The most important aspect of your relationship to the IRS and state taxing authorities is the withholding forms you fill out which identify your citizenship, domicile, and taxpayer status. They are the first contact most people ever have with the tax system and they can have a profound and long-lasting affect on the future interactions one might have with the government. If you either fill out the wrong withholding form or you fill out the right form incorrectly, you can severely prejudice your rights under the law. Nearly every American knows about the IRS Form W-4 withholding form because the private company they work for has most likely mandated (illegally, we might add) that it be filled out and submitted before they are allowed to start work. Not many people, however, know that this is the wrong form to fill out for most Americans and that there is another, better form that more truthfully and accurately represents their status to the payroll department. That form is the IRS Form W-8BEN. Those who submit this form are exempt from backup withholding and 1099 reporting:
"Foreign persons who provide Form W–8BEN, Form W–8ECI, or Form W–8EXP (or applicable documentary evidence) are exempt from backup withholding and Form 1099 reporting."
[IRS Publication 515, year 2000, p. 3]The IRS form W-8BEN identifies the submitter as a "nonresident alien" (OFFSITE LINK), which is the status that most Americans born in states of the Union have by default. We won't explain here all the nuances of why this is the case, because you can read as much detail about the subject as you like in the following sources:
Nonresident Alien Position, Form #05.020-memorandum of law on why people domiciled in states of the Union are nonresident aliens
You're Not a "resident" under the Internal Revenue Code (OFFSITE LINK)
You're Not a "citizen" under the Internal Revenue Code (OFFSITE LINK)
Very briefly, the reason that "nonresident alien" is the correct status for Americans born anywhere in the country and domiciled in states of the Union is that they are:
"nationals" under 8 U.S.C. §1101(a)(21) (OFFSITE LINK) because they owe allegiance to their state, which is "foreign" (OFFSITE LINK) to the legislative jurisdiction of the federal government.
"
http://sedm.org/Forms/MemLaw/WhyANational.pdf"state nationals". See the pamphlet
Not statutory "citizens" as defined in 8 U.S.C. §1401. Click here for an article on this subject.
Not statutory "residents" or "aliens", which are equivalent, as defined in 26 U.S.C. §7701(b)(1)(A) (OFFSITE LINK) . Click here (OFFSITE LINK) for an article on this subject.
Not "individuals". All "individuals" are federal "public officers" or "franchisees" domiciled on federal territory. See:
5.1 Why Your Government is either a Thief or You Are a Public Officer for Income Tax Purposes, Form #05.008
http://sedm.org/Forms/MemLaw/WhyThiefOrEmployee.pdf
5.2 Why Statutory Civil Law is Law for Government and not Private Persons, Form #05.037
http://sedm.org/Forms/MemLaw/StatLawGovt.pdf
5.3 Government instituted slavery using franchises, Form #05.030
The IRS Form W-4 can only be used for public (government) employment withholding. This is confirmed by the content of 26 CFR §31.3121(b)-3(c), which says that services performed outside the "United States", which is defined ONLY as the "District of Columbia" in 26 U.S.C. §7701(a)(9) and (a)(10) and not expanded anywhere else to include states of the Union, do not constitute "employment" within the meaning of I.R.C. Subtitles A and C.
Title 26: Internal Revenue
PART 31—EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE
Subpart B—Federal Insurance Contributions Act (Chapter 21, Internal Revenue Code of 1954)
General Provisions§ 31.3121(b)-3 Employment; services performed after 1954.
(a) In general. Whether services performed after 1954 constitute employment is determined in accordance with the provisions of section 3121(b).
(b) Services performed within the United States [District of Columbia]. Services performed after 1954 within the United States (see §31.3121(e)–1) by an employee for his employer, unless specifically excepted by section 3121(b), constitute employment. With respect to services performed within the United States, the place where the contract of service is entered into is immaterial. The citizenship or residence of the employee or of the employer also is immaterial except to the extent provided in any specific exception from employment. Thus, the employee and the employer may be citizens and residents of a foreign country [such as states of the Union] and the contract of service may be entered into in a foreign country, and yet, if the employee under such contract performs services within the United States, there may be to that extent employment.
