( “CtC” ), Defendant Peter Hendrickson, states “So, actually, withholding only applies to the pay of federal government workers, exactly as it always has (plus ‘State’ government workers, since 1939, and those of the District of Columbia since 1921).”

    19. Defendants’ contention that withholding applies only to government workers is frivolous and false. See, e.g., Sullivan v. United States, 788 F.2d 813, 815 (1st Cir.1986); United States v. Latham, 754 F.2d 747, 750 (7th Cir.1985); (contention that “under 26 U.S.C. § 3401(c) the category of ‘employee’ does not include privately employed wage earners is a preposterous reading of the statute.”); O’Connor v. United States, 669 F.Supp. 317, 322 (D.Nev.1987). Defendant Peter Hendrickson was an employee of Personnel Management, Inc. in 2002 and 2003 within the meaning of IRC § 3401(c). Defendant Peter Hendrickson’s employer properly withheld federal income and employment taxes from his wages.

    20. In addition to the monetary loss occasioned by the erroneous tax refunds that the IRS made to or on behalf of Defendants, their conduct in filing false tax returns caused substantial interference with the internal revenue laws by administratively burdening the IRS, requiring the agency to expend considerable resources to detect the erroneous refunds, examine Defendants’ 2002 and 2003 Form 1040 tax returns, and obtain the documents necessary to prove that the refunds were erroneous.

    21. In order to qualify for injunctive relief under Rule 65 of the Federal Rules of Civil Procedure, Plaintiff must establish (1) the likelihood of the government’s success on merits; (2) whether the injunction will save Plaintiff from irreparable injury; (3) whether the injunction would harm others; and (4) whether the public interest would be served by the injunction. See Southern Milk Sales, Inc. v. Martin, 924 F.2d 98, 103 n. 3 (6th Cir.1991); In re DeLorean Motor Co., 755 F.2d 1223, 1228 (6th Cir.1985).

    *4 22. Plaintiff has prevailed on the merits of its erroneous refund claims against Defendants as reflected in the prior order adopting in part and rejecting in part the Magistrate Judge’s Report and Recommendation with respect to Plaintiff’s motion for summary judgment.

    23. Defendants’ actions impose an immediate and irreparable injury on Plaintiff by impeding, impairing and obstructing the assessment and collection of federal taxes in accordance with the internal revenue laws.

    24. In the absence of an injunction, Plaintiff will continue to suffer irreparable injury as Defendants and those who imitate them continue to file false tax returns. Since Plaintiff has met all of the proper standards and the traditional equity criteria for the entry of a permanent injunction under IRC § 7402(a), a permanent injunction should issue.

    25. Defendants will not be harmed by the entry of an injunction against them because they will only be required to obey the law, including the provisions of the Internal Revenue Code and the applicable Treasury Regulations.

    26. Finally, the United States’ system of taxation relies on self-assessment and the good faith and integrity of taxpayers to disclose completely and honestly all information relevant to their tax liability. The public interest will be accordingly be served by requiring Defendants to correctly report the income that they receive on their federal tax returns.

    27. Accordingly, it is hereby

    ORDERED, that Defendants are prohibited from filing any tax return, amended return, form (including, but not limited to Form 4852 (“Substitute for Form W-2 Wage and Tax Statement, etc.”)) or other writing or paper with the IRS that is based on the false and frivolous claims set forth in Cracking the Code that only federal, state or local government workers are liable for the payment of federal income tax or subject to the withholding of federal income, social security and Medicare taxes from their wages under the internal revenue laws (26 U.S.C.); and it is further

    ORDERED, that within 30 days of the entry of this Amended Judgment and Order of Permanent Injunction, Defendants will file amended U.S. Individual Income Tax Returns for the taxable years ending on December 31, 2002 and December 31, 2003 with the Internal Revenue Service. The amended tax returns to be filed by Defendants shall include, in Defendants’ gross income for the 2002 and 2003 taxable years, the amounts that Defendant Peter Hendrickson received from his former employer, Personnel Management, Inc., during 2002 and 2003, as well the amounts that Defendant Doreen Hendrickson received from Una E. Dworkin during 2002 and 2003.

    SO ORDERED.

  15. 15 Ecclesiastes
    21 January 2009 at 15:54

    Hendrickson’s brief can be found here: http://www.losthorizons.com/PostAppellateBrief.pdf

    Other documents relating to the lawsuit can be found here: http://www.losthorizons.com/lawsuit.htm

  16. 16 Ecclesiastes
    21 January 2009 at 15:57

    Other cases that could have been cited to refute Hendrickson’s claims include the following:

    “Similarly, Latham’s instruction which indicated that under 26 U.S.C. § 3401(c) the category of ‘employee’ does not include privately employed wage earners is a preposterous reading of the statute. It is obvious that within the context of both statutes the word ‘includes’ is a term of enlargement not of limitation, and the reference to certain entities or categories is not intended to exclude all others.” United States v. Latham, 754 F.2d 747, 750 (7th Cir. 1985).

    “To the extent Sullivan argues that he received no ‘wages’ in 1983 because he was not an ‘employee’ within the meaning of 26 U.S.C. § 3401(c), that contention is meritless. Section 3401(c), which relates to income tax withholding, indicates that the definition of ‘employee’ includes government officers and employees, elected officials, and corporate officers. The statute does not purport to limit withholding to the persons listed therein.” Sullivan v. United States, 788 F.2d 813, 815 (1st Cir. 1986).

