26
Sep

Who is Liable?

   Posted by: BobMcNeil   in IRS

Here’s another message I received from Chuck Conces, Chairman of the Lawmen Committee for the Public Interest.

Posted by: Chuck Conces [email protected]

Mon Sep 24, 2007 6:44am (PST)

Dear Lawmen and Others Riding Hard: Someone wrote up a nice summation on liability. I cannot say that everything in it is correct, but I do know that the “law” that makes anyone liable must have a statute at large AND an implementing regulation. Otherwise it is not law, and that is as stated by the USC and the Supreme Court of the United States.

The following is the write up which appears to very accurate.

WHO IS “LIABLE” FOR THE TAX?
(links go to FindLaw)

Federal taxes are collected from those who are “liable” for the various taxes imposed in the Internal Revenue Code. For example, 26 U.S.C. § 7601 commands that the Secretary of the Treasury “canvass” the various internal revenue districts to located those “liable” to pay any internal revenue tax:

_Section 7601_
http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=26&sec=7601) . Canvass of districts for taxable persons and objects.

General rule.
The Secretary shall, to the extent he deems it practicable, cause officers or employees of the Treasury Department to proceed, from time to time, through each internal revenue district and inquire after and concerning all persons therein who may be liable to pay any internal revenue tax, and all persons owning or having the care and management of any objects with respect to which any tax is imposed.

After taxes are assessed against a taxpayer so liable therefore, the Secretary must give notice and demand for payment thereof to persons “liable” for the tax:

Section 6303_
http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=26&sec=6303) . Notice and demand for tax.

General rule.
Where it is not otherwise provided by this title, the Secretary shall, as soon as practicable, and within 60 days, after the making of an assessment of a tax pursuant to section 6203, give notice to each person liable for the unpaid tax, stating the amount and demanding payment thereof. Such notice shall be left at the dwelling or usual place of business of such person, or shall be sent by mail to such person’s last known address.

Tax liens authorized via 26 U.S.C. § 6321 are filed against persons “liable” for the tax:

_Section 6321_ http://caselaw.lp.findlaw.com/scripts/ts_search.pl Lien for taxes.

If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.

And the Secretary is authorized to collect taxes from those identified as “liable” for taxes:

_Section 6331_
http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=26&sec=6331) . Levy and distraint.

Authority of Secretary.
If any person liable to pay any tax neglects or refuses to pay the same within 10 days after notice and demand, it shall be lawful for the Secretary to collect such tax (and such further sum as shall be sufficient to cover the expenses of the levy) by levy upon all property and rights to property (except such property as is exempt under section 6334) belonging to such person or on which there is a lien provided in this chapter for the payment of such tax. Levy may be made upon the accrued salary or wages of any officer, employee, or elected official, of the United States, the District of Columbia, or any agency or instrumentality of the United States or the District of Columbia, by serving a notice of levy on the employer (as defined in section 3401(d)) of such officer, employee, or elected official. If the Secretary makes a finding that the collection of such tax is in jeopardy, notice and demand for immediate payment of such tax may be made by the Secretary and, upon failure or refusal to pay such tax, collection thereof by levy shall be lawful without regard to the 10-day period provided in this section.

The Internal Revenue Code imposes in subtitle C several different types of employments taxes, and only one party is “liable” therefore: the employer. The FICA tax is imposed in § 3101, and only the employer is “liable”:

_Section 3102_
http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=26&sec=3102) . Deduction of tax from wages.

Requirement.
The tax imposed by section 3101 shall be collected by the employer of the taxpayer, by deducting the amount of the tax from the wages as and when paid.
* * *

Indemnification of employer.
Every employer required so to deduct the tax shall be liable for the payment of such tax, and shall be indemnified against the claims and demands of any person for the amount of any such payment made by such employer.

The Railroad Retirement Tax is imposed via § 3201, and it is the employer who is liable therefore:

Section 3202_
http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=26&sec=3202) . Deduction of tax from compensation.

Requirement.
The taxes imposed by section 3201 shall be collected by the employer of the taxpayer by deducting the amount of the taxes from the compensation of the employee as and when paid.
* * *

Indemnification of employer
Every employer required under subsection (a) to deduct the tax shall be liable for the payment of such tax and shall not be liable to any person for the amount of any such payment.

The employment tax imposed via § 3402 that provides for wage withholding makes the employer “liable” for it:
Section 3403_
http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=26&sec=3403) . Liability for tax.