"(c) Services performed outside the United States—(1) In general. Except as provided in paragraphs (c)(2) and (3) of this section, services performed outside the United States (see §31.3121(e)–1) do not constitute employment."
Private employers who decide to use the W-4 effectively become "public employers" by partaking in the governments social insurance scheme and must turn their formerly private employees into "public officers" and Kelly Girls on loan from Uncle Sam as part of this "scheme".
IRM 5.14.10.2 (09-30-2004)
Payroll Deduction Agreements2. Private employers, states, and political subdivisions are not required to enter into payroll deduction agreements. Taxpayers should determine whether their employers will accept and process executed agreements before agreements are submitted for approval or finalized.
[SOURCE: http://www.irs.gov/irm/part5/ch14s10.html]However, the IRS form W-8BEN, unlike the W-4, has many appropriate uses. It can be used:
To stop "employment" withholding. When this form is submitted, the employer must stop ALL withholding, including Medicare, Socialist Security, and FICA, and Federal Income Tax.
Change your legal "domicile" (OFFSITE LINK) to a place outside the jurisdiction of the federal government and the tax laws. See block 4 of the W-8BEN form.
Open tax-free accounts at financial institutions, all without a "Taxpayer Identification Number" (OFFSITE LINK)
Change your status with the IRS to that of a "nontaxpayer" (OFFSITE LINK) .
To Stop W-2 earnings reports to the Federal Government.
To avoid the W-4 Exempt penalty of $500. There is no regulation that allows the submitter of a W-8BEN to be penalized for submitting it, even if it is wrong.
Most people don't know about this very useful form, and the main reason is because the government doesn't want the secret getting out! The IRS has done their best to discourage people from using this form by, for instance:
Emphasizing that nonresident aliens under 26 U.S.C. §871(a), who have earnings not connected with a "trade or business" are subject to a flat 30% tax rate, even though this tax only applies to corporations involved in very specific types of transactions and does not apply to natural persons. This deceives natural persons into avoiding being nonresident aliens in order to avoid paying a usually higher tax rate, when in fact, such an approach would produce NO tax liability in most cases.
Not putting anything on the form about the fact that nonresident aliens with no earnings connected with a "trade or business" are not subject to withholding, even though the regulations at 26 CFR §31.3401(a)(6)-1(b), shown below, indicate that no withholding is required. Since the form doesn't mention that nonresident aliens in most cases are not subject to withholding, then people naturally gravitate to the W-4, because it is the only IRS form that mentions an exemption from withholding. This causes them to use the WRONG form, thus maximizing the illegal flow of donations to the IRS by misinformed and deceived Americans.
Not putting anything on the form indicating that no Social Security Number is required in the case of nonresident aliens, even though the regulations at 26 CFR §1.1441-6(c)(1) say none is required.
By not mentioning that nonresident aliens not engaged in a "trade or business" do not earn any "taxable income", as shown below and in 26 U.S.C. §864(b)(1)(A), 26 U.S.C. §861(a)(3)(C)(i), 26 U.S.C. §3401(a)(6), 26 U.S.C. §1402(b).
By not providing any other form for use by nonresident aliens that will stop withholding other than the W-8BEN and the 8233 and doing a very confusing job in their
There are many reasons why the IRS form W-4 is not the correct form, and those reasons are beyond the scope of this article because covered much more thoroughly elsewhere. The most authoritative articles on the subject are listed below:
Great IRS Hoax (OFFSITE LINK), section 5.6.20: Why you aren't an "exempt" individual. This section clearly establishes that most Americans SHOULD NOT be filing a W-4 Exempt. Read and heed!