    “Plaintiff’s allegation is without legal merit as he attempts to limit ‘employees’ to employees of the federal government. However, the term employee refers to every individual who performs services at the direction or control of another. See 26 CFR section 31.3306(I)-1(b). Thus, even individuals that are not employees of the federal government are still construed as employees within the regulation if they fit within the definition pursuant to 26 CFR section 31.3401(c).” Bernier v. IRS, KTC 1999-540, No. CV 98-0331-N-EJL (U.S.D.C. Idaho 1999)

    “Plaintiff’s next argument is that he is not an ‘employee’ under 26 U.S.C. § 3401(c) because he is not a federal officer, employee, elected official, or corporate officer. Plaintiff mistakenly assumes that this definition of ‘employee’ excludes all other wage earners.” Peth v. Breitzmann, 611 F. Supp. 50, 53 (E.D.Wis. 1985), 1985 U.S. Dist. LEXIS 21509, 85-1 U.S.T.C. ¶9321, 55 AFTR2d 1280 (complaints dismissed and sanctions imposed for filing frivolous actions “brought in bad faith”).

    “Plaintiff apparently bases his position on a strict interpretation of the statutory language of section 3401(c) which does not on its face include all persons who earn wages from an employer. … The definition should not be read as exclusive, but rather as indicative of Congress’ intent that those persons so designated in section 3401(c) would be subject to the income tax withholding provision in the same manner as all other employees. The definition of “employee”, contrary to the interpretation urged by plaintiff, is more properly read to include all those persons with the ‘status of employee under the usual common law rules applicable in determining the employer-employee relationship.’” Chamberlain v. Krysztof, 617 F.Supp. 491, KTC 1985-137 (N.D.N.Y. 1985) (footnotes omitted).

    In Pabon v. Commissioner, T.C. Memo 1994-476, the petitioner alleged, among other things, that he “is not an employee of the Federal or state governments, is not engaged in a revenue taxable activity of alcohol, tobacco or firearms and therefore not subject to any exise [sic] tax….” The court concluded that the petition “is nothing but tax protester rhetoric and legalistic gibberish….”

  17. 21 January 2009 at 20:56

    Don’t kill me, but I am going to have to look all these up. I am familiar with most of them, but I still need to look them up to fully answer you.

  18. 21 January 2009 at 21:29

    John stated on 21 January 2009 at 10:01 am:

    If the W-2s and 1099s are incorrect, the taxpayer can try to work it out with the payor or allege to the IRS that he did not actually receive the amount recorded on the W-2 or 1099.

    Really? So if my payor says, “F U” about my corrections, then I am just hosed? In other words, you are saying that I have no recourse to correct the record on my own behalf?

    But the burden is on the taxpayer to resolve such issues.

    Again. Really? What happened to self-assessment?

  19. 19 John
    22 January 2009 at 05:08

    The IRS operates under the assumption that the taxpayer’s employer wouldn’t F them over. I think that is a pretty reasonable assumption. After all, the employer must also pay 7.5% of the employee’s wages in FICA taxes, so it doesn’t make sense for them to over-report.

    I was a little unclear – should have said “Burden is on the taxpayer to prove amounts on W-2 or 1099 are incorrect.”

    It would be helpful if taxpayer had direct deposit to show a record or something similar. If the employer refuses to correct the W-2, taxpayer can initiate a complaint with the IRS. The IRS will then contact the employer and tell them about all the wonderful penalties they may face if they don’t resolve the issue.

    As for the employee correcting the record himself? This is something you would file with the IRS after attempting to get the employer to correct the W-2. But the burden is still on the taxpayer to prove the employer’s records are incorrect.

    I don’t know what you mean by self-assessment.

  20. 20 Ecclesiastes
    23 January 2009 at 05:14

    I don’t really know what would happen if an employer and employee contradicted each other about how much the employee was really paid, but I would expect that the employee would win if he/she could produce some credible records and credible evidence showing that he/she was paid less than the employer was claiming.

    Hendrickson’s problem was that he never denied that he was paid what Personnel Management (the company he worked for) claimed to have paid him, and he never denied that the payments he received were to compensate him for his labor or services for Personnel Management, so there was no dispute about the amounts paid or the purpose of the payments. He just wanted to argue about whether the money he received was “wages,” and the courts said that his arguments were nonsense.

  21. 23 January 2009 at 10:22

    @Ecclesiates: What do you say about this?

    We must reject … the broad contention submitted in behalf of the Government that all receipts — everything that comes in — are income within the proper definition of “gross income” – Southern Pacific Co. v. John Z. Lowe, 247 U.S. 330

    And this…

    “The phraseology of form 1040 is somewhat obscure …. But it matters little what it does mean; the statute and the statute alone determines what is income to be taxed. It taxes only income “derived” from many different sources; one does not “derive income” by rendering services and charging for them.” – Edwards v. Keith, 231 F. 111 (2nd Cir.)

    And this…

    “Income is nothing more nor less than realized gain …. It is not synonymous with receipts …. Whatever may constitute income, therefore, must have the essential feature of gain to the recipient …. If there is no gain, there is no income.” – Conner v. U.S., 303 F.Supp. 1187

    And this…

    “There is a clear distinction between “profit” and “wages” or compensation for labor. Compensation for labor cannot be regarded as profit within the meaning of the law.” – Oliver v. Halstead, 196 Va. 992; 86 S.E. 2d 858

  22. 22 Ecclesiastes
    23 January 2009 at 15:37

    We must reject … the broad contention submitted in behalf of the Government that all receipts — everything that comes in — are income within the proper definition of “gross income” – Southern Pacific Co. v. John Z. Lowe, 247 U.S. 330

    Even taking this (partial) quotation at face value, so what? The general statement that “not everything that comes it in gross income” doesn’t tell you what is or is not gross income, or whether compensation for labor is gross income.

