24
Nov
09

Are You An Employee?

What would you do if someone told you for the purposes of taxation, you were not an employee when you went to work as a private-sector worker? Would you believe them?

26 USC § 3401(c) defines an “employee” as follows:

Employee For purposes of this chapter, the term “employee” includes an officer, employee, or elected official of the United States, a State, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing. The term “employee” also includes an officer of a corporation.

Admittedly, at first glance you read the word “employee” and go, oh yeah, I’m an employee. But let’s break out some old school grammar and get down to what this says.

The first part of the sentence are the people eligible – “officer, employee, or elected official.” The second part of the sentence are the location limiters – “United States, a State, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing”

So what we have is…
Officer, employee, or elected official of… the United States
Officer, employee, or elected official of… a State
Officer, employee, or elected official of… any political subdivision thereof
Officer, employee, or elected official of… District of Columbia
Officer, employee, or elected official of… any agency or instrumentality of any one or more of the foregoing

Are you any of those?

You may be going, “well, it says that the definition ‘includes’!” Of course. In laymen’s thought, why would congress name “Employees of… whatever” if the term “employee” includes all these employees already. If you are an employee of the United States (think, FBI agent or something), then aren’t you already an “employee” by common definition. Of course you are. So why define it again?

The answer is simple, because when words are defined in law, they ignore all common definitions. For instance if Congress decided to say “for the purpose of this chapter, ‘gas’ is to be defined as natural gas” then whenever you read the word “gas” then you would know that the law was not referring to gas that you pump at BP or QuickTrip, but rather natural gas.

Likewise, for Title 26 (tax law) the word “includes” is specifically defined. So, we can conclude that the word “includes” no longer means “in addition to” but rather whatever they defined it to be. In this case, in horrible wording, they defined it to mean inclusive of things within the same scope. Confusing right?

Let’s try to make an example. “For the purposes of this chapter ‘gas’ includes natural gas and bio gas.” So for this, we would conclude that natural gas and bio gas are “gasses” but we could also conclude that gas from landfills is included as well because landfill gasses are a type of bio gas. We could also say that town gas is included because it is a sub-type of natural gas. However, we could not conclude that gas put in your car to be a “gas” under this law.

So, who cares if you are or are not an employee? Well, everyone should! Only these select “employees” are the ones that make “wages” (also a custom term) and wages are taxable. Title 26 does not specify how to handle your money if you are not making “wages.” So if you are not an “employee” and you don’t make “wages” then you are probably paying more taxes then you should, permitting that you read and know the law.

Check it out. You might be surprised.

 

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"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

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