Skip to comments.Claire Wolfe: Yes, You Can Work without a Social Security Number
Posted on 11/20/2003 9:52:47 AM PST by Sir Gawain
Living the outlaw life:
Yes, You Can Work without
a Social Security Number
By Claire Wolfe
"You can't work without a social security number."
Several generations of young Americans were told that big lie as they reached working age. Sadly, in the last few years that lie has been replaced by an even worse one: "You can't leave the hospital at birth without a social security number."
Nevertheless, it is and always has been a lie to say you must have an SSN to work.
I know. I'd have died of starvation years ago if it were true. So would untold numbers of other hardworking folks. Yes, Americans can work without a social security number. It's just not particularly easy.
Let's clear up a common misunderstanding. There is NO law, anywhere on the books in the United States, that requires everyone to have a social security number.
Having said that, there are plenty of laws, regulations, customs, and corporate policies that make life very, very inconvenient if you don't have a number. But "illegal" and "inconvenient" are two different things.
If you have no SSN , or refuse to use the one you were issued, you may not be able to purchase stocks, be an employee of a big corporation, get welfare, hold a professional license, take out a mortgage, or be used as a tax deduction by your parents. In some places, you can't even rent a DVD.
But nobody's going to throw you in prison or hit you with a hefty fine for "failure to have a number." 1
Major inconvenience is a pain - and in this case it's an outrage against freedom. But it's not the same thing as facing jail time or having a criminal record.
If inconvenience is unacceptable, then get a number and use it when you believe it's required. This article isn't for you.
This article is for Freedom Outlaws who want to avoid the SSN because they value their independence and privacy. It's for religious objectors who believe the SSN is the Mark of the Beast. It's about practical ways that anybody with enough chutzpah can earn a Numberless living.
Some things this article isn't about:
We won't cover arcane social security history or legalisms or discuss how to officially rescind the number you were already given. (The free-market way to rescind your SSN is: quit using it.)
This article is also not about "tax avoision," as publisher Mike Hoy calls it. True, most people who drop their SSNs also want to get out of the tax grinder, and most methods described below can accomplish that. But some folks object to the SSN on religious grounds, yet still want to be taxpayers. What you do with your number-free status is up to you.
If you'd like to file income tax returns and you have religious objections to the SSN, ask the IRS about the alternative Individual Taxpayer ID Number (ITIN). Theoretically, the ITIN is only for "resident and nonresident aliens who cannot obtain an SSN" but who have tax liabilities in the U.S. In practice it is sometimes given to people whose religion forbids the kind of all-identifying, all-controlling number the SSN has become.
Most people perceive that earning a living is the most difficult aspect of the Numberless life. Not so. Earning a living is a snap compared to doing some other things (like getting a bank loan or certain types of insurance). Earning a living is a necessity, so we come up with our most creative ideas to make it happen.
Here are some of our options, from the most obvious to the more arcane.
Let's begin with the blindingly obvious. You purchase inexpensive tools of a trade and you sell your services for cash. Mow lawns, do massage, repair decks, maintain computers, clean houses, write software, give spiritual readings, edit manuscripts - whatever. Millions and millions do this every day.
It's "safer" to sell services than goods, since the business-license Nazis have a habit of showing up when you're visibly marketing physical objects, and that puts you back into the numbering game. But if you "do your thing" discreetly, and don't call official attention to your finances, you'll usually be left to work and earn in peace.
The obvious has some obvious drawbacks, of course. The work is often catch-as-catch can and doesn't pay much (unless, of course, you're selling illegal drugs; but let's not go there). Most cash-only work is done for individuals or for very small businesses -- businesses which may be dishonest or on shaky financial ground.
The companies that want to contract with you for higher-paying, longer-term work usually don't want to pay in invisible cash. Cash offers them no paper trail for tax writeoffs. So they either "1099 you," if you're a contractor who earns more than $600 per year from them, or they report your earnings to the IRS on a W2, if you're a wage slave. In each case, they'll ask for your SSN.
As you're probably painfully aware, employers deduct taxes from their wage slaves before paying them a dime. Contractors, on the other hand, generally get the full amount they earn and are responsible for "voluntarily" paying any taxes they owe.
Let us say you are an individual who works on your own (a sole proprietor) and you have one or more client companies. At some point in your relationship with each client, they'll ask for your SSN, usually by using the IRS's W9 form.
If your clients are small companies, they may hire you first and only ask for an SSN later in the year. This is good; it means you already have a relationship with them before they learn that you're not Numbered. They may be more motivated to work with you. Big, lawyer-ridden firms, heavily regulated businesses, and businesses in some of the nation's burgeoning People's Republic states will ask for an SSN (and possibly a business license number), up front. This is bad.
Whenever the query comes, you explain that you have no number, and inform your client business that they aren't actually required to get one from you.
This is true; under the IRS code they're only required to request your number, and continue to do so each year you do work for them. There's only a $50 fine for failing this task, and you can offer to pay that.
One of three things happens after you say you have no number.