    But let’s look at the full quote and the context of the decision. What the court actually said was:

    “We must reject in this case, as we have rejected in cases arising under the Corporation Excise Tax Act of 1909 [citations omitted] the broad contention submitted in behalf of the government that all receipts-everything that comes in-are income within the proper definition of the term ‘gross income,’ and that the entire proceeds of a conversion of capital assets, in whatever form and under whatever circumstances accomplished, should be treated as gross income.

    The court was dealing with a variation of an issue that had come up before, which is that a return of capital is not income. When you sell an asset, the “income” is not the gross purchase price, but the gain, which is the difference between what you bought it for and what you’re selling it for.

    The exact issue was whether a dividend that was paid out of profits earned before 1913 was income when the dividend was received in 1913. The court held that the profits earned before 1913 were not subject to tax and really a form of capital, and that a distribution of capital is not income. (You can read the decision for yourself at Findlaw.com)

    And this is still the law today. The Internal Revenue Code provides that a dividend is taxable income only to the extent that it is paid out of the earnings or profits of a corporation. Corporations sometimes pay dividends that exceed earnings and profits and are considered a return of capital and not taxable.

    And Southern Pacific v. Lowe was not really a constitutional decision, but one of statutory construction on the meaning of “income” in the revenue act of 1913. The Supreme Court has, in other cases, upheld the constitutionality of taxes on gross receipts as lawful excises. A recent opinion of the Circuit Court of the District of Columbia upheld the constitutionality of taxing damages received on account of non-physical injuries on the grounds that, even if the amounts received were not “income” in the constitutional sense, the imposition of the tax was still constitutional as an excise. See http://pacer.cadc.uscourts.gov/docs/common/opinions/200707/05-5139b.pdf

  23. 23 Ecclesiastes
    23 January 2009 at 15:45

    “The phraseology of form 1040 is somewhat obscure …. But it matters little what it does mean; the statute and the statute alone determines what is income to be taxed. It taxes only income “derived” from many different sources; one does not “derive income” by rendering services and charging for them.” – Edwards v. Keith, 231 F. 111 (2nd Cir.)

    You’ve omitted a sentence from earlier in the same paragraph of the opinion:

    “But no instructions of the Treasury Department can enlarge the scope of this statute so as to impose the income tax upon unpaid charges for services rendered and which, for aught any one can tell, may never be paid.”

    The charges were “unpaid” because the taxpayer in question had rendered services, and had issued a bill and charged for them, but had not yet been paid. The IRS was essentially trying to tax someone on income that was “accrued” but not actually received. Nowadays, corporations are required to be on the accrual method, but that was not the law in 1913.

  24. 24 Ecclesiastes
    23 January 2009 at 19:34

    “Income is nothing more nor less than realized gain …. It is not synonymous with receipts …. Whatever may constitute income, therefore, must have the essential feature of gain to the recipient …. If there is no gain, there is no income.” – Conner v. U.S., 303 F.Supp. 1187

    From the paragraphs immediately following the fragments quoted above:

    “As already pointed out, plaintiffs’ home was rendered uninhabitable by the fire. Plaintiffs had an insurance policy which reimbursed them for their necessary and reasonable increase in living expenses resulting from the fire. Plaintiffs rented another home, the rental payments were $600.00 per month, this lasted for six months, and plaintiffs paid out of their pocket $4,200.00 as rent…. It is apparent that plaintiffs in this case realized no gain in connection with the reimbursement by the insurance company of the rental payments in the total amount of $4,200.00.”

    Yes, the case was about whether insurance proceeds from a fire should be considered taxable income.

    But whether insurance proceeds should be considered income doesn’t really seem to have much to do with whether wages or salaries are income.

  25. 25 Ecclesiastes
    23 January 2009 at 19:40

    “There is a clear distinction between “profit” and “wages” or compensation for labor. Compensation for labor cannot be regarded as profit within the meaning of the law.” – Oliver v. Halstead, 196 Va. 992; 86 S.E. 2d 858

    The “Va.” means that the case is from the Supreme Court of Virginia, a state court, and not any federal court.

    And the case had nothing to do with the federal constitution.

    And the case had nothing to do with taxes.

    And “the law” referred to in the opinion was the state nonprofit corporation law, because the issue in the case was whether payment of wages by a nonprofit corporation was a distribution of “profit” prohibited by the state nonprofit corporation law.

  26. 26 Ecclesiastes
    23 January 2009 at 19:52

    Now let’s look at a United States Supreme Court decision that actually considered the constitutionality of a tax, and the limits on the Congressional power to tax.

    Confronted by an argument that Congress could not impose a tax (in the form of a “license tax”) on activities that it could not regulate or prohibit (or license), the Supreme Court responded by stating that:

    “It is true that the power of Congress to tax is a very extensive power. It is given in the Constitution with only one exception and only two qualifications. Congress cannot tax exports, and it must impose direct taxes by the rule of apportionment and indirect taxes by the rule of uniformity. Thus, limited, and thus only, it reaches every subject, and may be exercised at discretion.” License Tax Cases, 72 U.S. 462, 471 (1866).