The employer shall be liable for the payment of the tax required to be deducted and withheld under this chapter, and shall not be liable to any person for the amount of any such payment.

And those who provide pensions, etc, are considered employers who are “liable” for the deferred wage/income payments they make:

Section 3405_
http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=26&sec=3405) . Special rules for pensions, annuities, and certain other deferred income.
* * *

(d) Liability for withholding.
(1) In general
Except as provided in paragraph (2), the payor of a designated distribution (as defined in subsection (e)(1)) shall withhold, and be liable for, payment of the tax required to be withheld under this section.

And in certain circumstances, certain third parties are “liable” for employment taxes:

_Section 3505_
http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=26&sec=3505
) . Liability of third parties paying or providing for wages.

Direct payment by third parties
For purposes of sections 3102, 3202, 3402, and 3403, if a lender, surety, or other person, who is not an employer under such sections with respect to an employee or group of employees, pays wages directly to such an employee or group of employees, employed by one or more employers, or to an agent on behalf of such employee or employees, such lender, surety, or other person shall be liable in his own person and estate to the United States in a sum equal to the taxes (together with interest) required to be deducted and withheld from such wages by such employer.

Personal liability where funds are supplied
If a lender, surety, or other person supplies funds to or for the account of an employer for the specific purpose of paying wages of the employees of such employer, with actual notice or knowledge (within the meaning of section 6323(i)(1)) that such employer does not intend to or will not be able to make timely payment or deposit of the amounts of tax required by this subtitle to be deducted and withheld by such employer from such wages, such lender, surety, or other person shall be liable in his own person and estate to the United States in a sum equal to the taxes (together with interest) which are not paid over to the United States by such employer with respect to such wages.

Clearly, being made “liable” for a tax via an express provision of the Internal Revenue Code is very important.

Subtitles D and E of the Internal Revenue Code impose various excise taxes, and excellent examples appear in these titles of sections of the Code that impose taxes and make specific parties “liable” therefore.

For instance, the tax on tires is imposed via § 4071:

_Section 4071_
http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=26&sec=4071) . Imposition of tax.

Imposition and rate of tax.
There is hereby imposed on tires of the type used on highway vehicles, if wholly or in part made of rubber, sold by the manufacturer, producer, or importer a tax at the following rates:

Those “liable” for this tax are identified in the same section as follows:

Special rule for manufacturers who sell at retail.
Under regulations prescribed by the Secretary, if the manufacturer, producer, or importer of any tire delivers such tire to a retail store or retail outlet of such manufacturer, producer, or importer, he shall be liable for tax under subsection (a) in respect of such tire in the same manner as if it had been sold at the time it was delivered to such retail store or outlet. This subsection shall not apply to an article in respect to which tax has been imposed by subsection (a).

The section imposing the gambling tax also identifies who is “liable” for such tax:

_Section 4401_
http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=26&sec=4401) . Imposition of tax.

(a) Wagers.
(1) State authorized wagers.
There shall be imposed on any wager authorized under the law of the State in which accepted an excise tax equal to 0.25 percent of the amount of such wager.
****

Persons liable for tax.
Each person who is engaged in the business of accepting wagers shall be liable for and shall pay the tax under this subchapter on all wagers placed with him. Each person who conducts any wagering pool or lottery shall be liable for and shall pay the tax under this subchapter on all wagers placed in such pool or lottery. Any person required to register under section 4412 who receives wagers for or on behalf of another person without having registered under section 4412 the name and place of residence of such other person shall be liable for and shall pay the tax under this subchapter on all such wagers received by him.

Directly connected to this tax on wagers is a tax on those receiving the wagers as an occupation tax:

_Section 4411_
http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=26&sec=4411) . Imposition of tax.

In general.
There shall be imposed a special tax of $500 per year to be paid by each person who is liable for the tax imposed under section 4401 or who is engaged in receiving wagers for or on behalf of any person so liable.

Authorized persons.
Subsection (a) shall be applied by substituting “$50” for “$500” in the case of –
(1) any person whose liability for tax under section 4401 is determined only under paragraph (1) of section 4401(a), and
(2) any person who is engaged in receiving wagers only for or on behalf of persons described in paragraph (1).

The section imposing a tax on crude oil also specifies who is “liable” for that tax:

_Section 4611_
http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=26&sec=4611) . Imposition of tax.

