40 Days of Frivolous Tax Arguments: Wages, Tips, and Other Compensation Received For Personal Services Are Not Income.


How funny. In America, almost everything is “income.” That’s just how things work. Heck… you can’t even win a prize without that being income. About the only thing that is not income is a gift or an inheritance, but even those are easily taxed by our government.

The heart of the argument against wages being income is that there is no taxable gain when you “exchange” your labor for money. They claim that you actually have a “basis” in your labor (kind of like it has inherent value) and you can exchange it for the fair market value of wages without a profit. No profit or gain means no taxation, to those who argue against income taxes.

In a similar vein, some argue that they are merely being “reimbursed” for their time when they are paid wages… again, no income in their little world.

Sorry, that’s now how the U.S. tax law works. The law says that all sources of compensation or income (any pay!) are taxable. There is even a Revenue Ruling that clearly states that wages or other compensation for personal services are taxable.

Oh… and this covers not just money. If you barter (receive some goods or services in exchange for your work), it is likely that this is taxable as well. You don’t get out of income taxes just because cash money wasn’t exchanged.

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