How you can resist funding the government → the payroll / social security tax (FICA) → how and why I started resisting the self-employment tax

How you can resist funding the government → the payroll / social security tax (FICA) → how and why I started resisting the self-employment tax

What sort of tax resister are you, anyway?
There are many ways to resist taxes, and many reasons to. Tax resisters use different strategies, have different objectives, and have different reasons why we take our stands. I resist my federal income tax by keeping my income low and using legitimate deductions and credits that reduce the tax to zero, and I resist federal excise and self-employment taxes in other ways. I do these things to reduce my complicity in the actions of the government.
Is what you’re doing legal?
All of us illegally evade taxes to some extent — not because everybody is trying to get away with something, but because most of us are unaware of just how much is taxable and how much fuss we’re technically obligated to comply with. On the other hand, even dedicated tax resisters find it difficult to avoid paying any taxes. There’s a big gray area in the middle between absolute compliance and absolute evasion. When I started resisting, my strategy was to do so above-board and legally, so although I was in the gray area along with everyone else, I actually did things more by-the-book than before. It’s been part of my experiment to show that even if you want to follow the rules you don’t have to pay federal income tax if it would compromise your values. In , I started resisting federal self-employment tax as well — by simply not paying it, which isn’t legal. So I currently use a combination of legal and non-legal methods to resist paying taxes.
What do you mean “everybody evades taxes”? I pay all my taxes!
Do you pay “use tax” on things you bought out of state and therefore didn’t pay sales tax on at home (if you’re in a sales tax state, like most of us)? I didn’t even know this tax existed until I started tax resistance and did some research. This is one example of a tax that people are technically obligated to document, report, and pay, but that in practice people evade out of ignorance or frustration at the paperwork.
Have you considered earning money in the underground economy and never declaring it to the IRS?
I’ve given this some thought. I think if you can get away with earning undeclared income, it makes sense to do so. On the other hand, you can resist taxes even if you want to do everything above-board and by-the-book. If the right opportunity in the underground economy comes along, I might take it. I may decide not to discuss it on this blog, though, because that could be used against me by the powers-that-be. As of the time I’m writing this, I have not earned any significant amount of undeclared income and I still pursue federal income tax resistance through legal means. This might change.
Don’t you know that you don’t have to pay income tax because wages aren’t really income and the sixteenth amendment wasn’t legally ratified by Ohio and anyway it doesn’t apply to people living in states but only those who live on federal land, and all you have to do is declare yourself a sovereign citizen and buy this book?
I often get advice like this, but I see a fatal flaw: The IRS and the courts are the ones who get to decide what the rules of the game are and when they can seize your property or throw you in prison, and they don’t read the same book you’re reading. They’ve decided that arguments like these won’t fly. However, even completely silly tax arguments can “work” just because it’s so much trouble for the IRS to unravel them. Unless there’s plenty of money involved or it’s a high-profile case, it isn’t worth their time. So although these legal theories have about as much to recommend them as Nigerian Scam emails and pyramid schemes, I’m glad some people have taken this on as a hobby. I think I’ll pass, though.
Do you think you’re going to enjoy a life of abject poverty?
Who said anything about abject poverty? I just want to live under the tax line. I can earn $50,000 a year, and then, by doing things like putting some in tax-deferred retirement accounts and some in a Health Savings Account, keep about $23,750 to live on. Thanks to perfectly legal, above-board, IRS-approved deductions and exemptions, I won’t have to pay any income tax on any of that. In , the median per capita income in the United States was $37,522. Other stats I’ve seen suggest that something like 91–92% of the world’s population earns less in a year than I get to spend after putting away 35–40% of my income for retirement. About 500 million people living on the planet with me right now are trying to get by on less than 2% of that. I’m filthy rich! And I’m not paying taxes! It’s the American Dream! I won’t have to sell my body for top ramen money any time soon. I’ll be fine.
Wait a minute: You can pull in $50K without paying income tax? Legally? How does that work?
You can read my (free, on-line) how-to guide for some details. It’s a little-known fact that paying no federal income tax is very common in the United States. According to The Tax Policy Center, about 40% of households in the U.S. were expected to pay no federal income tax at all for tax year .
But you won’t really have $50K to spend — a lot of it is tied up in this and that, right?
Yes, to some extent. For instance, one way to make $50K income tax free is to put some of it into tax-deferred retirement accounts, some into a Health Savings Account, donate some to charity, and spend some on college tuition. But it’s still your money that you get to spend, and there are worse ways to spend your money. And because you’re not paying taxes, that $50K is a real $50K: forty thousand full dollars, not after-tax dollars. Before I embarked on tax resistance, each dollar I earned was reduced 17½¢ by federal income tax withholding. By eliminating that tax, I gave myself a raise by increasing the value of every dollar I earned and thereby increasing my take-home pay for every hour I worked.
But not everybody could get those deductions, you know.
