Tax Victory?

In late 2018 early 2019, I was dealing with some issues that revolved around the mortgage that I had just entered into in June of 2018. I am a big fan of the movie “The Big Short,” which was about the housing market bubble and subsequent crash of 2008. I also invest in the stock market, so, the housing market debacle really peaked my interest in regards to “The Big Short.” Not to mention, there’s some great actors in it as well which really helped drive home the enormity and severity of the situation that seemingly the entire world was missing. I took this information to heart and decided to see if my mortgage had become a part of the same fraudulent and criminal enterprise known as the “securities bonds market” in which mortgages are held in “Mortgage Backed Securities” or “MBS.” These markets on their own are not fraudulent or criminal so I set out to find any information I could regarding this situation and if I was inadvertently part of it.

I went down to my local recorders office at the court house to get the recorded documents the bank filed at the time of closing on our house. Mortgage packets are rather large “contracts” and depending on the price per page the court house charges for these documents, it can get pretty pricey. There were so many inconsistencies and discrepancies in my documents that the county recorder told me I had enough problems to work out with these documents that she wasn’t going to charge me for printing off all the signed copies (which only contained my signature). Through this process, I also searched the tax records on the property that the mortgage was for. This brought up some serious questions regarding my tax status with the IRS as well as my property taxes and how it is required in the tax code if at all. So, I set out to read the tax code.

My entire life, all I’ve ever heard was that it would take someone 300+  years (I don’t remember the specific time frame) to read the entirety of the tax code start to finish. Challenge accepted. I started reading 26 USC from Cornell Law’s website which was far easier than I thought. I didn’t just dive into the code at first. I browsed around the sub-titles for a while to see if anything jumped out at me that I should read first. Subtitle A being “Income Taxes,” I went back to the beginning, as one would suspect, and started there. Inside this subtitle Chapter 1 “Normal Taxes and Surtaxes” seemed like the right place to be. I proceeded through that door. Sub-chapter A “Determination of Tax Liability” seemed like a great place to start as it likely held all the answers to my questions about who was liable for an income tax… I was incorrect. There wasn’t much info except tax tables showing you how to compute your tax burden AFTER you’ve determined you actually have a tax liability. That was not the answer I was looking for. I first needed to determine if I was liable for a tax. The rest of chapter 1 only pertained to corporations and estates (treated as corporations).

I went back to the Subtitles. It wasn’t Subtitle A that was needed, even though “Income Taxes” seems like the logical place to start. Subtitle C “Employment Taxes” was where I went next as the rest of 26 USC subtitles only pertained to corporations and federal organizations. Subtitle C, Chapter 24 “Collection of Income Tax at Source on Wages” was the ticket. Everything else within Subtitle C was for Federal Insurance companies, corporations, or the Railroads. Obviously that didn’t pertain to me so I went with Chapter 24. The first sub-chapter in Chapter 24 is “definitions.” This was the ticket. This is the MOST important thing when attempting to understand statute or the law. The language we use daily is generally not the language used within statute. The words may be the same but generally speaking, the definitions of those words are almost always in contradiction to our lay-man understanding.

I went into this with the intention of defining everything from the statute. This way, I couldn’t be misled or mistaken as to what the forms we file are saying or referring to. This also applied to my understanding of who I was in regards to the title “tax payer.” Was I a tax payer, or was I to be labeled a “tax protestor” or “evader.” Well of course I protest the tax because it’s taking money away from my family. I’m not okay with that but if I’m required to pay it, I will do so. It will be under protest but I will “comply.” If I have no tax liability, you can bet your future paychecks that I will be ceasing all tax payment activity. So, what needed to be defined? When you get a job, what are you called? An EMPLOYEE. When you fill out your W-4 (required for “official” employment) what are you pledging? A dollar amount to be taken from your WAGES for tax prepayment which is also what shows up in the boxes of your W-2 come January. These are the first two things I sought out in the definitions section. I opened up the definitions section and guess which definition was the 1st shown at the top of the page?

(a) Wages

For purposes of this chapter, the term “wages” means all remuneration (other than fees paid to a public official) for services performed by an employee for his employer, including the cash value of all remuneration (including benefits) paid in any medium other than cash; except that such term shall not include remuneration paid—

 

What does this mean exactly? This means that wages are only defined as “benefits” being paid to you in anything other than cash. In a real world practical scenario, this would be a stock option paid to you instead of say 10% of your salary. Let’s say your salary is $100,000. You would receive $90,000 through out the year in your paychecks and $10,000 in stocks from the company you work for. If the company stock is worth $100/share, means you’ll receive 100 shares of the company over the course of the year (providing the price of the share never fluctuates). That stock paid to you is by definition a “wage.” That being said, do you have wages (benefits paid in anything other than cash)? Most W-2 laborers don’t actually receive wages. Yet their W-2 says they have wages equal to the cash value of their direct deposit in their demand deposit account. Is that not cash? Is a payroll check not a version of cash? Yes. So why does your W-2 say you are receiving benefits you are unaware of? Great question. I will explain that later as it’s a very simple answer but one most people don’t understand or want to understand.