    The Supreme Court has also flatly stated that Congress can tax employments and other activities engaged in as a common right:

    “But natural rights, so called, are as much subject to taxation as rights of lesser importance. An excise is not limited to vocations or activities that may be prohibited altogether. It is not limited to those that are the outcome of a franchise. It extends to vocations or activities pursued as of common right.” Charles C. Steward Machine Co. v. Davis, 301 U.S. 548 (1937).

    I think that the Supreme Court meant what it said in those two cases, and I think that the 16th Amendment means what it says, and that Congress can tax incomes without apportionment.

  27. 27 Mister Guy
    25 January 2009 at 11:04

    So, as I suspected originally, this “scheme” is just simple tax evasion…don’t report that you had any income or wages, and you don’t have to pay any tax! And this from some of the same people that rail against how the “poor” are raping the system and taking “property” from them…when, in fact, they are actively trying to dodge the entire tax system in the first place! It really makes one’s head spin around in disgust…ugh…

    How would the govt. that we all need (at least to some small extent) be paid for in the first place…or would it be paid for at all?? The GOP has done an excellent job at running up bills at the federal level that they can’t pay for, after all…sheesh…

  28. 25 January 2009 at 20:00

    @Mister Guy: I know you from other blogs. Do not come here to my blog spouting your opinion as fact. If you wish to debate me, then debate facts, not your opinions.

    And this from some of the same people that rail against how the “poor” are raping the system and taking “property” from them…when, in fact, they are actively trying to dodge the entire tax system in the first place! It really makes one’s head spin around in disgust…ugh…

    What? This makes no sense. Poor person makes what they make. Middle class person makes what they make. Rich person makes what they make. Where is the inconsistency as you imply?

    The GOP has done an excellent job at running up bills at the federal level that they can’t pay for, after all…sheesh…

    Is this comment directed at me or is it just your usual rant about how you hate the GOP?

  29. 25 January 2009 at 20:13

    John stated at 21 January 2009 at 12:02 pm :

    27. Accordingly, it is hereby

    ORDERED, that Defendants are prohibited from filing any tax return, amended return, form (including, but not limited to Form 4852 (“Substitute for Form W-2 Wage and Tax Statement, etc.”)) or other writing or paper with the IRS that is based on the false and frivolous claims set forth in Cracking the Code that only federal, state or local government workers are liable for the payment of federal income tax or subject to the withholding of federal income, social security and Medicare taxes from their wages under the internal revenue laws (26 U.S.C.); and it is further

    ORDERED, that within 30 days of the entry of this Amended Judgment and Order of Permanent Injunction, Defendants will file amended U.S. Individual Income Tax Returns for the taxable years ending on December 31, 2002 and December 31, 2003 with the Internal Revenue Service. The amended tax returns to be filed by Defendants shall include, in Defendants’ gross income for the 2002 and 2003 taxable years, the amounts that Defendant Peter Hendrickson received from his former employer, Personnel Management, Inc., during 2002 and 2003, as well the amounts that Defendant Doreen Hendrickson received from Una E. Dworkin during 2002 and 2003.

    SO ORDERED.

    I do think it is interesting that all the court ordered them to do is change their testimony. They didn’t really refute them, they just said, “you are wrong, refile.” I would think that if the court had more righteousness/conviction that they would have taken their power (since they are awarding the Plantiff with the win) to just correct the reocrd on their behalf. Instead, they want Hendrickson to submit testimony against himself, when he’s already put forth his signed and sworn testimoney when he signed his 1040 and his 4852.

    Sounds fishy to me.

  30. 25 January 2009 at 20:39

    Ecclesiastes wrote on 21 January 2009 at 3:57 pm:

    “Similarly, Latham’s instruction which indicated that under 26 U.S.C. § 3401(c) the category of ‘employee’ does not include privately employed wage earners is a preposterous reading of the statute. It is obvious that within the context of both statutes the word ‘includes’ is a term of enlargement not of limitation, and the reference to certain entities or categories is not intended to exclude all others.” United States v. Latham, 754 F.2d 747, 750 (7th Cir. 1985).

    What is a “privately employed wage earner” anyways? The case does not define it, so we can’t see exactly what an employee is and therefore cannot say that an employee is “anyone who works” as being purported. Does it?

    “To the extent Sullivan argues that he received no ‘wages’ in 1983 because he was not an ‘employee’ within the meaning of 26 U.S.C. § 3401(c), that contention is meritless. Section 3401(c), which relates to income tax withholding, indicates that the definition of ‘employee’ includes government officers and employees, elected officials, and corporate officers. The statute does not purport to limit withholding to the persons listed therein.” Sullivan v. United States, 788 F.2d 813, 815 (1st Cir. 1986).

    What we didn’t write is that…

    “… [Sullivan] did not submit actual tax return or schedule for profit or loss from business or profession… Sullivan filed with the IRS a letter entitled “Request for Refund of Income Tax,” and two attached documents entitled “Income Tax Refund Statement for the Tax Year 1983,” and “Business Income/Loss Statement for the Tax Year 1983.” In the letter, Sullivan stated that he was a “natural individual and un-enfranchised freeman” who “neither requested, obtained, nor exercised any privilege from an agency of government” for taxable year 1983… Sullivan reported no income from “wages, tips, [or] other compensation”, even though two Forms W-2 he attached indicated that he had received $32,502.32 in “wages, tips, [or] other compensation.”

    “[Thus] Sullivan’s purported return facially indicated (bold added) that his self-assessment was incorrect, and that his position was frivolous. The attached Forms W-2 show that Sullivan received wages totaling $32,502.32 in 1983, yet he reported no income from wages on the purported return.”