True — different people have different deductions they can take and different financial obligations they must meet. I don’t have a car, or children, or a chronic disease, or a mortgage, or student loan debt. I’ve got more flexibility in my finances that allows me to consider a step like this.
How did you find out about the deductions and credits you use, and how do you know they’re legit?
I mostly learned about the credits and deductions that I use by reading IRS documents like Publication 17 — the agency’s how-to guide for individual income tax filers. To delve further into the fine print, I looked to other IRS documents.
If I want to do tax resistance, do I have to choose between poverty and persecution?
There are also the paths of prevarication and paperwork! Seriously, though, in the field marked off by those four “P”s there’s a lot of territory. Some tax resisters are persecuted by the government, and some deliberately provoke this sort of confrontation as part of their protest. And some resisters do adopt a voluntary simplicity lifestyle that seems impoverished to some people. But many resisters are neither persecuted nor impoverished. There are many tactics, and many ways to go about using them.
You may be avoiding federal income tax, but you still owe self employment tax, and pay California sales tax (and maybe the state income tax), various excise taxes, tariffs (indirectly anyway), etc. What about that?
There’s that gray area again. I wonder what I’d have to do to avoid paying (or owing) any taxes at all. I’d probably have to avoid money altogether, since some is lost to tax just about every time it changes hands. I couldn’t get vaccinated, since there’s an excise tax on vaccines. I couldn’t eat food that had been shipped using taxed fuel. I couldn’t drink booze that hadn’t been home-brewed or bootlegged. I couldn’t leave the country and return legally, since there is a high fee to purchase a passport. I’d have to avoid using any products that were subject to an import tariff — or maybe any products whose manufacturers or sellers made a taxable profit or who paid their employees taxable salaries. Sounds pretty tough. I think I’ll stick with moral impurity for now and put off sainthood for another day. That said, where there’s room for improvement I’m eager for suggestions. I have home-brewed beer to avoid the excise tax on alcohol, and these days I avoid booze entirely. I don’t own a car so I pay little excise tax on gasoline directly. As for the self-employment tax, I decided in to just stop paying it (non-legally). So far that’s worked out fine.
If you think the government is so bad, why don’t you just leave the country?
If you are asking whether I’ve considered moving to another country as a way to live on less money, avoid support of the U.S. government, get out from under the thumb of Uncle Sam, spend my suddenly large bank of free time by seeing a bit more of the world, and so forth — I have considered this and am considering it. If what you’re asking is “If you hate the government so much, why don’t you leave its country” then the answer is different: I don’t believe this country belongs to the government. I don’t believe that by opposing the government, I become less invested in the place where I was born, where I grew up, and where I live. In short, I think that it’s the government that’s the problem, and that if push comes to shove it’s the government that should leave the country, not the people.
Do you just want to “not support” the government, or actually to resist it in some fashion?
I think many protesters with their signs and chants and their #hashtags are fooling themselves if they think they oppose the government — their actions and their rhetoric don’t take a nickel from the bottom line of their actual support. I think a compelling case for the need to resist the government can be made. Now, finally, I have earned the right to weigh that case. Once I stop supporting the government, I can decide whether to wash my hands of it or whether to go further and actively oppose it.
Don’t you know that many brave people have fought and died so that you would have the right to espouse the tripe that is your opinion?
I’ll try to hold up my end of the bargain.
How can you reconcile withholding financial support for our federal government and continuing to benefit from services supplied by that same government?
I see what you’re getting at, but I think this is a sham argument. Let’s say Al Capone sets up shop in your neighborhood and offers you the standard mob protection racket deal: “We’ll make sure your home doesn’t burn down and your kneecaps don’t get broken if you pay us $50 every week — it’s great insurance.” You grumble but pay, resenting it all the while. Now imagine Al Capone uses some of the money you and your neighbors have been coughing up to add a new wing to the hospital, or to throw a party for returning war veterans, or to buy a truck for the volunteer fire department? Should you stop resenting being shaken-down every week? Should you start being glad you’re being extorted? Should you feel guilty if you can weasel out of paying? How much of your money does Al Capone have to spend on philanthropy before it becomes okay that he’s extorting it from you?
Taxes are the way everybody chips in to fund things of mutual benefit, like national parks and the social safety net. By refusing to pay taxes aren’t you shirking your duty to help out?
When I hear this argument, I imagine a favorite charity: maybe Amnesty International, or Habitat for Humanity, or Doctors Without Borders… something like that. What if I learned that my favorite charity spends half of the donations I send to them on a campaign of murder, brutality, and torture? Would I continue to send them checks to support the good things they do with the other half of my money, or would I find another charity to support? Nothing about tax resistance prevents you from contributing your time and money to beneficial projects. It just means you intend to do so in a way that doesn’t also contribute to the harmful projects of the government.
Speaking of charity, why don’t you just continue to earn as much money as you used to, and then donate enough to charity that your taxable income drops below the tax line?