The very first thing that I wanted to define was “Employee” but it’s as if the definitions page was reading my mind and wanted me to know that I am not being paid wages. That still left the question of whether or not I’m an employee. Luckily within the definition of “Wages,” is the definition of employee as well as employer. I clicked on that link and found this gem…

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. –26 USC § 3401(c)

Most of the time I will get a single “light bulb” moment. On a great productive day, maybe 2 “light bulb” moments. Reading this definition of employee changed my life. After all, this is the definition that pertains directly to us all since this is within the “Collection of Income Tax on Source at Wages” section of the tax code. We’re told we have to pay an income tax so this section tells us exactly who needs to pay. Well, they’re right. Employees do need to pay an “income tax.” However most people I know, aren’t employees according to the tax code itself. This blew my mind but I also became very angry at the idea that I’ve been mislead and lied to my entire life which has cost me tens of thousands of dollars in my professional career. First thing I did was called up the IRS. Now that I had this great information, I needed to know how to file taxes properly. What forms do I need to file? What should I put on my W-4? So many questions. I recommend anyone reading this call up the IRS customer service line and ask the following questions.

I told the first person that picked up at the IRS that I was just reading through the tax code and found that I don’t meet the definitions of “Employee” nor do I receive “Wages.” The response was so simple and frankly idiotic, I didn’t even know how to respond. “Well, you get a W-2 right?” Of course I get a W-2 but I know now that the information on the W-2 is incorrect. I replied “Ya, I get a W-2 but I’m not an employee according to your definition and I don’t receive wages, so, why am I receiving a W-2 with incorrect information on it and how do I fix this issue?” Surprise, surprise… Their answer was, “you receive a W-2 therefore you’re an employee who receives wages.” This is where I knew that the IRS wasn’t interested in telling the truth, if they even knew what the truth was. I attempted to have a logical conversation in an attempt to further explain myself in the off chance that the person I was talking to just didn’t understand what I was getting at. I had my laptop out with the statutes pulled up and I read them to the IRS directly. Again… Their answer was “You receive a W-2, so you are obviously an employee who receives wages.”

At this point, I was starting to get irritated and it likely showed. The agent I was talking to said they were going to forward me to a “tax law professional” that could hopefully answer the questions I had been asking. They hung up… I called back. Had the exact same conversation with the 2nd agent. They transferred me to a “tax law professional” as the previous agent claimed. The 3rd agent answered saying “Hello, this is John Doe, IRS Tax Law Professional.” I was pretty excited. I finally had someone that would be able to be on the same page as me regarding the tax code. I thought maybe I was misinterpreting the statute so hopefully this person would either confirm my beliefs or set me straight on what the code actually meant. This was my favorite conversation between the 3 agents by far. I started this exchange the same way I did with the first 2 agents. Their two part response went like this. 1.) “I’m not a tax law professional so I can’t comment on the tax law.” WHAT? You answered the phone with the title of “TAX LAW PROFESSIONAL!” Now I knew beyond a shadow of a doubt that I was on to the truth and was asking the right questions. This fact was further supported by the 2nd half of their response which was to direct me to the IRS form SS-8. The agent proceeded to show me that in the instructions for the SS-8 form, it defines an employee as “under the common law rules a worker is an employee if the firm has the right to control what will be done and how it will be done.” I snapped back that this form only pertains to Social Security benefits and ones determination of whether or not you have to pay SS taxes. “I’m not an employee per 26 USC definition so I shouldn’t be paying SS taxes either. So, what do I have to file in order to fix this problem?” Again, circled back to the SS-8 form and proceeded to tell me that “you receive a W-2 so you are an employee…” At this point I said I needed to talk to someone above them that actually knew what the code said and how to properly file the new found information. They hung up on me…

This all happened within two hours one rainy afternoon. I was so confused but so pumped at the same time. I knew I was on to a bright tax future but was even more lost than before because now I needed to figure out how to file my taxes properly to receive the money back that was erroneously taken from me. I scoured the internet for months. Read a ton of blogs and seemingly shady articles that all seemed to be proving that most people aren’t liable for a tax. I knew this but no one shed any light on how to fix the issue. FINALLY! I came across a website that talked about and even showed what appeared to be authentic results of people’s returns for ALL of the taxes that they paid in for a specific year. Needless to say, I was wildly intrigued though a bit skeptical. I read all the articles, comments, and even poured over the user submitted documents claiming their success. I decided that I was going to try something first. I felt that I needed to put the IRS on notice legally that I was not a tax payer and that I would no longer be contributing to their “voluntary” system. I typed up a 13 page contract with all of the relevant statutes from the tax code and told them they had 45 days (I know the IRS is “busy” and would need extra time to respond) to negate my claims should I be inaccurate. That was in May of 2019 and at the time of this writing (Dec 2022) have yet to hear a response from them. This is what’s called “tacit pro-curation.” Debt collectors do it all the time and it’s a valid legal principle that confirms the claims in the paperwork if you don’t dispute it in the time given and specified in the same documents. For example, I gave the IRS 45 days to refute my claims. If they failed to do so, which they did, my claims were to be considered correct and accurate legally and that was contractual.