General Rule.
There is hereby imposed a tax at the rate specified in subsection (c) on –
(1) crude oil received at a United States refinery, and
(2) petroleum products entered into the United States for consumption, use, or warehousing.
*****

(d) Persons liable for tax.
(1) Crude oil received at refinery
The tax imposed by subsection (a)(1) shall be paid by the operator of the United States refinery.
(2) Imported petroleum product
The tax imposed by subsection (a)(2) shall be paid by the person entering the product for consumption, use, or warehousing.
(3) Tax on certain uses or exports
The tax imposed by subsection (b) shall be paid by the person using or exporting the crude oil, as the case may be.

A tax is imposed on distilled spirits in § 5001:

_Section 5001_
http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=26&sec=5001) . Imposition, rate, and attachment of tax.

(a) Rate of tax.
(1) General.
There is hereby imposed on all distilled spirits produced in or imported into the United States a tax at the rate of $13.50 on each proof gallon and a proportionate tax at the like rate on all fractional parts of a proof gallon.

Those who are “liable” for this tax are identified in § 5005:

_Section 5005_
http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=26&sec=5005. Persons liable for tax.

General.
The distiller or importer of distilled spirits shall be liable for the taxes imposed thereon by section 5001(a)(1).

The tax on wines makes certain parties “liable”:

_Section 5043_
http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=26&sec=5043) . Collection of taxes on wines.

Persons liable for payment.
The taxes on wine provided for in this subpart shall be paid –
Bonded wine cellars.
In the case of wines removed from any bonded wine cellar, by the proprietor of such bonded wine cellar; except that –
(A) in the case of any transfer of wine in bond as authorized under the provisions of section 5362(b), the liability for payment of the tax shall become the liability of the transferee from the time of removal of the wine from the transferor’s premises, and the transferor shall thereupon be relieved of such liability; and
(B) in the case of any wine withdrawn by a person other than such proprietor without payment of tax as authorized under the provisions of section 5362(c), the liability for payment of the tax shall become the liability of such person from the time of the removal of the wine from the bonded wine cellar, and such proprietor shall thereupon be relieved of such liability.
Foreign wine.
In the case of foreign wines which are not transferred to a bonded wine cellar free of tax under section 5364, by the importer thereof.
Other wines.
Immediately, in the case of any wine produced, imported, received, removed, or possessed otherwise than as authorized by law, by any person producing, importing, receiving, removing, or possessing such wine; and all such persons shall be jointly and severally liable for such tax with each other as well as with any proprietor, transferee, or importer who may be liable for the tax under this subsection.
Payment of tax.
The taxes on wines shall be paid in accordance with section 5061.

Specific parties are made liable for the beer tax:

_Section 5418_
http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=26&sec=5418. Beer imported in bulk.

Beer imported or brought into the United States in bulk containers may, under such regulations as the Secretary may prescribe, be withdrawn from customs custody and transferred in such bulk containers to the premises of a brewery without payment of the internal revenue tax imposed on such beer. The proprietor of a brewery to which such beer is transferred shall become liable for the tax on the beer withdrawn from customs custody under this section upon release of the beer from customs custody, and the importer, or the person bringing such beer into the United States, shall thereupon be relieved of the liability for such tax.

The tobacco tax also makes a specific party liable for it:

_Section 5703_
http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=26&sec=5703) . Liability for tax and method of payment.

(a) Liability for tax.
(1) Original liability.
The manufacturer or importer of tobacco products and cigarette papers and tubes shall be liable for the taxes imposed thereon by section 5701.

Pursuant to the commands of the federal Privacy Act, the IRS is required to give a notice (contained in the Privacy Act Notice or Notice 609) of the various laws that require persons to supply information to it. The IRS Privacy Act Notice states: “Our legal right to ask for information is Internal Revenue Code sections 6001, 6011 and 6012(a), and their regulations. They say you must file a return or statement with us for any tax you are LIABLE for.” To determine whether one must file a federal income tax return, one thus only needs to study these 3 sections of the Code.

The first section states as follows:

_Section 6001_
http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=26&sec=6001) . Notice or regulations requiring records, statements, and special returns.

Every person liable for any tax imposed by this title, or for the collection thereof, shall keep such records, render such statements, make such returns, and comply with such rules and regulations as the Secretary may from time to time prescribe. Whenever in the judgment of the Secretary it is necessary, he may require any person, by notice served upon such person or by regulations, to make such returns, render such statements, or keep such records, as the Secretary deems sufficient to show whether or not such person is liable for tax under this title.