It’s a common misconception that people can get under the income tax line by donating a sufficient amount to charity. I’ve run the numbers, and it’s not that simple. The first problem is that the deduction for charitable donations is an itemized deduction, so you have to donate enough to get your itemized deductions as high as your standard deduction before you reduce your taxes. (As of there is a $1,000 above-the-line tax deduction for charitable contributions that you can take even if you don’t itemize, so this can help a little bit.) The second problem is that your deduction is typically limited to some percentage of your adjusted gross income. The third problem is that you take your itemized deductions after you calculate your adjusted gross income, so you can’t reduce your AGI that way and therefore can’t use this method to qualify for tax credits that require a low AGI (like the retirement savings tax credit I rely on).

Every once in a while the government loosens some of these restrictions. For instance, in the wake of Hurricane Katrina they allowed people to make tax-deductible hurricane-related donations up to 100% of their AGI. The ceiling on charitable deductions was also removed in the wake of the CoViD-19 epidemic in . These opportunities are difficult to predict, however, and only help with the second of the three problems.

Is this site going to end up just being some shady excuse to beg money from people?
No.
Do you really think you’re going to change the government’s policies this way?
No, I don’t. Some people resist taxes as a protest directed at people in power or as a tactic to try to force concessions from the government. But the reason I resist is to stop my personal support of the government — to wash my hands of it. I had a selfish desire to live my life according to my principles, and not a grander agenda of regime change or reform. Which isn’t to say that I don’t want change, just that this path wasn’t chosen with that goal in mind. That said, I like to think that by writing about what I’m doing I might encourage other people to try tax resistance. What if 10% of people who are of the opinion that the government is run by a bunch of psychopaths actually withdrew their support? Well, I don’t know what would happen, but I think it would mean more than if they all tweeted about how angry it makes them feel or they decided to vote for some politician or they paraded around in the streets again. Tax resistance is a good exclamation point at the end of my convictions — a way of saying “and not only that, but I mean it!”
Is there an RSS / XML feed for this site?
Yes: https://sniggle.net/TPL/rss1.xml is the RSS 1.0 feed and https://sniggle.net/TPL/atom10.xml is the Atom 1.0 feed.
Why are acronyms and abbreviations, like IRS, underlined in Picket Line RSS feeds?
I use the HTML element <abbr> to mark an abbreviation. I usually include the full or spelled-out versions of abbreviations in the “title” attribute of the tag. Some web browsers note the presence of such tags by underlining the enclosed text, and if you hover the mouse pointer over such an underlined abbreviation, a little pop-up window will display the contents of that “title” attribute. You may not find this particularly useful, but people with impaired vision who use audible screen readers to read web pages might appreciate hearing “US” pronounced differently depending on whether it’s a capitalized version of the word “us” or an abbreviation for “United States,” for instance. This may also help search engines and other automated tools to analyze the pages on this site more usefully.
Is there a topic index to this site that I can use to find information on a particular subject?
Yes, and it’s unique to the blog-world as far as I know: Take a look at the outline page. It’s organized not in alphabetical order, but in clusters of topics that kind of mirror one way the content on this site might be grouped.
Who is this Ishmael Gradsdovic?
He’s my imaginary friend. That’s more substantial than a nom de plume but less scary than a psychotic break with reality. He tells some interesting stories, like the one about his baseball-theorizing college friends, or the time his free will disappeared, or his photojournalist stint in the opening days of the Afghanistan War. He has a telepathic, clairvoyant tapeworm who interviewed Mahatma Gandhi, Aristotle, and Epictetus. Sometimes he writes letters to the editor.