    So, of course Sullivan lost. He submitted official forms, W-2s, which clearly stated that he made wages and then on his 1040 stated that he made NO wages. That is not what Hendrickson is saying at all.

    Can I get the full case of Bernier v. IRS, Peth v. Breitzmann, and Chamberlain v. Krysztof so I can fully evaluate what they said?

  31. 31 Mister Guy
    27 January 2009 at 12:36

    “Do not come here to my blog spouting your opinion as fact. If you wish to debate me, then debate facts, not your opinions.”

    Afraid of a *real* debate eh?? Very typical of the Right-wing kiddo…

    “Where is the inconsistency as you imply?”

    You & your kind are always complaining that the “poor” are taking “property” from you (your tax money), and it turns out that you are actively trying to dodge the entire tax system in the first place! What a bunch of baloney…

    “Is this comment directed at me or is it just your usual rant about how you hate the GOP?”

    And then you & your kind complain about the national debt & deficit, when it’s your very regimes that have increased that debt & deficit, which you are now unwilling to pay for with your own taxes! Again, your entire position is utterly ridiculous…have fun doging your responsibilities as a citizen of the USA…

    “Instead, they want Hendrickson to submit testimony against himself”

    …nope, they just want him to tell *the truth* about the wages that he actually earned, as certified to by his own employer!

    “What is a ‘privately employed wage earner’ anyways? The case does not define it, so we can’t see exactly what an employee is and therefore cannot say that an employee is ‘anyone who works’ as being purported. Does it?”

    This is just more silly word games on your part…it’s really not going to get you anywhere BTW…

    “Sullivan reported no income from ‘wages, tips, [or] other compensation'”

    …just like you & your buddy in MI did!

    “That is not what Hendrickson is saying at all.”

    Yup, your buddy’s just LYING about his wages and trying to get away with it!

  32. 27 January 2009 at 19:40

    @MG: Again, you have no qualms with showing your true colors.

    You & your kind

    What is my kind MG since you seem to know me so well?

    that the “poor” are taking “property” from you (your tax money), and it turns out that you are actively trying to dodge the entire tax system in the first place! What a bunch of baloney…

    Is this a logical and true statement MG?:
    Government takes XX from Person A.
    Government gives XX to Person B.
    Person B is taking XX from Government.
    Therefore XX has been taken from Person A and given to Person B.

    and it turns out that you are actively trying to dodge the entire tax system in the first place! What a bunch of baloney…

    Am I dodging or trying to follow the law as it says? If I was dodging taxes, then I just would be not filing. I am filing.

    And then you & your kind complain about the national debt & deficit, when it’s your very regimes that have increased that debt & deficit,

    First off, is this OUR regime or are you from “another regime”?

    So because my “regime” is racking up the deficit, I am directly responsible?

    which you are now unwilling to pay for with your own taxes!

    What services am I getting of which I am not paying for?

    …nope, they just want him to tell *the truth* about the wages that he actually earned, as certified to by his own employer!

    So whatever your “employer” says you made, you made, huh? You cannot correct the record?

    “Sullivan reported no income from ‘wages, tips, [or] other compensation’”
    …just like you & your buddy in MI did!

    You really are laughable MG. Sullivan submitted an official document stating that he made wages, and then turned around and said, “I made no wages.” It is just like me going on vacation, handing someone my American passport and then telling them that I am not an American. Same thing.

    Anything else MG?

  33. 33 Mister Guy
    27 January 2009 at 21:19

    “What is my kind MG since you seem to know me so well?”

    Not a Right-winger eh?? I doubt it…

    “Person B is taking XX from Government.
    Therefore XX has been taken from Person A and given to Person B.”

    Nope, but thanks for admitting that taxes go to fund the govt. though. Our taxes are collected by the govt. (which is one of many responsibilities that we have as U.S. citizens…one that you’re apparently dodging BTW), then the govt. pools those resources to fund the things that govt. does on behalf of the people that the government represents. The idea that any one person’s tax money is going to fund one specific thing that a govt. does is just silly.

    “Am I dodging or trying to follow the law as it says? If I was dodging taxes, then I just would be not filing. I am filing”

    …and you are LYING about whether you made any wages, which is actually breaking the law…as your buddy in MI is finding out.

    “So because my ‘regime’ is racking up the deficit, I am directly responsible?”

    Yes, and so are the rest of the taxpayers in the USA unfortunately. However, you are engaged in *tax evasion* at the exact same time that you are complaining about the federal government’s debt & deficit.

    “What services am I getting of which I am not paying for?”

    Let’s just look at the state-sponsored services that you are getting…police, fire, emergency management, economic infrastructure (roads, enforcement of contracts, etc.), public works, education systems, health care systems, public transportation, and energy…water…and waste management systems.

    According to Black’s Law Dictionary, a tax is a financial charge or other levy imposed on an individual or a legal entity by a state/locality or a functional equivalent of a state/locality. A tax is NOT a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority. When taxes are not fully paid, civil penalties (such as fines or forfeiture) or criminal penalties (such as incarceration) may be imposed on the non-paying entity or individual…so get ready for that kiddo…

    “So whatever your ’employer’ says you made, you made, huh? You cannot correct the record?”

    And magically make “the record” say that you made ZERO dollars, when your employer has been sending tax data that says that you have been making a LOT more than that?? No, that’s called TAX EVASION, and it’s against the law…as you’ll be finding out soon enough!

    “Sullivan submitted an official document stating that he made wages, and then turned around and said, ‘I made no wages.’ It is just like me going on vacation, handing someone my American passport and then telling them that I am not an American. Same thing.”

