Are you engaged in a trade or business?
If so, do you KNOW what the legal definition of a "trade or business" is in the law?
You can find it in the tax code at 26 USC 7701(a)(26):
The term “trade or business” includes the performance of the functions of a public office.
There is NO OTHER definition of this term anywhere in the tax code.
FYI.
Anyone in a modern-traditional job is told to fill out a W-4; its purpose is not to establish definitions but merely to establish the flow of money to the IRS through withholding. If you fill out W-4 as exempt, you might not get federal withholding because that income tax is irregular and zero might be the right amount to withhold; but they still withhold that SS/Med (always 7.65%) because W-4 does not exempt from withholding from that income tax because it's flat. Only contract employees or invoice relationships avoid SS/Med withholding because it is assumed the contractor or invoicer is handling any withholding separately; but most modern-traditional jobs don't offer the contract option.
"Citizenship" is not so relevant, because whether you exercise it or not, they don't care, they think they've got you on the form that purports to establish liability. Homework: what form is most commonly used for a payer to state under penalty of perjury that it has paid you an amount of money and defined that money to be a category of income, creating a legal presumption that remains unless rebutted by corrective evidence? I've peeked at Hendrickson's book and I think he comes around to the right answer. I'll need to check out his website.
So the actual job you have is to ensure that any reports that swear to the IRS that you earned income, when it was not income, must be corrected. That process is the real issue.
There's the secondary process called getting along with your workplace and earning a living. The 4029 route is real but I don't know anyone who's done it without actually joining one of the approved social-protection churches (Amish, Mennonite, Anabaptist, etc.). Even if you told your boss in your best Jake Blues deadpan that you've decided to become a Mennonite, he might still refuse to stop withholding until you actually signed the form and proved you have limited connection to one of the few approved churches (many apply but can't prove the narrow criteria that give them the exemption).
The fact is that most modern-traditional jobs, especially if you've not questioned the arrangement for awhile, don't have many tools available to stop SS/Med withholding. Only if you know the owner and that person can think independently and make calculated decisions would you have a good chance. That's the person whom you'd want to convince that you'd be better off as a contractor who will invoice labor charges weekly, and that your earnings would move from payroll to expenses. (If they really are aware to it, they'll realize that shifting you to contractor also saves them the additional 7.65% of your earnings that constitutes their share of the SS/Med tax, besides putting the responsibility for your share on you and not them.)
So if none of these routes work then being a responsible head of household means determining whether you should stay in what is effective slave labor or whether you should market yourself as a contractor or online worker. Many contractors are misclassified as "trade or business", but that's not so important because the stopping of the flow of money to the beast has been accomplished and you can correct any mistakes later.
But if you want to stay at the job and it's unlikely they'll listen, you can still have the moral victory that you've given them fair warning of your position; that's also important later if anyone asks you what steps you took to notify your workplace of your position. Essential: tell them why the money you received is not "income", as you've implied here. I remember Lentz too, and his free stuff is helpful for concepts, but more important is the IRC itself. Expecting consequences is less important (is actually unimportant). First remedy path for overwithheld tax is always to prove the tax was overwithheld through channels.
I was going in with the mindset of “I am only responsible for me”, but after reading your comment a few times, it clicked. I realized now I was starting from point b (irs) not point a (work). I really appreciate your response.
So at the very least, I would have to inform them that I don’t have income, and that information would be relevant when it comes time to send out w2, and that ss/mc doesn’t apply to earnings. Whatever they do is up to them. I tried to do the right thing so my ass is covered. A moral victory.
Is there anything about the code you would recommended reading? I really am an idiot and their code is all mumbo jumbo. I probably read “cracking the code” 4 times and still missed the w2 part (yea, it’s in there…)
Thank you, I'm glad it made sense. Yeah, you have likely sifted through to the better sources and are now ready to read whole sections of the code for yourself in place like 26 USC 7701 of course. Note that they are only positive law, not statute law, and sometimes you need to dig deep (or go to a depository library) to find out the actual statute law that is rephrased during codification, sometimes unhelpfully. But 26 USC 7701 contains definitions and that section has been around in one form or another since literally Lincoln, who passed an income tax to fund the War Against the States.
I've certainly heard of people reading Hendrickson 4 times and still having difficulty with his exposition. The trick is to know the words of the law for yourself and then you can rightly judge whatever is said about the law. When I saw OP, I knew he was citing the law accurately and was peeling back one corner of it out of a big patch that needs peeling, so I chimed in.
Now it's necessary to testify truly to your workplace as a matter of conscience, but remember that is only supplementary evidence and it's a preparatory step. The W-2 is indeed a jurat evidence that claims something about you, typically in boxes 1, 3, 5. If you had earned "wages" in a certain amount, but the W-2 said you had earned "wages" in a different amount, it would be wrong, wouldn't it? And this situation would arise on occasion even if it were just as innocent as that your boss had misaccounted what you were paid, so the IRS should have a process for correcting a mistake on a W-2, shouldn't it? All you need to do is live consistently with your head held high that you know the nature of the money paid to you and that you resist claims that it is otherwise than what you know it to be. Whenever anyone uses a term likely to be defined in the IRC, look it up. Whenever anyone uses a common word in relation to taxes, Google for code definitions of the term just to be sure. The suspects are usual.
Digression about definitions, related to OP. I've always found it fascinating that there are now four chapters about "employee" taxes, covering withholding, railroad, Social Security and Medicare (21-24 if I recall). The first two were written at close to the same time because the early federal taxpayers and the Railroad Retirement taxpayers were roughly similar classes at that time. (Some SS numbers are actually "RR" numbers, but there are today no more RR numbers to assign because that federal program has died out.) The next two chapters were written after Roosevelt arrived. All four have distinct, separate definitions of "employee". Spoiler: the Railroad Retirement definition is an excessively detailed description of all kinds of rail work, while the other three definitions are all looser phrases using the word "includes" instead. Why would that be??