If the company 1099s you without a number, theoretically, the IRS demands that they immediately begin withholding 29 percent (formerly 31 percent) of your earnings. They can be held liable for that amount by the IRS if they don't. (http://www.irs.gov/pub/irs-pdf/p1679.pdf) 2 Ouch.
Be aware that if you allow your clients to withhold the 29 percent (called backup withholding), that money will usually be stolen, either by your client or the IRS. Don't expect it to be credited to you on anyone's books, although it's supposed to be.
In practice, many smaller companies wait until the IRS demands backup withholding. The IRS, in turn, is so overburdened and can be so dinosaur-slow that you may receive your full pay for years before the IRS frightens your client into backup withholding. But once the IRS makes that demand, the stuff hits the proverbial rotary airfoil.
If you are "into" tax resistance, there are various things you can do at each stage, which may or may not save you from the dreaded backup withholding. Most of these are beyond the scope of this article. They also involve legalistic manuvering that spotlights you as one of those "illegal tax protesters."
One alternative, however, is to continue doing business with that same client company, but on different contracting terms - as described later in this article.
But let's say you're not a contractor or don't want to be. You want to be an employee. What happens to you.? You apply for a regular job. They'll ask for your SSN, usually right on the application. You explain that you have no SSN, stating, "It's against my religion."
Believe it or not, if your objections are religious, there are precedents on your side. (Read about them here: http://iresist.com/ice/tacobe~1.htm).
However, these precedents, while hope-inspiring, aren't legally binding on anyone but the participants in the cases.
If you press the issue (perhaps subtly suggesting that you're sure the company wouldn't want to commit illegal religous descrimination), you have a miniscule chance to get hired without a number. A friend's teenaged son has now worked two summers at a regular job for the same employer without an SSN - and this year the employer didn't even hassle him about it.
However, most corporations are so risk-averse and terrified of the IRS that, even if you convince a prospective boss that you have a right to work without an SSN, she'll probably find some other excuse not to hire you. With no SSN, it's really best in the long run to avoid conventional employment. If you succeed in getting a job, the employer takes out all the usual deductions, sends the money off to the feds and the states, and reports it under a "place-holder" number (999-99-9999).
Again, don't count on ever seeing any of that money back.
I consider this next option to be cheating because it requires you to use someone's SSN, even though not your own. But it's an option that many Unnumbered people find both convenient and protective. 3
You establish a limited liability company (LLC), limited partnership (LP), or corporation in one of the states that are tax-friendly and that specialize in easy, inexpensive business incorporation. This usually means Wyoming (http://soswy.state.wy.us/corporat/corporat.htm) or Nevada (http://sos.state.nv.us/comm_rec/crforms/crforms.htm). Businesses can be incorporated in these states for only a few hundred dollars.
You must have a local representative (a "registered agent") with an address in that state. Very easy; people there commonly perform that function as a routine part of a law practice or business service. An officer of your new company must give an SSN. You don't want that officer to be you. In both these friendly states, you can remain anonymous while choosing a nominee officer and using that person's SSN.
The best possible officer - if you can diplomatically manage it - is a friend or relative who is dying and who won't be off "doing his own thing" with his identity in the years after he helps you incorporate your business. Alternatively, anyone you trust and who trusts you can become the nominal principal of your company. Many businesses that help set up corporations will provide nominee officers, as well. But for both cost and security, most Numberless folks would rather have their own nominee.
Depending on the type of entity you've established, your new company then applies to the IRS for the third available type of number, the Employer Identification Number (EIN), and can also apply for a business license in the state where you'll be working.
Your shiny new business contracts with clients for work. It gives its EIN and business license number (if required), not yours. When an SSN is required, it's that of your nominee officer. Your company pays you, but probably doesn't 1099 you. (That's up to you.)
If you're already working as an independent, you can contract with your existing clients under this new entity. Furthermore, you can set up a new Wyoming or Nevada company every few years if you need to.
Finally, we come to one of the most interesting and least known options, private contracting.
Private contracting (as distinguished from the IRS's regulation-ridden "independent contracting") is a term used by Charlie Adams, whose service, Contract America, was one of the pioneers in this field. There are now several companies offering similar services. Some are listed below, with contact information.
Here's how it works once you've been accepted by a private contracting firm. If you are already an independent contractor getting a 1099, you simply switch to contracting under this new arrangement. Your client will probably want a new copy of form W9, which (instead of showing your information) now shows the EIN of the contracting company and the fact that the contracting company is a corporation - not a sole proprietorship, a partnership, or an LLC controlled by you.
The contracting company invoices your clients. (Some may have you send the invoice, using their name and address.) Your clients pay the contracting company. Upon receiving the check, the contracting firm pays you, taking out a fee for itself. (Contract America, for instance, pays you 92 percent of the total and keeps 8 percent as their own fee. So does Anthony Hargis, another of the firms listed below. If you're lucky or persuasive, your client will cover the 8 percent fee.)