    LOL…and what you & your buddy in MI have done is intentionally LIE about the amount of wages that you made…so that you could simply get back most of the payroll deductions that your employer made over the past tax year.

    What’s really laughable is that you actually think that you’ll end up getting away with it! All someone needs to do is contact your states tax collecting agency and forward them the info that YOU have posted on this very website. Get ready for the hammer to fall kiddo…it’s coming…hopefully sooner rather than later…

  34. 34 Ecclesiastes
    27 January 2009 at 21:20

    Ecclesiastes wrote on 21 January 2009 at 3:57 pm:

    “Similarly, Latham’s instruction which indicated that under 26 U.S.C. § 3401(c) the category of ‘employee’ does not include privately employed wage earners is a preposterous reading of the statute. It is obvious that within the context of both statutes the word ‘includes’ is a term of enlargement not of limitation, and the reference to certain entities or categories is not intended to exclude all others.” United States v. Latham, 754 F.2d 747, 750 (7th Cir. 1985).

    What is a “privately employed wage earner” anyways? The case does not define it, so we can’t see exactly what an employee is and therefore cannot say that an employee is “anyone who works” as being purported. Does it?

    You seem to be quoting-and-pasting from Hendrickson’s web site, because “The quoted language doesn’t even clarify what is meant by ‘privately employed wage earners'” is included in Peter Hendrickson’s FAQ.

    On Hendrickson’s web site (www.losthorizons.com), the phrases “private-sector worker” and “private-sector employer” and “private-sector earnings” appear hundreds of times. Why don’t you ask Hendrickson what those phrases mean?

  35. 35 Ecclesiastes
    27 January 2009 at 21:45

    Can you tell me any specific position that Hendrickson took from that link? I can’t. All it says is that he was found to be wrong. That doesn’t tell me much as far as specifics go.

    If “all it says is that he was found to be wrong,” doesn’t it at least tell you that he was wrong?

  36. 27 January 2009 at 23:41

    You seem to be quoting-and-pasting from Hendrickson’s web site, because “The quoted language doesn’t even clarify what is meant by ‘privately employed wage earners’” is included in Peter Hendrickson’s FAQ.

    On Hendrickson’s web site (www.losthorizons.com), the phrases “private-sector worker” and “private-sector employer” and “private-sector earnings” appear hundreds of times. Why don’t you ask Hendrickson what those phrases mean?

    Ecclesiastes, this is simple. United States v. Latham it says “the category of ‘employee’ does not include privately employed wage earners is a preposterous reading of the statute.”

    I retorted with “well, then what exactly is a ‘privately employed wage earners’ then?” And now you are telling me that all of the following terms are EXACTLY the same? You inquire about private-sector workers, private-sector employer, and private-sector earnings and state that Hendrickson talks about them all over the place. The difference is, and I am suprised that you are sinking so low to even do this… Hendrickson is not writing laws here. When words are defined in a law then they hold special definitions. It is a common grammatical rule where nouns (i.e. worker, employer, earnings) are further explained by adjectives (private-sector).

    Pete is writing on a website, not writing a law. A Private-sector worker is simply not a federal worker. In United States v. Latham they specifically state “privately employed wage earners” (emphasis mine). A wage is the very thing we are debating here, isn’t it? So don’t go telling me that a specifically defined term in a law means the same thing as a common word on someones website.

    If “all it says is that he was found to be wrong,” doesn’t it at least tell you that he was wrong?

    No, actually it doesn’t. A lawyer like yourself should know that good people lose every day and bad people win every day.

    People thought the world was flat – anyone who said that it was round, was “wrong.” But really, they were right.

    As for court, this is especially true (in my opinion) when you come into a court and don’t have the training that your fellow players have (you are not a lawyer). I wouldn’t have the slightest clue of when to object and do all that other stuff, so I’d probably lose any case that I tried to argue. And, pro-se, on an issue like this, is one hell of an order and probably the reason he’s done as he has. I don’t doubt his position.

  37. 37 Mister Guy
    28 January 2009 at 00:34

    Edit: I am deleting MG’s comment because he needs to learn manners. You can come here to debate, as others have. However, I will not permit people to come to my blog and belittle and berate others like little 5 year olds.

    With that said, I am sure that MG will run away and tell me that I am “running away from a debate because I am wrong” but I assure you, I leave comments for all to read and judge for themselves. As of yet, I don’t think anyone is a clear winner in this debate. But again, I will not allow such comments as MG thinks are “OK” to post. He may be able to do so on other blogs I have seen him at, but he will not be permitted to do so here on my blog.

  38. 38 Mister Guy
    28 January 2009 at 18:45

    Edit: MG refuses to post something without name calling, therefore, his post is deleted, again.

  39. 39 Jeff W of Texas
    25 March 2009 at 09:21

    There are a number of points that I feel will contribute to this discussion.
    For the IRS/U.S. to claim in arguments that someone is a “Tax Protester” is ad hominem, not a valid argument. The citations of authority by the plaintiff don’t really strike at that relevant arguments they are trying to settle. I am NOT a lawyer but I don’t see how a judge can see how those citations can be marshalled to bolster the US’ position.

    Hendrickson is not a tax protester (except in spirit), rather he says that his employment compensations are not subject to EXCISE because they did not arise from the exercise of federal privilege, property or power–to the best of his knowledge. His employer does not engage in similar federal activity either, therefore his compensation is not from any excisable federal benefit.

