PROOF OF FACTS: “IncludIBLE” or “includABLE”?

The main word used for equivocation about whether an earning is statutory “income” is the word “includable” v. “incluable”.  Here is the trickery involved:

Legal Documents

In legal documents, the use of “includable” or “includible” can have a significant impact on the interpretation of the document. For example, if a contract states that certain items are “includable,” this means that they must be included in the total calculation. On the other hand, if the contract states that certain items are “includible,” this means that they may be included but are not necessarily required to be.

[Includable vs Includible: How Are These Words Connected?, The Content Authority; https://thecontentauthority.com/blog/includable-vs-includible]

Black’s Law Dictionary, on the other hand, never makes the above distinctions, which is rather curious.

So let’s apply the above to voluntary W-4 withholding agreements to people who would not otherwise earn “wages”:

26 CFR § 31.3402(p)-1 – Voluntary withholding agreements.

§ 31.3402(p)-1 Voluntary withholding agreements.

(a) Employer-employee agreement.

An employee and his employer may enter into an agreement under section 3402(p)(3)(A) to provide for the withholding of income tax upon payments of amounts described in paragraph (b)(1) of § 31.3401(a)–3, made after December 31, 1970. An agreement may be entered into under this section only with respect to amounts which are includible in the gross income of the employee under section 61, and must be applicable to all such amounts paid by the employer to the employee. The amount to be withheld pursuant to an agreement under section 3402(p)(3)(A) shall be determined under the rules contained in section 3402 and the regulations thereunder. See § 31.3405(c)–1, Q&A–3 concerning agreements to have more than 20-percent Federal income tax withheld from eligible rollover distributions within the meaning of section 402.

So in the above, they are admitting that the amounts are not required to be included in gross income but a 26 U.S.C. §3402(p)  voluntary withholding agreement could cause them to be included in “gross income” regardless.

Obviously they could have just used the word “included” here if there was no choice in the matter but to include the amounts in the “gross income” of the employee. 

Interesting how they state that an agreement under 3402(p) can be made “ONLY with respect to amounts which are includible in the gross income of the employee.”

Since literally ANY amount is ABLE to be included in the gross income by the employee, there is actually no such thing as an amount that is NOT includible in the gross income of the employee.  This choice of the word “includible” and not “included” is an indication that the possibility still exists of excluding the amounts from the gross income of the employee, notwithstanding any agreement to treat the amounts as “wages” under the provisions of IRC Sec. 3402(p).

The U.S. Tax court uses the word “includible” rather than “includable”, and therefore RECOGNIZES that earnings need not be included in “gross income”:

“A. Whether Petitioner’s MRP Is Includable in Gross Income Section 61(a)(11) expressly defines gross income to include pensions. Petitioner’s “Military retirement pay is pension income within the meaning of sec. 61(a)(11).” Wheeler v. Commissioner, 127 T.C. 200, 205 n. 11 (2006), affd. 521 F.3d 1289 (10th Cir. 2008); see also Eatinger v. Commissioner, T.C. Memo. 1990-310; sec. 1.61-11, Income Tax Regs.”

[Mathews v. Commissioner, No. 3074-09, at *7 (U.S.T.C. Oct. 19, 2010)]