Sovereignty Forms and Instructions, Instructions 4.13: Stop Employer Withholding of Income Taxes (OFFSITE LINK)
Great IRS Hoax (OFFSITE LINK), section 5.6.7: You Don't Earn "Wages" so your Earnings Can't Be Taxed
Great IRS Hoax (OFFSITE LINK), section 5.6.8: Employment Withholding Taxes are "Gifts" to the U.S. government
Great IRS Hoax (OFFSITE LINK), section 5.6.13: The Federal Employee Kickback Program Position
Great IRS Hoax (OFFSITE LINK), section 5.6.15: Your Private Employer Isn't Authorized to Act as a Federal Withholding Agent
Because of the many pitfalls of using the IRS form W-8BEN, you may decide to use our alternative or Substitute W-8 form that avoids all these pitfalls below. The following form avoids the use of all of the IRS' favorite "words of art" and very clearly spells out all the applicable laws so that the clerks are properly educated about the requirements of law:
Affidavit of Citizenship, Domicile, and Tax Status, Form #02.001
2. Citizenship, Domicile, and Tax Status Options Summary
There is much confusion over the various citizenship, domicile, and tax status options and their proper relationship to each other. The only reason given by most people for not adopting nonresident alien status is because they simply do not understand it well enough. The tables and diagrams in this section are presented to clear up that confusion so that you may make an informed choice about whether you want to adopt this status, which is the only correct status for a person born within and domiciled within a state of the Union.
Table 1: Citizenship status” vs. “Income tax status"
Citizenship status
Where born
Defined in
Tax Status under 26 U.S.C./Internal Revenue Code
“Citizen”
(defined in 26 CFR 1.1-1)“Nonresident alien”
(defined in 26 U.S.C. §7701(b)(1)(B))“Alien/Resident”
(defined in 26 U.S.C. 7701(b)(1)(A), 26 CFR §1.1441-1(c )(3)(i) and 26 CFR §1.1-1(a)(2)(ii))“U.S. citizen
District of Columbia, Puerto Rico, Guam, Virgin Islands
Yes
(only pay income tax abroad with IRS Forms 1040/2555. See Cook v. Tait, 265 U.S. 47 (1924)
No
No
“U.S. national
American Samoa; Swain’s Island; or abroad to U.S. national parents under 8 U.S.C. §1408
8 U.S.C. §1101(a)(22)(B);
8 U.S.C. §1408
8 U.S.C. §1452No
(see 26 U.S.C. §7701(b)(1)(B))
Yes
(see IRS form 1040NR for proof)No
“national” or
“state national”State of the Union
8 U.S.C. §1101(a)(21);
8 U.S.C. §1452;
Fourteenth Amendment, Section 1No
Yes
No
“Foreign national”
Foreign country
None
No
Yes
(if living outside the federal United States/federal zone)Yes
Table 2: Affect of domicile on citizenship status
Status
Domicile WITHIN
the FEDERAL ZONETemporary domicile WITHOUT the FEDERAL ZONE
Permanent Domicile WITHOUT the FEDERAL ZONE
Tax form(s) to file
IRS form 1040
IRS form 1040 plus 2555
IRS form 1040NR
Location of domicile
Federal territories, possessions, and the District of Columbia
Foreign nations ONLY
Foreign nations
States of the Union
Domestic national
Citizen
8 U.S.C. §1401(Not required to file if physically present in the “United States” because no statute requires it)
Citizen abroad
26 U.S.C. §911(Meets presence test)
National but not citizen
8 U.S.C. §1101(a)(21)8 U.S.C. §1101(a)(22)(B)
Foreign national
Resident
26 U.S.C. §7701(b)(1)(A)
Resident abroad
26 U.S.C. §911(Meets presence test)
Nonresident Alien
26 U.S.C. §7701(b)(1)(B)Alien
8 U.S.C. §1101(a)(3)NOTES:
1. American citizens who are domiciled outside of federal jurisdiction, either in a state of the Union or a foreign country, are “nationals” but not “citizens” under federal law. They also qualify as “nonresident aliens” under 26 U.S.C. §7701(b)(1)(B). See sections 4.11.2 of the Great IRS Hoax for details.
2. Temporary domicile in the middle column on the right must meet the requirements of the “Presence test” documented in IRS publications.