    To call them “wages” on a W2 form gives it the meaning the IRS MUST use as defined for them, as being subject to the excise tax because that is what the form is all about. He might make a mistake by saying they are not wages in the IRS sense of the word, but the IRS says the relationship he has with his employer is just like one if his employer was the US Gov’t. and they would be right (with one difference: it is not the Gov’t.) Their trick is that they can get the employer to make their argument for them by saying the employer declares these are [excisable] “wages”.

    As an employer, correcting these forms if not an easy thing to do. Besides the W2, there are 941’s, 940’s, W3’s. This even affects the company’s 1120 Income Tax statement, because it would increase the net [excisable] profit since these are no longer payroll expenses. The employer would also be due a refund for their equal contribution to FICA & FUTA. There is incentive for the employer.

    I am also the employee. To correct the current year, I really need to fix the W2 lest I face the $500 penalty for filing a frivolous return that contradicts the W2. It means I must also fix all 3 other prior years so that they can’t make the claim that my own prior returns refute the nature of current earnings doing the same job for the same employer. I suppose that the IRS can’t go back any further than I can to correct the earlier forms. If they were to say 2005, 2004 & 2003 refute my character of compensation, I would say I would lawfully amend them, too, if they allowed it (but they are limiting their own liability).

  40. 40 Jeff W of Texas
    26 March 2009 at 08:53

    On ‘privately employed wage earner’: It is not the litmus test that applies to the statute. If the earner enjoys the benefit of employment arising out of federal power, property, privilege or position then it is a “wage” earner subject to the excise called federal income tax. It does not matter how employed, in what capacity, or what type of occupation. IRC sections 3401(a) and 3121(a).

    I’ve been studying this really hard because I plan to amend my returns as far back as the law allows. This means I may recoup a year’s worth of take-home pay. I’ve been an honest and ignorant filer, up to now.

    As simply as I can put it: we individuals are the final authority of what we file on our returns. Under the law, a third party may allege to the IRS that they paid you “wages” that are taxable (to the best of their [limited] knowledge). We have the right to dispute and rebut that claim on form 4852. Supplying that with our 1040X return and not the contradictory W2, they must abide by it. Providing self-contradictory returns are frivolous! Congress provided us with our rights to answer allegations. We do not need to compel a third party to amend their information, which is good news because we rarely have that power.

    Note that if that third party provides the IRS reason to believe we owe the IRS an answer, they have the authority to compel it from us. As long as we have no federal “income”, it’s simple enough to set them straight.

  41. 41 Ecclesiastes
    26 March 2009 at 15:46

    “As simply as I can put it: we individuals are the final authority of what we file on our returns.”

    As simply as I can put it: what you claim is ridiculous.

    Is every individual the final authority on whether the traffic light was red or green? Is every individual the final authority on whether a contract exists or whether it was performed? Was O.J. Simpson the final authority on whether he murdered his wife?

    It sounds as though you’ve been reading Hendrickson’s stuff also. He’s been indicted for acting on his beliefs, and you need to be careful you don’t do the same.

  42. 26 March 2009 at 23:10

    @Ecclesiates: I appreciate your return. However, I don’t appreciate you blasting people and calling them ridiculous. If they are indeed “ridiculous” then show them why – quote some court cases or something. No?

    @Jeff: I don’t know if you have read CtC or not. But you must be aware that all words have strings attached to them. This is especially true with the word “wage.” If you go to court and tell them that you make a wage, whether it be “private wage” or “federal wage,” you owe taxes on that wage. You will lose if you make that arguement. Please check out United States v. Latham:

    “Similarly, Latham’s instruction which indicated that under 26 U.S.C. § 3401(c) the category of ‘employee’ does not include privately employed wage earners is a preposterous reading of the statute. It is obvious that within the context of both statutes the word ‘includes’ is a term of enlargement not of limitation, and the reference to certain entities or categories is not intended to exclude all others.” United States v. Latham, 754 F.2d 747, 750 (7th Cir. 1985).

    It is my belief that Latham lost not because he knew he didn’t make wages as a federal employee, but because he stated on his own account that he made wages. WAGES ARE TAXABLE.

    I will warn you that the IRS specifically calls out Latham in rebuttal to the idea that only government employees make wage of which can be taxed. (See here) However, there are many things that they don’t tell you about Latham – namely that he didn’t file an income tax for multiple years and that he submitted a fradulent W-4 to his payer. So in other words, Latham said “I am not a government employee, therefore I am not even going to send in a 1040.” I think that is wrong, and with that in mind, I agree that Latham was wrong. I know the same goes for Sullivan, which is quoted… and quite possibly the other two quoted cases too.

    I do agree with Ecclesiastes in that we are not the final authority as you had mentioned. We do have the right to correct the record as anyone does with the 4852. However, if you put nonsense down on a form, then you need to be able to back that up. On a neutral subject relating to taxes, let’s say that you state that you donated $100,000 to Goodwill. If you did, then you should have receipts to prove that. Simply because you put it on a form doesn’t mean that it is right or that you have the ultimate authority.

    With that said, I do find it interesting how a particular form is filled out and signed under perjury and the IRS comes in and pretty much goes “no, what you put is frivolous” and then provides no evidence to prove otherwise. It seems that if they don’t like what you have to say, then they just alter it to fit their needs. If Ecclesiastes cares to come back I would be interested in where in the Code it specifically deligates the authority to change someones sworn testimony without a court hearing and without any evidence provided against the form filer.

