Summary of the Summer
-----------------------------------------------------------------------6 September 1996
Yes, I'm late again. And I know I said I wouldn't let it go slack so badly again. Massive apologies. For just
this instant, what I've inserted below is just a summary of what's happened, rather than actual
correspondence. I may update again sometime soon with the details.
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Bad news: IRS found me again at Lycos, and levied me again.
Good news: Related to that and my paperwork efforts, I've resigned and am about to take up working a
contractor position, something to which I will limit myself for the rest of my life.
1.In May, I got a letter back from Lycos' CFO which said, in effect, "We like your SS# a whole lot, so
we're going to keep it." I have written a response to this, which tells them in essence to think about it again
before I take them into court, that they have ignored a bunch of issues and have treated me like a child, and
I won't be ignored. 2.Also in May, the SocSecAdmin responded similarly, that they like my SS# a whole
lot, and will be keeping it. This is fine at some level, since they have their own paperwork nightmares
keeping them awake at night, but it doesn't matter to me because I have nonetheless disowned any potential
benefits, and thereby I remain excised from their system. 3.IMPORTANT: I have heard nothing more about
a 1994 Form 1040, which is to say, the IRS is giving up on this one, as they rightfully must. 4.But I am
losing the original battle which started the whole mess: I have been levied (again) for the remaining balance
due from the original Major Stupid on the 1991 Form 1040. The reason for the loss is for the two reasons
that [a] my ex-wife remains volunteered into the system, and [b] that 1040 was joint, so regardless of my
own new detachment from the system, I remain obligated on that one. It's a good thing I hadn't thought
quite this far ahead when I started, or I might not have started at all. (I'd have thought, "Gee, I'll lose all that
money anyhow", which would have made it difficult to develop the motivation to begin.) Anyhow, I'm out
a few thousand $$$, but that's the last I expect to hear from the IRS, ever. 5.While on vacation in early
August, I got a response from Lycos' CFO and legal counsel (both), which was painful. This has gotten
seriously ugly: I was shown in exacting detail the Treasury Regulations which stipulate the requirement for
"employees" to provide, or have provided for them, a SS#. In the process of this, if the company has to get
it for an employee without the employee's help, they must then begin doing withholding at a "single, no
exemptions" rate, in opposition to my In Lieu Of W-4 which placed me outside withholding until now. (I
have had FICA withholding, but not fed withholding.)
Result: I resigned before they could do that to me. I have just taken a contract position. But one paycheck
from Lycos was levied.
So IRS got another $2200 of the balance they perceive as owed, from that one paycheck's levy. And I will
probably make some arrangement to get rid of the rest of that balance myself, rather than set myself up for
another levy, somehow else. I am in no desperate straits from this, though, because I have other
compensation coming my way which keeps me well ahead of the game.
Here's the real kicker, in my opinion, regarding #5 above:
The issue centers around the question, "What's an `employee'?" If I'm an "employee," then I'm subject to
Treasury Regulations. If I'm not, then I'm not subject to those TRs.
See what the US Code says about this question:
(c) Employee
For purposes of this chapter, the term ''employee'' includes an officer, employee, or elected official of the
United States, a State, or any political subdivision thereof, or the District of Columbia, or any agency or
instrumentality of any one or more of the foregoing. The term ''employee'' also includes an officer of a
corporation.
This is the only def'n of "employee" anywhere in the US Code. In general, an "employee" is someone who
works for govt. Interesting, yes? Are you an "employee"? Maybe, maybe not. If you don't work for an
actual state agency of some sort, and weren't elected to office, you may think the answer is No.
But what's an "agency or instrumentality" of govt?
Here's a sick answer, which is nonetheless really quite appropriate, and signifies deep, deep trouble out of
which we need to crawl, if you ask me (or even if you don't):
"...We are of the opinion that there is a clear distinction in this particular between an individual and a
corporation, and that the latter has no right to refuse to submit its books and papers for examination on the
suit of the State. The individual may stand upon his Constitutional Rights as a Citizen. He is entitled to
carry on his private business in his own way. His power to contract is unlimited. He owes no duty to the
State or to his neighbors to divulge his business, or to open his doors to investigation, so far as it may tend
to incriminate him. He owes no such duty to the State, since he receives nothing therefrom, beyond the
protection of his life, liberty, and property. His Rights are such as the law of the land long antecedent to the
organization of the state, and can only be taken from him by due process of law, and in accordance with the
Constitution. Among his Rights are the refusal to incriminate himself, and the immunity of himself and his
property from arrest or seizure except under warrant of law. He owes nothing to the public so long as he
does not trespass upon their rights."
"Upon the other hand, the corporation is a creature of the state. It is presumed to be incorporated for the
benefit of the public. It receives certain special privileges and franchises, and holds them subject to the laws
of the state and the limitations of its charter. Its rights to act as a corporation are only preserved to it so long
as it obeys the laws of its creation. There is a reserved right in the legislature to investigate its contracts and
find out whether it has exceeded its powers. It would be a strange anomaly to hold that the State, having
chartered a corporation to make use of certain franchises, could not in exercise of its sovereignty inquire
how those franchises had been employed, and whether they had been abused, and demand the production of
corporate books and papers for that purpose." [emphasis added]
--Hale vs. Hinkel, 201 US 43, 74-75.
I've had this citation around for a long time (in the driver brief) and I'm disappointed with myself that I
didn't read this into it until now. Read the important statement again:
"The corporation is a creature of the state. It is presumed to be incorporated for the benefit of the public."
A corporation is not private enterprise. A corporation does not operate by right. It operates, and has its
existence, via a granted privilege. That privilege takes the form of its corporate charter. And thus, since one
works for a govt-instantiated entity, one works for what is in effect an "agency or instrumentality" of govt.
I was an "employee." So are you, if you work for a corporation.
The use of incorporation as a vehicle for business structure is a Bad Thing. Once upon a time in this
country, trusts were the fundamental building block of big business. But that hasn't been the case
throughout nearly the entirety of this century. We really need to get back to it, if we're to avoid this
problem in the general case.
My solution in my particular case is to resign from having been an "employee," and only to take positions
in the future as a "contractor" or "consultant." Thereby, I'm sufficiently removed from a corporation that
I'm not an employee in a formal sense. This means I don't get any other benefits, of course, but that's fine
with me -- I now work in "consultation" which includes a differential so that I can acquire my own health
and life insurance policies. It also means that, if the company implodes on itself, I'm not protected like
"employees" are, in that bankruptcy law requires that the 1st debt to be paid during liquidation is payroll:
As a contractor, I could get shafted in that way. But that's OK with me, I'll just fine somewhere else to work
then.
That's where life stands for me now. It's a bit unsteady, since contract work is instrinsically less stable, but
I'm OK with that; life without risk is death. I'm just a little more alive right now than I might normally
prefer to be. :-)
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-----------------------------------------------------------------------Karl Kleinpaste
Last modified: Thu Oct 23 16:15:06 EDT