3. “FEDERAL ZONE”=District of Columbia and territories of the United States in the above table
4. The term “individual” as used on the IRS form 1040 means an “alien” engaged in a “trade or business”. All “taxpayers” are “aliens” engaged in a “trade or business”. This is confirmed by 26 CFR §1.1441-1(c )(3), 26 CFR §1.1-1(a)(2)(ii), and 5 U.S.C. §552a(a)(2). Statutory “U.S. citizens” as defined in 8 U.S.C. §1401 are not “individuals” unless temporarily abroad pursuant to 26 U.S.C. §911 and subject to an income tax treaty with a foreign country. In that capacity, statutory “U.S. citizens” interface to the I.R.C. as “aliens” rather than “U.S. citizens” through the tax treaty.
Because the states of the Union and the federal government are “foreign” to each other for the purposes of legislative jurisdiction, then it also follows that the definitions of terms in the context of all state and federal statutes must be consistent with this fact. The table below was extracted from the Great IRS Hoax, section 4.9 if you would like to investigate further, and it clearly shows the restrictions placed upon definitions of terms within the various contexts that they are used within state and federal law:
Table 3: Meaning of geographical “words of art” within the various contexts
Law
Federal constitution
Federal statutes
Federal regulations
State constitutions
State statutes
State regulations
Author
Union States/
”We The People”Federal Government
“We The People”
State Government
“state”
Foreign country
Union state
Union state
Other Union state or federal government
Other Union state or federal government
Other Union state or federal government
“State”
Union state
Federal state
Federal state
Union state
Union state
Union state
“in this State” or “in the State”[1]
NA
NA
NA
NA
Federal enclave within state
Federal enclave within state
“State”[2] (State Revenue and taxation code only)
NA
NA
NA
NA
Federal enclave within state
Federal enclave within state
“several States”
Union states collectively[3]
Federal “States” collectively
Federal “States” collectively
Federal “States” collectively
Federal “States” collectively
Federal “States” collectively
“United States”
states of the Union collectively
Federal United States**
Federal United States**
United States* the country
Federal United States**
Federal United States**
NOTES:
1. The term “Federal state” or “Federal ‘States’” as used above means a federal territory as defined in 4 U.S.C. §110(d) and EXCLUDES states of the Union.
2. The term “Union state” means a “State” mentioned in the United States Constitution, and this term EXCLUDES and is mutually exclusive to a federal “State”.
3. If you would like to investigate the various “words of art” that lawyers in the federal government use to deceive you, we recommend the following:
3.1. Sovereignty Forms and Instructions, Cites by Topic:
http://famguardian.org/TaxFreedom/FormsInstr-Cites.htm
3.2. Great IRS Hoax, sections 3.9.1 through 3.9.1.28.
[1] See California Revenue and Taxation Code, section 6017 at http://www.leginfo.ca.gov/cgi-bin/displaycode?section=rtc&group=06001-07000&file=6001-6024
[2] See California Revenue and Taxation Code, section 17018 at http://www.leginfo.ca.gov/cgi-bin/displaycode?section=rtc&group=17001-18000&file=17001-17039.1
[3] See, for instance, U.S. Constitution Article IV, Section 2.
Figure 1: Citizenship and domicile options and relationships
If you would like a single form containing all the citizenship summary information contained in this section, please download the following:
Citizenship, Domicile, and Tax Status Options, Form #10.001
http://sedm.org/Forms/Emancipation/CitDomTaxStatusOptions.pdf
3. Withholding on Nonresident Aliens
Nonresident alien tax withholding is described in the following:
Withholding of Tax on Nonresident Aliens and Foreign Corporations, IRS Publication 515
http://famguardian.org/TaxFreedom/Forms/IRS/IRSPub515.pdf (OFFSITE LINK
The IRS website contains propaganda intended to deceive private employers in the states of the Union into withholding earnings of nonresident aliens who have “income from sources within the United States” at:
NRA Withholding http://www.irs.gov/businesses/small/international/article/0,,id=104997,00.html
This propaganda advises “withholding agents” to withhold 30% of the payments made to nonresident aliens from “sources within the United States” and to file an IRS Form 1042 documenting the amount of earnings and withholding. The information provided is deceptive and constructively fraudulent, because:
1. The term “U.S.” means ONLY the District of Columbia in the context of the Internal Revenue Code Subtitle A income tax. See 26 U.S.C. §7701(a)(9) and (a)(10). They don’t define this term anywhere on their website that we could find. I wonder why? This is the only logical conclusion one can reach after reading the rulings of the Supreme Court on the issue of federal jurisdiction within states of the Union such as the following:
“It is no longer open to question that the general government, unlike the states, Hammer v. Dagenhart, 247 U.S. 251, 275 , 38 S.Ct. 529, 3 A.L.R. 649, Ann.Cas.1918E 724, possesses no inherent power in respect of the internal affairs of the states; and emphatically not with regard to legislation.