  43. 43 Jeff W of Texas
    27 March 2009 at 09:06

    26 USC 6020 says:
    “(a) Preparation of return by Secretary
    If any person shall fail to make a return required by this title or by regulations prescribed thereunder, but shall consent to disclose all information necessary for the preparation thereof, then, and in that case, the Secretary may prepare such return, which, being signed by such person, may be received by the Secretary as the return of such person.
    (b) Execution of return by Secretary
    (1) Authority of Secretary to execute return
    If any person fails to make any return required by any internal revenue law or regulation made thereunder at the time prescribed therefor, or makes, willfully or otherwise, a false or fraudulent return, the Secretary shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise.
    (2) Status of returns
    Any return so made and subscribed by the Secretary shall be prima facie good and sufficient for all legal purposes.


    This says that anyone who doesn’t file a return and discloses something about taxable wages gives the IRS reason to file on their behalf. This being the only information they have, it is without dispute or rebuttal, prima facie. (2)

    A Employer copy W2 is information he does obtain otherwise and without rebuttal is the secretary’s best knowledge. (1)

    I have ordered CtC. Quoting Mr. H:
    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.”

    To shorten: If the assistant assessor increases the return, the filer may declare the true amount and that will be the sum to assess.

    A “frivolous” claim has special qualifications, among which is self-contradiction and incompleteness (like not signing), and carries a $500 penalty. Thus if the W2 you attach says $50,000 and you file a different number like 0, it contains a contradiction. That contradiction is still there if you add (not replace it with) a 4852 correction. The IRS can’t arbitrarily reject it as frivolous; they have to have cause, as it carries a penalty.

    My difficulty is when to avoid using terms that the IRS MUST interpret with “strings attached”. I’m struggling with words to use outside of their box since they were including this entire thesaurus of words to describe taxable income. How, for instance, do you describe having relationship with a private, non-governmental entity that is not within their purview according to the excise laws of the United States? No IRS employee you will take to acknowledges any limit to their domain, if they knew of any limit. The lack of any terms forces one to make claims that don’t sound true: “I didn’t have any ‘WAGES’ because I wasn’t ‘EMPLOYED’ by a ‘CORPORATION’!” (As defined under title 26 within the excise laws of the U.S.) Then they ask, “What kind of relationship did you have with the payer on this W2, who swears you had WAGES?” “Uhhh… none?”

    I have yet to receive his book, and so I have been reading his website. I can find his case law citations, but it is harder to verify his US Code references. He sites original acts of congress, re-enactments, and 1913, 39, and ’54 codes, but I’m challenged to find the current (1981?)US code that references its own origins. A gets its authority from B who got it from C but who knows if there isn’t a revising code that overrides A? He goes to prior codes and statutes because some of the code, many titles, 26 among them, have not been fully adopted! As such they are color of law, prima facie, so one must dig below the surface.

    I want to understand, follow, adhere and apply the law. He makes a strong case that government can prey upon the ignorant. There’s way to much history to give us cause to distrust power.

  44. 44 Ecclesiastes
    1 November 2009 at 06:25

    Peter Hendrickson, the author of “Cracking the Code,” was convicted last week of 10 counts of willfully filing false income tax returns and is now facing a possible 30 years in prison. (He’ll probably only get 2-3 years in prison based on federal sentencing guidelines.)

    If you’re still following the strategy Hendrickson advocates in his book, you might want to think again.

  45. 1 November 2009 at 22:18

    This is true that Peter Hendrickson was convicted as stated above.

    However (and I am sure the “gurus” such as Ecclesiastes will disagree about), many things went wrong. (1) The judge told the jury they could not see the law – he simply stated “this is what the law says.” In reality, the law is the law and not for the judge to tell the jury what it is and is not. (2) Hendrickson was convicted of 10 counts of willfully filing false income tax returns. In reality, how is this even true? For one to willfully file a false income tax return then you have to consciously know that what you are doing is unlawful. Why would Hendrickson file returns for so many years, many of them being denied and him being penalized, if he did not truly believe in it. People like Ecclesiastes want you to believe that someone has spent half their life researching the tax code, filing returns as they felt lawful, writing a book, and fighting for years with the IRS just to do something he knew was wrong. It seems unlikely that someone would go through years and years, court case after court case if they simply were a fraud.

    I advise you to check the laws out for yourself and to not listen to people who think they know it all such as the poster above. If nothing else, read my article entitled, I Can Prove That You Are a Slave in America (link).

    Lastly, I am not swayed by the loss and nor are any of the people who have read Hendrickson’s book. I hope that you too find the truth. Thanks for the reminder Ecclesiastes, I hope that you and your buddies are having fun in your self-indulged slavery.


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Quotes:

"We are apt to shut our eyes against a painful truth... For my part, I am willing to know the whole truth; to know the worst; and to provide for it." - Patrick Henry

"Politicians and diapers both need to be changed, and for the same reason." - Anonymous

"Right is right, even if everyone is against it, and wrong is wrong, even if everyone is for it." - William Penn

"Naturally the common people don't want war; neither in Russia, nor in England, nor in America, nor in Germany. That is understood. But after all, it is the leaders of the country who determine policy, and it is always a simple matter to drag the people along, whether it is a democracy, or a fascist dictatorship, or a parliament, or a communist dictatorship. Voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is to tell them they are being attacked, and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same in any country" - Hermann Goering

"I know that nothing good lives in me, that is, in my sinful nature. For I have the desire to do what is good, but I cannot carry it out. For what I do is not the good I want to do; no, the evil I do not want to do this I keep on doing." - Romans 7:18-19

"Twenty years from now you will be more disappointed by the things you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover." - Mark Twain

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