Discuss amongst yourselves: Even if I succeed in reducing my federal income tax to zero, I still will be paying Social Security taxes. Some say that this is just a trust fund that the government oversees, but others say that this money is essentially just another part of the general fund that the government uses. In order to actually remove my support for the government and its actions, would I need also to stop paying the Social security tax?

From a discussion I’m involved in over at the Claire Files Board:

Good questions all, and hard ones. I’m currently living sustainably at a level where I don’t owe federal income taxes. To be sustainable, I have to bring in a minimum of $15,000 per year; I can bring in $25,000 or more and still stay under the line by using deductions and credits. I’m not poor enough to qualify for EITC. To bring in $15,000 in income, I’d have to pay some FICA.

So, while I’m avoiding the federal income tax, I’m still giving money to The Man. And these days they get about as much from FICA as from the income tax. So that is a real concern.

If I close my eyes and plug my ears and go to that happy place, I can tell myself that FICA only funds social security and medicare, which, although highway robbery of a sort no good libertariish fellow can condone, at least doesn’t involve tearing the arms off of little boys with guided missiles. However, if I open my eyes and unplug my ears, I notice that all the money is really going into one big trough surrounded by politicians with forks and knives. (This deception will become easier to swallow in the near future when FICA contributions start to be less than Social Security / Medicare spending)

So if I really wanted to stop funding the government completely, I’d have to eliminate FICA contributions too. I could do this by not having any earned income (wouldn’t it be nice if I could live off $15,000 a year in interest and capital gains!) But I’m not so lucky, and it isn’t really a path I could recommend to anyone but the lucky.

I could also do this by being a minister (yep, it’s one of the rare FICA exceptions). I’m still looking for the congregation who’s willing to pay me $15,000 a year to be their pulpiteer.

I could lower my income and standard of living further and get to a point where my FICA contributions are matched by my EITC credit. This would be the most consistent position for me to take, given my momentum and my rhetoric. I’m not sure I have the balls for it, though, so I’m sticking with my half-way position for now. I’m one of those wade-in-to-the-pool rather than dive-in-to-the-pool sorts, I’m afraid.

I’d need to take excise taxes into account, too. I’ve already stopped paying the excise tax on my phone bill, but there are taxes on gasoline, beer, ammunition, and even vaccinations to deal with. I suppose I could do without, or factor those in to the FICA — EITC equation.

By this I assume you mean the deductions I claim for putting money in retirement funds, spending it on education, etc. Do things the government thinks are responsible or good for society and they give you a pat on the head and a tax break.

It is condescending, but for me this isn’t much of an issue. I think that putting away money for retirement is a pretty wise thing to do, so I don’t chafe at this being a requirement for qualifying for a credit. The education deduction I can take or leave. If I want, I can earn an extra so-many thousand dollars in a year and spend it on some classes; if not, I don’t earn or spend the money. No problem.

My whole tax resistance scheme is such a broad-brush lifestyle change in reference to the tax code that these little things are just details.

I sent almost a thousand dollars to the U.S. Treasury. This was a portion of the FICA tax (a.k.a. “payroll” or “social security” tax) tax that I owe for .

If my math is right, I got through without owing any federal income tax, but FICA is a different animal — much more difficult to evade.

It made me sick to write that check, but I did it anyway. I’m not prepared to evade this tax right now. I’ve got three paths I could take in the future with respect to FICA:

  1. I could decide I don’t mind paying it
  2. I could decide to evade it legally by not earning above-ground income
  3. I could decide to evade it illegally by not paying up

The first one is tempting. Because the FICA tax is nominally earmarked for the Social Security and Medicare programs, this makes it easy to say “well, that’s not so bad as bombing Iraqis and such, now, is it?”