[Carter v. Carter Coal Co., 298 U.S. 238, 56 S.Ct. 855 (1936)]"The difficulties arising out of our dual form of government and the opportunities for differing opinions concerning the relative rights of state and national governments are many; but for a very long time this court has steadfastly adhered to the doctrine that the taxing power of Congress does not extend to the states or their political subdivisions. The same basic reasoning which leads to that conclusion, we think, requires like limitation upon the power which springs from the bankruptcy clause. United States v. Butler, supra."
[Ashton v. Cameron County Water Improvement District No. 1, 298 U.S. 513; 56 S.Ct. 892 (1936)]2. The Internal Revenue Code is NOT positive law, but private law and religion which obligates no one in a state of the Union to do anything who doesn’t first volunteer to be subject to its provisions by signing a contract called a W-4 or an SS-5. See our memorandum of law on this subject:
Requirement for Consent, Form #05.003
http://sedm.org/Forms/MemLaw/Consent.pdf
3. Even if the Internal Revenue Code was positive law or public law , private employers in states of the Union are not subject to federal jurisdiction and applying for an Employer Identification Number doesn’t make them subject either.
4. Private employers exclusively within states of the Union are NOT the subject of the article, because they do not qualify as “withholding agents” as we pointed out earlier in section 1.
5. The federal income tax described under I.R.C. Subtitle A is measured by the receipt of “income” in connection with a “trade or business” (OFFSITE LINK). This is the privileged activity being “taxed”, and it is an avoidable activity that few private employees are engaged in, because they do not in deed and in fact hold a privileged “public office” as required by 26 U.S.C. §7701(a)(26). See:
The "Trade or Business" Scam, Form #05.001The IRS website admits some of the truths above, but you really have to dig for it. In the International Taxpayer Glossary, it says the following about withholding of those who have no income from the District of Columbia:
Services performed outside the U.S
Compensation paid to a nonresident alien (other than a resident of Puerto Rico) for services performed outside the United States [District of Columbia] is not considered wages and is not subject to graduated withholding or 30% withholding.
[SOURCE: http://www.irs.gov/businesses/small/international/article/0,,id=96594,00.html]
IRS Publication 519, Year 2000 agrees with the above, by saying the following:
Income Subject to Tax
Income from sources outside the United States that is not effectively connected with a trade or business in the United States is not taxable if you receive it while you are a nonresident alien. The income is not taxable even if you earned it while you were a resident alien or if you became a resident alien or a U.S. citizen after receiving it and before the end of the year.
[IRS Publication 519, Year 2000, p. 26]
A person who meets the requirement above of being a nonresident alien with no income from the District of Columbia, whether connected to a trade or business or not under 26 U.S.C. §871, is described in the regulations as follows, under 26 CFR §871-1(b)(i):
Title 26: Internal Revenue
PART 1—INCOME TAXES
nonresident alien individuals§ 1.871-1 Classification and manner of taxing alien individuals.
(a) Classes of aliens. For purposes of the income tax, alien individuals are divided generally into two classes, namely, resident aliens and nonresident aliens . Resident alien individuals are, in general, taxable the same as citizens of the United States; that is, a resident alien is taxable on income derived from all sources, including sources without the United States. See §1.1–1(b). Nonresident alien individuals are taxable only on certain income from sources within the United States and on the income described in section 864(c)(4) from sources without the United States which is effectively connected for the taxable year with the conduct of a trade or business in the United States. However, nonresident alien individuals may elect, under section 6013 (g) or (h), to be treated as U.S. residents for purposes of determining their income tax liability under Chapters 1, 5, and 24 of the code. Accordingly, any reference in §§1.1–1 through 1.1388–1 and §§1.1491–1 through 1.1494–1 of this part to non-resident alien individuals does not include those with respect to whom an election under section 6013 (g) or (h) is in effect, unless otherwise specifically provided. Similarly, any reference to resident aliens or U.S. residents includes those with respect to whom an election is in effect, unless otherwise specifically provided.
