Not Written for You: The Income Tax Hidden in Plain Sight
Part 3 of 13
What Are You Signing?
You have signed a W-4. You have probably signed a W-9. You signed both without reading the law behind them. So did the person who handed them to you.
These forms have something in common that almost no American knows. They are all withholding certificates. The Secretary of the Treasury says so in his regulations:
W-8. W-9. All withholding certificates. All used to establish "status" for withholding purposes. All existing within chapters 3 and 4 of the tax code.
Chapter 3 is titled "Withholding of Tax on Nonresident Aliens and Foreign Corporations." Chapter 4 is titled "Taxes to Enforce Reporting on Certain Foreign Accounts."
Both deal with foreign persons. Neither mentions Americans doing ordinary business with other Americans.
Who Receives a Withholding Certificate?
A withholding certificate goes to a withholding agent. Nobody else. The statute that establishes the withholding agent's role reads:
That is the statute. The regulation restates its core principle more concisely:
Note the preamble: this definition exists for purposes of chapter 3, which is titled "Withholding of Tax on Nonresident Aliens and Foreign Corporations." The withholding agent handles income belonging to a foreign person. If no foreign person's income is involved, there is no withholding agent. And if there is no withholding agent, there is no one to receive a withholding certificate.
What the W-9 Makes You Swear
The W-9 requires a signature under penalty of perjury. Among the certifications: you are swearing to your "nonforeign status for the purpose of withholding under chapters 3 and 4." You are also certifying you are exempt from FATCA, a law about foreign financial accounts.
Why would a plumber in Georgia need to swear he is not a foreigner to receive a payment from a homeowner in Georgia?
Under the law, he wouldn't. The W-9 exists to identify "U.S. persons" in the pipeline of foreign-owned income. When you sign one, you declare yourself to be inside that pipeline. You place yourself within a system built for a transaction you are almost certainly not part of.
What the W-4 Makes You Swear
The W-4 is titled "Employee's Withholding Certificate." You fill it out on your first day at work. Withholding begins.
We know from Part 2 that "employee" means government workers. We know from Treasury Decisions 8734 and 8881 that wage withholding applies to U.S. source income paid to foreign persons. When you sign a W-4, you are declaring: I am the person this system was built for. Please withhold.
What the Form Doesn't Tell You
The W-4 is titled "Employee's Withholding Certificate." Right on its face, it tells you what it is. You are signing a withholding certificate. No ambiguity.
The W-9 is titled "Request for Taxpayer Identification Number and Certification." It does not say "withholding certificate" anywhere on the form. Yet the Secretary's own regulations classify it as exactly that. The W-9 is a withholding certificate that does not disclose its nature to the person signing it.
One form tells you what you are signing. The other does not.
Why This Matters
Tax law is regulatory law. What matters is not whether you are truly the person upon whom the tax was imposed. What matters is what you declared on the form you signed under oath.
Sign a W-9, and you create a legal declaration that you are a U.S. person in the foreign-income pipeline. The requester files a 1099. The IRS starts tracking whether you file a return. Sign a W-4, and withholding begins. A W-2 is filed. The IRS expects a 1040 — a return that every Treasury Decision since 1913 says is for nonresident aliens.
Nobody made you read the law before you signed. Nobody at the company had read it either.
Next: We follow the money to the documents that confirm everything — Treasury Decisions 8734 and 8881.
You must be logged in to post a comment.