Cross References
• Muhammad, T.C. Memo. 2021-77, June 29, 2021

The Tax Court in a recent case explained the error of a common tax protestor argument. The taxpayer was employed at a University and received a W-2 that reflected wages paid along with various tax withholding amounts.

The taxpayer argued that she did not receive taxable wages because IRC section 3401(a) defines wages to mean “all remuneration…for services performed by an employee for his employer.” IRC section 3401(c) provides that “for purposes of this chapter, the term ‘employee’ includes an officer, employee, or elected official of the United States…”

Because the taxpayer was not “exercising a federal privilege” when performing services for the University, she claimed that she was not an “employee” and thus earned no “wages” as defined by IRC section 3401(a).

The Tax Court stated this was a time-worn tax protestor argument that no court has ever accepted. IRC section 3401(c) provides that the term employee “includes” federal officers and employees. It does not state that the term employee “consists exclusively” of federal officers and employees. Anyone fluent in English knows that the word “includes” cannot be assumed to mean “includes only.” By providing that wages “means all remuneration… for services performed by an employee,” subject to 23 narrow exceptions listed in IRC section 3401(a), it is obvious that the term employee is not limited to government employees.