The second section provides as follows:

_Section 6011_
http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=26&sec=6011) . General requirement of return, statement, or list.

General rule.
When required by regulations prescribed by the Secretary any person made liable for any tax imposed by this title, or with respect to the collection thereof, shall make a return or statement according to the forms and regulations prescribed by the Secretary. Every person required to make a return or statement shall include therein the information required by such forms or regulations.

Thus, the “general requirement” for making a tax return is that, first, one must be liable for a tax. But WHO is LIABLE for the federal income tax?

The federal income tax is found in subtitle A of the Internal Revenue Code and consists of sections 1 through 1563. You may download a 2002 version of the entire Internal Revenue Code _here_
http://www.constitution.org/whatsnew.htm) ( item 6 on this page, size: 1.34 Gigs).

Once downloaded, please search the Code (particularly the first 1563 sections) to determine who is “liable” for the federal income tax. The only section of the Internal Revenue Code that makes anyone “liable” for the federal income tax is as follows:

_Section 1461_
http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=26&sec=1461. Liability for withheld tax.

Every person required to deduct and withhold any tax under this chapter is hereby made liable for such tax and is hereby indemnified against the claims and demands of any person for the amount of any payments made in accordance with the provisions of this chapter.

This party is the withholding agent for nonresident aliens and foreign corporations; see _§ 1441_
http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=26&sec=1441
http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=26&sec=1442

Withholding agents may be individuals, corporations, estates, trusts, political organizations, homeowners associations, etc.

These are the parties who are required to make federal income tax returns pursuant to § 6012:

_Section 6012_
http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=26&sec=6012. Persons required to make returns of income.

General rule.
Returns with respect to income taxes under subtitle A shall be made by the following:
(1)(A) Every individual having for the taxable year gross income which equals or exceeds the exemption amount, except that a return shall not be required of an individual –
(i) who is not married (determined by applying section 7703), is not a surviving spouse (as defined in section 2(a)), is not a head of a household (as defined in section 2(b)), and for the taxable year has gross income of less than the sum of the exemption amount plus the basic standard deduction applicable to such an individual,
(ii) who is a head of a household (as so defined) and for the taxable year has gross income of less than the sum of the exemption amount plus the basic standard deduction applicable to such an individual,
(iii) who is a surviving spouse (as so defined) and for the taxable year has gross income of less than the sum of the exemption amount plus the basic standard deduction applicable to such an individual, or
(iv) who is entitled to make a joint return and whose gross income, when combined with the gross income of his spouse, is, for the taxable year, less than the sum of twice the exemption amount plus the basic standard deduction applicable to a joint return, but only if such individual and his spouse, at the close of the taxable year, had the same household as their home.
* * *
(2) Every corporation subject to taxation under subtitle A;
(3) Every estate the gross income of which for the taxable year is $600 or more;
(4) Every trust having for the taxable year any taxable income, or having gross income of $600 or over, regardless of the amount of taxable income;
(5) Every estate or trust of which any beneficiary is a nonresident alien;
(6) Every political organization (within the meaning of section 527(e)(1)), and every fund treated under section 527(g) as if it constituted a political organization, which has political organization taxable income (within the meaning of section 527(c)(1)) for the taxable year; and
(7) Every homeowners association (within the meaning of section 528(c)(1)) which has homeowners association taxable income (within the meaning of section 528(d)) for the taxable year.
(8) Every individual who receives payments during the calendar year in which the taxable year begins under section 3507 (relating to advance payment of earned income credit).
(9) Every estate of an individual under chapter 7 or 11 of title 11 of the United States Code (relating to bankruptcy) the gross income of which for the taxable year is not less than the sum of the exemption amount plus the basic standard deduction under section 63(c)(2)(D). except that subject to such conditions, limitations, and exceptions and under such regulations as may be prescribed by the Secretary, nonresident alien individuals subject to the tax imposed by section 871 and foreign corporations subject to the tax imposed by section 881 may be exempted from the requirement of making returns under this section.
(b) Returns made by fiduciaries and receivers.
* * *
END.

No direct un-apportioned tax confirmed by the U.S. Supreme Court rulings.

Knowledge is power. Educate yourselves.

This entry was posted on Wednesday, September 26th, 2007 at 3:32 am and is filed under IRS. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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