Fact of the matter is, though, that this earmarking is mostly just an accounting gimmick. The money goes into one big pile and the politicians divide it up how they want. For a long time, FICA contributions exceeded Social Security and Medicare outlays, and so Congress spent the surplus on all of the other crap they like to spend our money on. Now that FICA is starting to fall behind, they’re scrambling for ways to avoid having to raid the other accounts to pay back what they stole.

So that excuse won’t wash, and I can’t think of any better ones.

If I want to get out of paying FICA, I could try to do it the legal way — by not earning any income. That would mean reducing my standard of living way below its currently modest below-the-income-tax-line level, since aside from income, I don’t have enough savings to last very long at my current burn rate. Living on less than a thousand dollars a year (what this approach would mean) would be a significant challenge.

An alternative to this would be to earn income under-the-table and keep the IRS in the dark about it. What they don’t know about they can’t tax. This means finding an income source that doesn’t go through easily-traceable channels (, by contrast, I did contract work for a company that isn’t about to play cute with the IRS by paying me under the table, and I sold merchandise on-line in a way that is probably open to inspection by any government agency that decides to care, so I reported everything).

I could also decide to do everything above-board as usual but then just refuse to pay up. This would move me into a more confrontational form of tax resistance. For it to be effective, I’d have to be careful about hiding assets. It would be no fun at all to do this and then have the IRS slurp the tax along with penalties and interest from my helpless bank account.

One Picket Line reader told me that he has a friend who has his own path out of my dilemma: he carefully adds up how much money he’s sent to the government over the year and then methodically sets out to do at least that much damage to government property! That certainly scores points for gumption.

What do you think? Are there options I haven’t noticed? Or better arguments for or against one of these options?

I’ve been dreading the moment when I would have to start addressing the hoopla about the Dubya Squad’s plans to muck around with Social Security. For a long time there were no plans to address — just a lot of hand-waving about an impending crisis, the importance of something called “ownership,” and so forth. Now that actual plans are starting to become fleshed out with details, it’s becoming clear that I won’t be able to avoid the issue here at The Picket Line as I’d hoped.

Most of what you’ll be hearing about “private accounts” (or whatever the media is convinced to call them) is just a smokescreen designed to take your attention away from what is really going on — the next phase in the great FICA robbery.

I’ll try to describe what’s been taking place:

The U.S. government gets the bulk of the money it spends from borrowing and taxing. Most of the taxes come from two sources: the federal income tax and FICA (a.k.a. the “payroll” or “Social Security” tax).

In some abstract universe that resembles our own, the federal income tax receipts go into the “general fund” that Congress taps to spend for all the things it likes to spend money on, and the FICA contributions go into a “trust fund” that is used to pay out Social Security and Medicare/Medicaid benefits.

To oversimplify a bit more: the federal income tax is paid mostly by the richer half of Americans. A large number of people (like me) don’t pay it at all. FICA, on the other hand, is paid by anyone who works for a living, and the richer you are the smaller a percentage of your income you have to pay. Most Americans pay more in FICA than they do in federal income tax.

For a long time, people also paid more into FICA than the government paid out in Social Security and Medicare/Medicaid benefits. This resulted in a surplus that Congress coveted. Congress has been borrowing this money by selling bonds to the Social Security “trust fund.”

A while back, someone foresaw the time when the trust fund would start paying out more money than it was bringing in, and its surplus would start to dry up. We must do something! Crisis! Crisis! What they decided to do at the time was to increase the FICA tax to raise more money. That kept the surplus coming, but Congress just kept borrowing from it, so the IOU kept getting bigger.

The Social Security “crisis” that you’re hearing about is not a crisis of the Social Security program itself (which could keep on doing what it’s doing for the foreseeable future without much change), but it’s a crisis about this debt that Congress owes and doesn’t want to have to start paying back. The government is acting like a guy who’s been on a bender all week and who, when the bartender tries to collect his tab, says “Don’t bother me with that right now — you’ve got to do something about our drinking problem!”

Congress has been pretending to believe in a marvelous myth: They don’t have to practice any fiscal discipline now because some day in the future a Congress of wise and brave politicians will appear who will look all this debt in the face and either a) cut spending to the bone and raise more money in the general fund so there’s enough to pay back the debt, b) default on the debt somehow and let Social Security wither, c) raise more money via FICA again so as to put off the day of reckoning even further, or d) cut Social Security and/or Medicare/Medicaid benefits so the IOUs don’t have to get cashed in any time soon.