The next day I worked, I submitted a new W-4 to file exempt so I could stop state and federal tax withholding. Waited until my next paycheck to confirm my employer was not going to cause any problems and everything went well. I didn’t file my taxes for a couple years as the IRS website states if they owe you a refund, you have 3 years to file for that refund. The next 2 years were spent reading and researching how I was supposed to file given this new found information I had regarding my tax liability, or the lack thereof. The IRS was worthless when it came to looking for direction. I found no clear direction except through the supposed success stories I had been reading about. I was a little apprehensive to just start filing documents I didn’t understand with the monster that is the IRS so I held off even though my confidence in the next steps and the process overall was growing daily.

It’s now early 2021. My family and I are preparing to make a large move across the country. We have been looking at houses and are about to submit an offer on a house we love and the bank we’re “financing” through says I need to submit the last 2 years of tax returns for the underwriters review. Standard procedure but up until this point, I had completely forgotten about my tax status and the weird situation I was in. I called the bank and explained my situation to them. They were a little confused at first but curious mostly as I’m sure they’d never come across this type of situation before. We came to an agreement that I would submit my returns to the bank as I thought they should be filed with the IRS and they will see what the underwriters have to say. There was not really any doubt from the bank at this point. Boy, did that change. The next day, the same guy from the bank calls and tells me that the underwriters won’t proceed with the mortgage because I’m now considered a “liability” because they believed what I was doing was tax fraud and tax evasion. I explained again the situation and that it’s perfectly legal and in fact the IRS provided all the documents as they’re all pertinent documents necessary for a tax return to be filed. Didn’t matter. I was a criminal at this point in the eyes of the bank. I asked to speak with a supervisor. I again, explained the scenario and said to push the process through to the underwriters again and have them call me if they have any questions or concerns about my returns. The supervisor then told me that they would do no such thing and that I was to scrap these returns and “file your taxes normally” or I wouldn’t be approved for a mortgage. I was appalled at the direction this conversation had taken. The bank was now attempting to control my relationship with the IRS because they didn’t understand the tax code. After another 5-6 minutes of the bank threatening me, I told them that I will file the taxes as the bank required even though I now know it was fraudulent but due to threat and coercion, I must follow their demands or I wouldn’t be accepted for a mortgage at any “lending” institution. After I was approved for the mortgage, I would file amended returns to correct the issues and return my taxes that I was forced to pay and then send pictures of the checks to the people at the bank proving I was correct and that they better advise their staff on the treatment of their “customers” when presented with something they don’t understand.

We finally close on our house in the fall of 2021 and I submit the amended returns to the IRS in the spring of 2022 for tax years 2019, 2020, and 2021. December of 2022 and I receive a full refund for the year 2020. Most people I told about it thought that it was a mistake and that the IRS would certainly be looking for the return of that money shortly. February 2023 rolls around and I got a letter from the IRS. My heart sank. I thought for sure this was the letter saying they screwed up and incorrectly issued my 2020 refund check. Couldn’t have been farther from reality. It was to my surprise a notice of paid due interest. The IRS sent me a notice stating that the check I received in December included interest that I had overpaid. I laugh every time I think about this because this was the IRS’ version of a legal notice claiming immunity from lawsuit for failure to refund interest owed for 2020 tax year. The IRS was acknowledging that my return was legitimate and that I couldn’t sue for failure to pay interest because it was already included in the refund check.

COMPLETE AND TOTAL REDEMPTION!! I immediately took to social media to spread the word that this process is legitimate, my research was accurate, and, what I’ve been saying and teaching has come to fruition. I now had my own experience with full physical evidence to back up all of my claims. Was this a mistake on behalf of the IRS? No. Here’s how I can prove it. The IRS is a collection agency at it’s legal core. It is registered as a collection agency so they have to follow all of the statutes within 15 USC 1692 (The Fair Debt Collection Practices Act). Therefore, when you make a mistake on your return, they’re legally obligated to notify you of the mistake in writing and give you statutory time to cure (rectify) the mistake. At the time of this writing, it is April 16, 2023 and the IRS has made no attempts to contact me via writing to raise issue with the refund. Mix that with the notice saying they’re paid in full including interest and you have a perfect return that can’t be claimed to have been done in error.

Going forward, I will be adding classes to the website that will start with taxes. I will be walking you through step by step what I did to file both an “in-season return” and an amended return. It’s not complicated but if you decide to make this change, you have to understand all aspects of the process. KNOW WHO YOU ARE!