(b) Classes of nonresident aliens —
(1) In general. For purposes of the income tax, nonresident alien individuals are divided into the following three classes:
(i) Nonresident alien individuals who at no time during the taxable year are engaged in a trade or business in the United States,
(ii) Nonresident alien individuals who at any time during the taxable year are, or are deemed under §1.871–9 to be, engaged in a trade or business in the United States, and
(iii) Nonresident alien individuals who are bona fide residents of Puerto Rico during the entire taxable year.
An individual described in subdivision (i) or (ii) of this subparagraph is subject to tax pursuant to the provisions of subpart A (section 871 and following), part II, subchapter N, chapter 1 of the Code, and the regulations thereunder. See §§1.871–7 and 1.871–8. The provisions of subpart A do not apply to individuals described in subdivision (iii) of this subparagraph, but such individuals, except as provided in section 933 with respect to Puerto Rican source income, are subject to the tax imposed by section 1 or section 1201(b). See §1.876–1.
Some important things to note at the point are:
1. There is no IRS withholding form that accurately states and reflects the fact that a nonresident alien whose earnings originate outside the U.S. [District of Columbia] is not subject to withholding, even though the IRS states this in IRS Publication 515 and on their website as well. This is no accident, but simply proof that the IRS wants to make it as difficult as impossible for nonresident aliens to obey the law by not withholding in cases where they aren’t required to. This ensures that such protected persons have to surrender their rights and privacy by engaging in the indignity of filing a return, disclosing all their personal information, and begging form money back that never should have been withheld or reported in the first place.
Services performed outside the U.S
Compensation paid to a nonresident alien (other than a resident of Puerto Rico) for services performed outside the United States [District of Columbia] is not considered wages and is not subject to graduated withholding or 30% withholding.
[SOURCE: http://www.irs.gov/businesses/small/international/article/0,,id=96594,00.html]
2. IRS does not want to recognize the fact that one can be a nonresident alien without being an “individual” or an “alien”, even though this is in fact the case. The reason is that they don’t want to recognize that the average American is beyond their reach and not subject to their jurisdiction. None of the withholding or reporting forms available from the IRS on the subject of nonresident aliens are intended for use or available for use by the average American who is NOT:
2.1. A “beneficial owner”
2.2. A “U.S. person”
2.3. An “individual”
2.4. An “alien”
When you try to add an option to the form, some recipients balk and just wrongfully PRESUME that there couldn’t be any status OTHER than the options appearing on the form. This too is a deliberate attempt to interfere with the rights of persons not subject to federal jurisdiction by removing remedies from them to document and protect their status.
3. The only IRS Form that American Nationals who are nonresident aliens can use to stop withholding is the W-8BEN.
4. The standard IRS Form W-8BEN provides no way to avoid disclosing the Beneficial Owner, even though there is no requirement in the I.R.C. itself to do so. Older versions of the W-8 form did not require disclosing the Beneficial Owner.