The beauty is that the contracting service doesn't file any paperwork on you. Also, because the service is a corporation and not a "pass-through" entity like an LLC or partnership (in which monies paid in go directly to the owners), nobody has to 1099 it. Charlie Adams reports that IRS-spooked businesses feel more secure dealing with a corporation for this type of transaction.
What if, instead of being a contractor, you're already an employee of a small business? With your employer's agreement, you resign your job, then sign on as a private contractor, with your payments going through the contracting agency.
As Charlie Adams says, "If you're cashier #32 at Wal-Mart you can't persuade your employer to do this." But a small business person might see considerable advantage in it. For instance: your former employer (now your client) doesn't have to calculate, deduct, and disburse all those payroll taxes, and he doesn't have to match your social security or Medicare "contributions" because you're not making any such contributions. On the other hand, if you've previously been paid in cash under the table, the company hiring you now has the comfort, and the paper trail, of a recorded payment and should be willing to pay you more as a result.
Does the IRS approve of all this? Probably not. They don't respect the right of individuals to contract on their own terms, and they've taken it unto themselves to decide who can be a "independent contractor" and who must be a wage slave. Nevertheless, Contract America has been in business for approximately five years without so much as getting a letter from the IRS. I also interviewed a man who had been using another service, Accurate Consulting, for five years, and he reported he's had zero problems with the IRS under this arrangement, despite having had many IRS troubles in the past.
Here are several companies that are in this business:
Contract America: http://www.contractamerica.com/, email@example.com, 1-800-961-0149
Accurate Consulting: 1282 Smallwood Drive W #143, Waldorf, Maryland 20603, 301-753-4408, firstname.lastname@example.org.
Anthony L. Hargis & Co.: http://www.anthonyhargis.com/, email@example.com, 714-957-1375 (Hargis has offered private banking services since 1976, and has gotten into the private contracting business more recently. Ask about it if you don't see it on their slightly confusing Web site.)
I've never personally used any of these services. Although each was recommended by someone with personal knowledge and experience of their reliability, remember caveat emptor. You should verify their reliability as thoroughly as they verify yours.
Am I telling you that any of the methods described in this article are risk free? Heck no! Some are perfectly legal but difficult to carry off. Others, at best, operate in the loopholes of the very hole-y tax code, which is eternally subject to the IRS's whims. Do not enter the Numberless life if you aren't ready to accept risk!
You must also understand that you won't be accruing any social security or unemployment "benefits" or any other perks. And the absence of a paper trail that makes you so happy today may come back to bite you two years from now if you decide you want to apply for a bank loan and need proof of income. Don't do this just to put a little extra money in your pocket because the long-term consequences can be profound. Do this only if you are philosophically committed to living free and making the necessary sacrifices in that cause.
This is not the path for all!
Yet, as abolitionist and former slave, Frederick Douglass, said, "If there is no struggle there is no progress. Those who profess to favor freedom and yet depreciate agitation, are men who want crops without plowing up the ground, they want rain without thunder and lightening. They want the ocean without the awful roar of its many waters."
Freedom is not risk free. Simply being different than the crowd is not risk free. But you can at least minimize the risks after making principled choices. Live quietly, don't call yourself to the government's attention, and chances are good that you'll be allowed to go on living your honest life unmolested.
1 The 1974 Privacy Act, a spectacularly unsuccessful attempt to curb the burgeoning overuse of SSNs, states that no federal, state or local government agency can deny you any right, benefit or privilege because you refuse to give an SSN. Although this law is still on the books, later laws, including a rash of citizen-tracking legislation secretively passed in the mid-1990s, are treated as though they supercede it. The Privacy Act never did apply to private organizations.
2 This IRS publication gives the backup withholding rate as 28 percent. Most other sources give it as 29 percent, scheduled to be reduced to 28 eventually. When you're dealing with tax matters, the only certainty is complete uncertainty about IRS "requirements." A further note on the nice client who goes on hiring you and "forgets" the 1099: Once your client decides to do that, it's to his benefit as much as yours not to report your income. If he 1099s you without a TIN and still pays you the full amount you earn, he can be held liable for your backup withholding. If he "forgets" the 1099, he may not be able to write off the cost of your services as easily, but he doesn't make himself an obvious target for the IRS.
3 This account of creating a business entity is necessarily simplified to fit within the article. Don't take it as legal or business advice, but conduct your own research. In addition to the Secretary of State links given in the article, abundant information about Wyoming and Nevada business incorporation is available on the Internet.
But besides that, it's no hinderance at all! LOL.
Just one more boldfaced lie in the long, long history of dishonesty and incrementalism from our government.
I don't have the cites, but I heard this discussed about a year back. The guest claimed that the absence of the SS# when claiming the dependent didn't disallow the deduction, the absence of a SS# merely causes the imposition of a $50 fee for said absence - the deduction still attaches.
But the article seems to suggest this as a way of evading taxation, or am I reading between the lines too much?
OK, I think I will just take her advice and do my thing. ;-)