The I.R.S. Modifies its W-4 Policy

Some interesting news for those tax resisters who are using their W-4 forms as a way of reducing withholding:

Employers will no longer be required to send copies of potentially questionable W-4 withholding forms to the Internal Revenue Service, the IRS announced .…

Temporary and proposed regulations, issued today by the Treasury Department, eliminate the requirement that employers send copies of potentially questionable Forms W-4, Employee’s Withholding Allowance Certificate, to the IRS. The new regulations take effect on .

In the past, employers had to send to the IRS any Form W-4 claiming more than 10 allowances or claiming complete exemption from withholding if $200 or more in weekly wages was expected.

Forms W-4 are still subject to review by the IRS. However, employers will no longer have to submit them to the tax agency, unless directed to do so in a written notice to the employer or pursuant to specified criteria set forth in future published guidance, the IRS said.…

[T]he IRS has developed a process to use information already reported on Forms W-2 to more effectively identify workers with withholding compliance problems. In some cases where a serious under-withholding problem is found to exist for a particular employee, the IRS will notify the employer to withhold income tax from that employee at a more appropriate rate. The new process will also enable the IRS to more effectively address situations in which employees fail to file a federal income tax return.

Interesting… To review: the W-4 is that form you typically fill out shortly after taking a job. On this form, you tell your employer how many “allowances” you are taking — which is something like the exemptions you’re planning to take on your 1040, but the correspondence is not exact. Your employer uses this number to calculate how much to take out of your paycheck each month to send to the IRS. The more allowances you claim, the less gets taken out.

So tax resisters are fond of claiming a bunch of allowances. One tax resister claimed three billion dependents on his W-4 back in . (If you’d like to try this game, ask your boss or your Human Resources department for a fresh W-4 and file a new one.)

In the past, if you were making more than about $35,000 a year, you’d have to declare at least ten allowances in order to eliminate withholding entirely, and this would require your employer to notify the IRS. The War Resisters League book War Tax Resistance says:

If your W-4 form is sent to the IRS, it will remain in effect until the employer hears in writing from the IRS. The IRS may instruct the employer to alter the withholding. The employer must abide by the IRS instructions until those instructions are revoked by the IRS. It is up to the employee to convince the IRS in writing why she or he is entitled to additional allowances.

Understandably, some war tax resisters were not eager to attract IRS attention in this way. Now, it seems that will be less of a worry.

I don’t know quite what to make of the IRS’s declaration that they’ll be able to distinguish a genuine W-4 from a tax resister’s W-4 by looking at the W-2. That doesn’t make much sense. I think they may be bluffing.

See The Picket Line and for an update on this.

Tax resister Geov Parrish asks why do so many of us pay our income taxes?

I raise this just about every year at this time, and it’s not a rhetorical question.…

[W]hat if we refused? The federal government in particular is vulnerable; the income tax system is based on voluntary compliance, and the IRS — though fearsome in its media-assisted reputation — is essentially a very large, and not always very efficient, collection agency. People laugh off collection agency bills simply because they don’t want to (or can’t) pay, but quake in terror of the IRS when the money isn’t just going to a private business — it’s going, in large quantities, to an institution now dedicated at the highest levels to enriching its patrons even if it means killing you. We are volunteering to buy the bullets for our own firing squads.

Why does virtually everybody volunteer?…

There are a few folks saying no. War tax resisters, refusing, for reasons of conscientious objection, to fund militarism, have been painfully aware for years of how much of our tax money goes to killing. Others refuse for libertarian reasons. A larger number choose to live under the taxable income, and still more folks, when forced to choose between enough food to feed the family in April and paying the IRS bill, make the eminently apolitical decision to forego hunger. As usual this year, there will be small groups of folks leafleting or protesting at post offices around the country. You’d think there’d be millions.

Resisting taxes has risks. It can be done symbolically, withholding a small amount here or there; it can be done with an expectation of ultimately paying more in interest and penalties, the extra cost of refusing to cooperate willingly; or it can require major life changes to find tax-free employment and become uncollectible. It can be a nuisance, or it can complicate one’s life immensely, or it can force a complete reexamination of why we work and where we want our time and labor to go.

Nobody should undertake tax resistance without understanding the risks. But there are also risks involved in passively cooperating with our own fleecing, or our own demise. And it’s simply amazing that more of us don’t look closely at which risk is greater.

The Christian Science Monitor reports that people who rat tax evaders out to the IRS don’t often profit from their snitching.

“Some people are under the impression that if you inform on somebody you automatically get 10 percent,” Faber says. But that’s not the case. Less than 8 percent of claims are allowed, according to the IRS, and of those the average award is 2.74 percent of the taxes recovered.…

The number of those who actually receive rewards is also small. Of the 4,765 people who applied for a reward in , just 190 got a check.

The Phone Tax, a “temporary” tax enacted to fund the Spanish-American war, bravely soldiers on, but not all taxes are so fortunate. , the U.S. House of Representatives voted to abolish the Estate Tax — called the “death tax” by those against it and the “Paris Hilton tax” by those who’d rather keep it. If you’re planning on leaving several million dollars behind when you die this may matter to you more than it does to me, but it will keep another $290 billion out of the government’s hands over the next decade and that makes me happy. I’d rather have Paris Hilton spending that money than Donald Rumsfeld.

What Congress gives it can just as easily take away, and now a bipartisan collection of congresscritters are trying to take away the power they gave to the IRS just to outsource some of its collections process to bounty hunters.

“We must protect American taxpayers from intimidation and abuse, and we must ensure that personal financial records are protected and remain private,” [Representative Chris] Van Hollen said. “Giving unaccountable private contractors unfettered access to Americans’ personal financial data poses a risk that we just cannot afford.”

Another article on war tax resistance manages to overstate the difficulty of resisting by lowering your income below the tax line:

arrives this week and Larry Dansinger of the Maine War Tax Resistance Resource Center in Monroe wants you to forget all about it.… April 15 for Dansinger is the glorious date he gets to tell the IRS to stuff it. In fact, he’s told the IRS to stuff it . And on , Dansinger and about a dozen like-minded Mainers will pass out pamphlets around the state encouraging you too to stick it to the IRS.

Dansinger recognizes that tax day may be a little late to convince people not to pay their taxes, but he figures this is the perfect time to help new resistors get a jump on next year.

“We want people to start thinking now about the income they are making this year, which they can make changes in if they feel they can no longer pay for the kind of military things that are going on right now,” says Dansinger, who has purposefully hovered at or below the minimum income for federal taxes ($7950 annually for a single person [sic]) for years.…

“Which is more painful,” asks Dansinger, “to risk possibly dealing with the IRS or risk the anguish of having your money used for things you don’t believe in?”

I think I’m pretty sly, slipping under the tax line on $25k a year, but according to yesterday’s Wall Street Journal, there were over four thousand people who made in excess of $200,000 in and yet owed no federal income tax that year. I want to learn some of their tricks.