How the IRS Is Not What You Think: Unpacking the Truth about Income Tax
If you’re like most Americans, you probably think the IRS is just a necessary evil, part of life that can’t be avoided. Taxes are a part of the system. But what if everything you’ve been told about taxes, the IRS, and the way the financial system operates is wrong? What if the IRS is not exactly what it seems, and most people are unknowingly opting into a system that’s not even meant for them?
In his book, Eliminate Income Tax from an Unincorporated Nonprofit Association, Kirk Carmichael reveals some surprising truths about the IRS, the income tax system, and how millions of Americans are unknowingly bound by a system that doesn’t even apply to them. What follows is an eye-opening look at how the IRS operates, why most of us don’t owe federal income taxes, and what you can do about it.
The IRS: A Private Entity, Not a Government Agency
The first major revelation in Carmichael’s book is something most of us never stop to question: the IRS is not a government agency. That’s right – the organization we’ve been taught to fear and respect is a private entity, a fact that drastically changes the way we should view taxes and tax collection.
For decades, we’ve been told that the IRS is a federal body tasked with collecting taxes on behalf of the U.S. government. However, Carmichael explains that the IRS is essentially a collection agency for private banks, namely the Federal Reserve, which prints money and charges the U.S. government interest for the privilege of borrowing it. The IRS exists to collect that interest from American citizens.
In 1913, the Federal Reserve was established, and with it, the IRS’s role was cemented as the collection arm of the government. However, the IRS doesn’t serve to fund the U.S. government in the way most of us assume. Instead, it primarily collects funds to pay the interest owed to the Federal Reserve, a private entity. This revelation alone turns the entire narrative around taxation on its head.
The 16th Amendment: A Misunderstood Law
One of the most widely misunderstood aspects of the tax system is the 16th Amendment, which supposedly authorizes the federal government to impose an income tax. But does it?
Carmichael uncovers a shocking truth about the 16th Amendment: it’s not what most of us have been led to believe. The amendment was initially intended to apply to federal employees and residents of Washington, D.C. – not to the general population. The federal income tax, as most Americans know it, didn’t become an all-encompassing system until later, when the narrative was shaped to make it seem mandatory for everyone.
Carmichael argues that the 16th Amendment was misrepresented and manipulated over time to make people believe they owed taxes, even when they didn’t. This change didn’t happen overnight, and it wasn’t a matter of law but of perception. By misleading people into believing the tax applied to them, the system flourished and expanded.
How We Unknowingly Opt Into the System
Here’s where things get even more interesting: we’ve been voluntarily opting into the income tax system without realizing it.
At some point, every working American signs a tax return contract – usually the famous 1040 form. What most people don’t realize is that by signing this form, they are voluntarily entering into a contract with the IRS, agreeing to pay income taxes based on certain assumptions. The problem? Most Americans never question this contract or fully understand what they’re signing.
The IRS relies on this ignorance to keep the system running smoothly. By signing the 1040 form, most people agree to be treated as taxpayers, even though they may not be subject to federal income tax in the first place. Carmichael explains that this contract, signed under penalty of perjury, is what makes the system seem legitimate, even though the vast majority of Americans have no legal obligation to pay these taxes.
This is where many people go wrong. Without understanding the contract, most individuals unwittingly enter into an agreement that locks them into the tax system. They might not owe a penny in federal income tax, but by signing the contract, they become liable for it.
The Deception Behind Compliance
Why is this such a big deal? Because the entire tax system is built on compliance, not legality. Carmichael argues that the IRS thrives on fear and misinformation. If you don’t fully understand the system, you’re far more likely to comply without question. The more people believe they owe taxes, the less likely they are to question the legitimacy of the system.
The key, according to Carmichael, is knowledge. Once you begin to understand how the IRS operates – and how you’ve unknowingly opted into the system – you can start to break free. This isn’t about evading taxes; it’s about understanding your rights and opting out of a system that doesn’t apply to you.
What You Can Do to Take Control
So, what’s the solution? According to Carmichael, the answer lies in understanding the law and taking steps to remove yourself from the IRS’s jurisdiction.
One of the most effective ways to do this, as outlined in the book, is through the formation of an Unincorporated Nonprofit Association (UNA). This is a legal entity that allows individuals to remove themselves from the IRS’s jurisdiction while still operating within the law. By setting up a UNA, you can restructure your finances, move assets out of your name, and protect yourself from the IRS without violating any laws.
Carmichael’s personal story highlights the power of the UNA. After learning the truth about the IRS, he created multiple unincorporated associations to protect his wealth and avoid unnecessary taxes. Over time, he developed a system that enabled him to operate outside the IRS’s scope without paying income taxes.
The Power of Knowledge
The truth about the IRS and income tax is unsettling, but it’s also empowering. Once you realize that the system relies on compliance rather than legality, you can begin to reclaim control over your finances. It’s not about evading taxes – it’s about understanding how the system works and making informed decisions about how to navigate it.
Carmichael’s book offers a roadmap for breaking free from the tax system. By learning the truth, understanding your rights, and taking action, you can make informed decisions that allow you to live a life free from fear and financial burden.
Conclusion
The IRS is not what you think. It’s not a government agency, and it doesn’t apply to most of us in the way we’ve been led to believe. The income tax system is built on misinformation, and millions of Americans are unknowingly caught in its web. But the truth is out there, and with the proper knowledge, you can take back control of your finances. Whether it’s through understanding the 16th Amendment or setting up an Unincorporated Nonprofit Association, the key to financial freedom starts with education. And once you see the truth, you’ll never look at taxes the same way again.