5. The standard IRS Form W-8BEN does not provide a block to indicate which of the above three types of nonresident aliens the submitter is as documented in 26 CFR §1.871-1(b), and this determination is very important because it affects whether withholding is or is not necessary. Those who are not “effectively connected to a trade or business” mentioned in paragraph (b)(1) above and all of whose earnings originate outside of the District of Columbia would not need withholding. The IRS doesn’t want to provide a form for nonresident aliens that shows how they can satisfy the class (b)(i) condition above and thereby avoid the requirement for withholding. This forces private employers to have to read the IRS publications to find out, which few will do, or call up the IRS to ask, in which case they are sure to get LIES. The reason they will get LIES is because the courts refuse to hold the IRS responsible for anything they say, print, or do. This is discussed at:
Federal Courts and the IRS' Own IRM Say IRS is NOT RESPONSIBLE for Its Actions or its Words or For Following Its Own Written Procedures
http://famguardian.org/Subjects/Taxes/Articles/IRSNotResponsible.htm
The combination of all the above factors combine to introduce just enough ambiguity and uncertainty for private employers that they just roll over and screw their workers rather than obey what the law actually says. This also explains why, if you use the W-8BEN form to stop withholding, you should use the amended form we provide in order to avoid this trap and to carefully read sections 4 through 4.4 so you know what kind of deception you can expect from the IRS and private companies regarding this form.
Both the Internal Revenue Code and the government's own publications say that "nonresident aliens" without income from a "trade or business in the United States" are not liable for income taxes under I.R.C. Subtitle A, do not need any information returns or W-2's filed on them.
- A "trade or business" is defined in 26 U.S.C. §7701(a)(26) as including ONLY "the functions of a public office", meaning that the person is a Congressman, President, Judge, or political appointee in receipt of excise taxable privileges.
- All Information Returns, including the W-2, 1098, and 1099, have as a prerequisite the receipt of "trade or business" earnings. See 26 U.S.C. §6041.
- "Trade or business" is further clarified in 26 U.S.C. §864 as:
TITLE 26 > Subtitle A > CHAPTER 1 > Subchapter N > PART I > Sec. 864
Sec. 864. - Definitions and special rules
(b) Trade or business within the United States
For purposes of this part [part I], part II, and chapter 3, the term ''trade or business within the United States'' includes the performance of personal services within the United States at any time within the taxable year, but does not include -
(1) Performance of personal services for foreign employer
The performance of personal services -
(A) for a nonresident alien individual, foreign partnership, or foreign corporation, not engaged in trade or business within the United States, or
Below are some brief examples demonstrating why "nonresident aliens" with no income connected with a "public office"/"trade or business" are "nontaxpayers":
1. 26 CFR §31.3401(a)(6)-1 says that nonresident aliens whose earnings originate from outside the District of Columbia or which are not connected with a "trade or business" are not subject to withholding:
Title 26
PART 31—EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE
Subpart E—Collection of Income Tax at Source§ 31.3401(a)(6)-1 Remuneration for services of nonresident alien individuals.
(a) In general. All remuneration paid after December 31, 1966, for services performed by a nonresident alien individual, if such remuneration otherwise constitutes wages within the meaning of §31.3401(a)–1 and if such remuneration is effectively connected with the conduct of a trade or business within the United States, is subject to withholding under section 3402 unless excepted from wages under this section. In regard to wages paid under this section after February 28, 1979, the term “nonresident alien individual” does not include a nonresident alien individual treated as a resident under section 6013 (g) or (h).
(b) Remuneration for services performed outside the United States. Remuneration paid to a nonresident alien individual (other than a resident of Puerto Rico) for services performed outside the United States is excepted from wages and hence is not subject to withholding.
2. 26 U.S.C. §3406(g) and 26 CFR §31.3406(g)-1(e) both say that foreign persons (which includes "nonresident aliens") are not subject to backup withholding or information reporting
TITLE 26 > Subtitle C > CHAPTER 24 > § 3406
(g) Exceptions
(1) Payments to certain payees Subsection (a) shall not apply to any payment made to— (A) any organization or governmental unit described in subparagraph (B), (C), (D), (E), or (F) of section 6049 (b)(4), or (B) any other person specified in regulations.
(2) Amounts for which withholding otherwise required Subsection (a) shall not apply to any amount for which withholding is otherwise required by this title.
____________________________________________________________________
Title 26: Internal Revenue
PART 31—EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE§ 31.3406(g)-1 Exception for payments to certain payees and certain other payments.
(e) Certain reportable payments made outside the United States by foreign persons, foreign offices of United States banks and brokers, and others. For reportable payments made after December 31, 2000, a payor is not required to backup withhold under section 3406 on a reportable payment that qualifies for the documentary evidence rule described in