So that’s cut spending, default on the debt, raise taxes, or cut benefits. All very unpopular choices for politicians to make. Each one is something that a politician will be attacked at election time for doing. But never fear, one day the wise and brave politicians will come and they’ll know what to do!

Alas, the day of reckoning has arrived, and this Congress is full of the same sort of scoundrels and cowards as all the others have been. The IOUs are starting to get cashed and the national debt is climbing like a rocket. Congress has tapped that rich uncle for a loan for the last time, but continues to insist on living beyond its means.

All of this talk of private accounts and who gets to put money in them and how much control you’ll have over them and whether it’s too risky and so forth is just a smokescreen. That’s the debate the politicians are hoping people have so it distracts ’em from what’s really going on. After all the smoke clears and the legislation gets to the president’s desk, it’s going to raise your taxes or cut your benefits or both (vaporizing the IOUs doesn’t seem like an option, and cutting spending enough to address the problem is laughably unlikely).

As Paul Krugman put it (paraphrasing Voltaire): “you can improve Social Security’s finances with privatization, as long as you also slash benefits — just as you can kill a flock of sheep with witchcraft, provided you also feed them arsenic.”

Note also: By engineering a system that allows for a perpetual loan from Social Security to the general fund, this also engineers a retroactive tax increase! The money you’ve been paying in FICA, that’s supposed to be going right back out again to recipients of Social Security, Medicare and Medicaid, has instead been siphoned into the general fund to pay for, you know, wars and stuff. Because this retroactive tax increase taps FICA, it is also a regressive tax increase that hits the poor harder than the rich.

But what about the libertarian argument about how the government shouldn’t even be in the social security and health insurance business in the first place? Isn’t there some benefit to replacing at least some of this with private accounts that belong to the person making the contribution? The answer is yes and that answer is also completely irrelevant to the debate, since the “personal accounts” under discussion do not belong to the person making the contribution but remain under the control of the government, which makes the rules about how much you can put in, where you can invest it, when you can take money out, how much you can take out, and so forth, and can change them at its whim.

Furthermore, the money that goes into these “private accounts” isn’t really your money at all — nope, the government will continue to take as much of your money as before (or more, if it boosts the FICA tax again), and then — get this — it will loan some of your money back to you to invest in these “private accounts” and expect you to pay that loan back with interest out of your Social Security benefits! (Yep, the more you look at it the dumber it looks. And, like Dubya’s crazy Medicare reform, it’ll probably start costing a lot more than advertised once the bills start coming due.)

So, in short, this becomes an issue here at The Picket Line because the proposed Social Security changes represent a new attempt by the government to take more money from us to spend on its wicked ways. It also makes my distress at paying FICA more acute.

FICA has been a thorn in my side since I started my experiment in tax resistance. I’ve been able to find practical, legal methods of avoiding the federal income tax and even some excise taxes, but FICA (a.k.a. the “payroll” or “social security” tax) has turned out to be a tougher nut to crack.

Looked at in one way, it should be an easy tax for me to resist. Because I’m self-employed, I pay FICA by writing a check and sending it to the U.S. Treasury four times a year. If I want to stop, I just stop sending the checks. This makes it much easier for me than for people whose FICA contributions are withheld directly from their paychecks.

What’s holding me back, then, has been my feeling that there isn’t much point in resisting this way. If I did stop paying, I imagine, the IRS would probably attach some sort of penalty to what they figure I owe and then start charging interest on top of that. By the time they got around to seizing the money from my bank account or from the checks that clients pay me, they’d be seizing more than I would have given them originally.

Two possible answers to this objection are 1) maybe if they have to go through a lot of fuss to go after you, it’ll cost ’em so much to do so that even with interest and penalties they’ll end up behind money-wise, and 2) maybe you could reorganize your financial profile so as to be harder to collect from (see, for instance this helpful guide on How To Resist Collection from the National War Tax Resistance Coordinating Committee).

The first of these answers may be true, but I wouldn’t know where to begin to do the math to find out for sure. It is difficult to predict the government’s policies and rules (certainly the law is little help in this regard). The War Resisters League book War Tax Resistance ( edition) claims that “Except in rare instances (e.g., when extremely large amounts of money are owed) the extra money taken by the IRS will not cover the collection costs. In dealing with tax refusers, often the IRS has spent more than it has collected.” Perhaps this is so.

