Exactly Who can withhold on an NRA and how exactly to deal with it?

1. The BIG picture

The U.S. person election in this article operates INDEPENDENT of the W-4 “wage” election. That is a completely different subject. In most cases, “nonresident aliens” receiving W-2’s are permitted to exclude their earnings by regulation from taxation, and also are not required to “effectively connect” those earnings by entering them on the 1040NR return.

There are two classes of “nonresident aliens” however:

1. Aliens. This comes under the foreign affairs functions of the Constitution.
2. “nationals of the United States” under 8 U.S.C. 1101(a)(22), which includes Americans born within the constitutional states of the Union.

Title 26 and the implementing regulations deliberately confuse and equivocate the above classes of “nonresident aliens” so that American nationals who pursue the nonresident alien status will get mistakenly tied up into I.R.C. Chapter 3 withholding and reporting, even though it doesn’t apply. Since U.S. persons aren’t subject to Chapter 3 withholding, this serves as a deterrent to American nationals who are ignorant of the law from pursuing the nonresident alien position to avoid the fear of I.R.C. Chapter 3 withholding..

American Nationals DO NOT come under the foreign affairs function of the national government unless they are abroad under 26 U.S.C. §911 AND make the U.S. person election while abroad like Cook did in the famous case of Cook v. Tait, 265 U.S. 47 (1924). Otherwise, they are beyond the CIVIL legislative reach of Congress unless consensually engaged in a voluntary privilege by making an election as documented herein. Once they do that, they come under Federal Preemption by election and thereby surrender their foreign status.

The only parties actually “made liable” are found in 26 U.S.C. §1461, which is WITHHOLDING agents on nonresident aliens and foreign corporations. It is ONLY the “withholding agent” and NOT the “employer” who is the liable party, and only in the case of nonresident aliens and foreign corporations as a foreign affairs function under the constitution.

There is also a grave distinction between being “imposed on” in 26 C.F.R. §1.1-1 and “made liable” in 26 U.S.C. §1461. The phrase “liable TO” in 26 C.F.R. §1.1-1 does not CREATE liability. Are you “liable to go to the bathroom today”? Those who make the U.S. person election are “imposed on” and “liable TO” but never “made liable”. One must be “made liable” in 26 U.S.C. §1461 before they can have a duty to file a return in 26 U.S.C. §6012. That duty to “return” the amount withheld originates in the common law duty to “return” property of another that is in your custody that you obtained by duress, fraud, or mistake and no STATUTE, including 26 U.S.C. §6012, is necessary to ENFORCE that duty. And that duty goes BOTH ways. If a withholding agent or employer withholds property you earned by mistake and sends it to the IRS, the IRS ALSO has that SAME duty as documented in:

Using the Laws of Property to Respond to a Federal or State Tax Collection Notice, Form #14.015
https://sedm.org/using-the-laws-of-property-to-respond-to-a-federal-or-state-tax-collection-notice/

The ONLY paper “return” a withholding agent can realistically file is an INFORMATION return for the amount withheld against “nonresident aliens” and “foreign corporations” in 26 U.S.C. §1441. But 26 U.S.C. §6012 refers to “making a RETURN of income”, not filing a physical piece of paper, so the real “return” is SENDING THE DAMN MONEY you illegally withheld to the government, you useful idiot slave! This is also consistent with what people like Dave Champion believe.

THUS, the underlying question is HOW DEEP do we go with the “nonresident alien individual” being made liable for the privilege of making money from the “United States”? AND in that context, the debate is about whether the United States means a specific geography, or the federal government. In order to answer that, we need to look at the “direct” and “indirect” taxation jurisdiction. The ANSWER is that the federal government HAS power to use either. Direct on the member union States, federal lands, and slaves ownership. Indirect over everything else granted via the Constitution. And that last question is dealt with HERE because it is DIRECTLY relevant to that scenario:

Proof of Facts: That earnings under 26 U.S.C. 871(a)(1) are profit from payments from the government, FTSIG
https://ftsig.org/proof-of-facts-that-earnings-under-26-u-s-c-871a1-are-profit-from-payments-from-the-government/

Personally, we believe that since it is the position of the courts that GROSS RECEIPTS belong in 26 U.S.C. §871(a)(1) and even 26 U.S.C. §61, even though 26 U.S.C. §871(a)(1) actually says ONLY PROFIT and GAINS, and the constitutional definition of “income” is profit and not gross receipts, then the only way that the constitutional definition of “income” as ONLY PROFIT can be waived to MAKE it a “gross receipts” tax is if the “taxpayer” is an alien not protected by the constitution or the constitution’s definition of “income”.

Additional information about this subject can be found at:

How American Nationals VOLUNTEER to Pay Income Tax, Form #08.024
https://sedm.org/Forms/08-PolicyDocs/HowYouVolForIncomeTax.pdf

2. Dealing with NRA withholding

1. Nonresident aliens can be the lawful target of backup withholding under the authority of 26 U.S.C. §3406 and 26 C.F.R. §31.3406(a)-1. But they must be ALIENS and NEVER American nationals!

2. Those DOING the withholding are described in 26 U.S.C. §7701(a)(16) as “withholding agents”.

3. Withholding agents are “made liable” in 26 U.S.C. §1461 to withhold on nonresident aliens and foreign corporations. This is the ONLY liability statute ANYWHERE in Internal Revenue Code Subtitle A.

4. Withholding is done under either:

4.1. 26 U.S.C. §1441(a) in the case of financial transactions OR

4.2. 26 U.S.C. §3406 in the case of “employment”

5. A W-9 is specified for use in the case of 26 C.F.R. §31.3406(h)-3 in the case of nonresident aliens engaged in PRIVILEGED activities such as a “trade or business” who therefore MUST specify an identifying number under 26 C.F.R. §301.6109-1(b).

6. Those nonresident aliens NOT so engaged are NOT required to furnish a number and therefore CANNOT submit a Form W-9 without misrepresenting their status and therefore must file the W-8 instead of the W-9.

W-8SUB, Form #04.231
https://sedm.org/Forms/04-Tax/2-Withholding/W-8SUB.pdf

7. 26 C.F.R. §31.3406(a)-2 defines the “payor” as someone paying the nonresident alien a “reportable payment”, meaning a payment made by those PAYERS lawfully connected with the “trade or business” excise taxable franchise, in 26 U.S.C. §6041(a), not those RECEIVING the payment who are nonresident aliens like you. This “payor” then becomes the “withholding agent” if an only if the payment they are making is paid to a “nonresident alien” or a “foreign corporation”, and is ALSO an ALIEN but not a “national”.

8. Thus a nonresident alien who is an American national and not privileged:

8.1. Must submit the W-8SUB for withholding purposes:

W-8SUB, Form #04.231
https://sedm.org/Forms/04-Tax/2-Withholding/W-8SUB.pdf

8.2. Must NOT Submit the W-9. Supplying an SSN or ITIN is a admission by the NRA that they are engaged in a privileged activity under 26 C.F.R. §301.6109-1(b).

8.3. Is NOT an “alien” and therefore NOT the party subject to withholding or backup withholding under I.R.C. Chapter 3. Such withholding only pertains to aliens or foreign corporations as a foreign affairs function. It DOES NOT pertain to American nationals because they are not engaged in a foreign affairs function if they are working within the exclusive jurisdiction of a constitutional state.