The second answer (reorganize my finances to make it harder to collect) I’ve given some thought to, but I’m also not sure where I’d begin. I don’t have much in the way of tangible assets to seize, but I do have bank accounts, an IRA, and such — and I can’t imagine it would be difficult for the IRS to find such things and dip their fingers in. Once upon a time, tax resisters could keep moving from bank to bank, or open accounts using nicknames, or open non-interest-bearing accounts that the IRS would never learn about… but in these post-“PATRIOT Act” days, I doubt this would get me very far. I could withdraw all the money from my bank accounts and stuff the cash in my mattress, but that’s not an option with an IRA.

Even if the IRS were able to seize the money from me without much effort, and even if it did add interest and penalties, would it be worth it to force them to take the money rather than handing it over meekly? I’m not sure. There is some worth to such a gesture, but I’m not convinced that there is much worth to it. It is possible that the penalties and interest would be worth more to me than the gesture would.

There are other options. I could switch over to the underground economy, for instance. That is an attractive solution, but might be difficult to do. Also, I’d have to be less-forthcoming about my activities here on The Picket Line.

So I continue to mull it over. My next FICA payments are due on .

I finished my tax returns for . I ended up owing no income tax, as I had planned, but $770 in additional self-employment tax. I’ve decided to stop paying my self-employment tax, although I’ll continue to file accurate 1040 forms each year showing how much the IRS thinks I should pay them.

This has been a difficult decision to make. I have been able to find no legal way of earning enough income to get by without owing self-employment tax (or its cousin FICA), so I’ve been left with the choice of paying that tax and learning to live with it, or resisting it illegally and accepting the consequences of taking that path.

I don’t expect that the consequences are going to be threatening or frightening, just annoying and frustrating. I figure the way this will probably play out is that the IRS will send me a series of letters that eventually climax in one that informs me that they’ve put a tap on my bank account and seized the money directly, probably with interest and penalties added.

That will be annoying, and may have consequences like bounced checks or difficulty in withdrawing money from an ATM when I need it or some red asterisk on my credit report or some such. That I can deal with. What I’d have a harder time accepting would be if the government ended up coming out ahead on the deal — if the interest and penalties were significant enough that I felt that my efforts had been counterproductive.

This is a lot of what led me to choose my legal method of income tax resistance in the first place — by never owing the money, I don’t run the risk of having to pay it involuntarily. Now I’m augmenting this with an illegal method of tax resistance that doesn’t have that same benefit.

I don’t think it is likely that the government will come out ahead if it decides to pursue my assets. First off, I don’t owe much — because my income is fairly modest, my self-employment tax is too. In a typical year, I’ll owe something like $3,000. This isn’t something the IRS is likely to bring out their big guns for (unless, I suppose, The Picket Line becomes suddenly influential and they feel like they need to make an example of me).

And there is friction in the machine, which is to say that for the IRS to start the process of seizing money costs them money. As I noted last month, the IRS is planning to outsource its simplest collection cases (a category into which my case may well fall) to private companies. To cover their costs and give them a profit motive, these companies will swallow about a quarter of what they collect. That gives some idea of how much the process is expected to cost — but the IRS will also rack up some additional expenses just getting to the point where they decide to turn a case over to these vultures.

I have some control over this — I can, if I choose, take additional steps to hide my assets and make it harder (and more expensive) for them to collect from me. I don’t know much about this sort of thing, or how difficult it will be. I may decide it’s not worth the bother.

This does blur the focus of The Picket Line somewhat. I’ve been able to give a good, simple soundbite about my tax resistance: “I’m avoiding paying any federal income tax, honestly and legally, by taking legitimate deductions and credits — and you can too!” Now I don’t have a sound-bite anymore. I have to explain that I’m resisting the income tax in a legal way, the self-employment tax illegally, (and then there’s excise taxes…). That’s harder to sell because it takes longer to explain and it’s easy to get into glazed-eyes territory, and it seems more frightening and sketchy to people who might be sympathetic with tax resistance but who get weak-kneed at the thought of getting a stern letter from an IRS computer.

I’ll try to keep good records and “do the math” so I can demonstrate whether or not this really is a practical method of keeping money out of the government’s hands.

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