What Is Exempt?

The taxing authority of the federal  government  extends ONLY to any activity over which it has authority to   exercise control, and any activity outside that authority is  “exempt” from taxation by the federal government.

U S. Supreme Court in McCulloch v.  Maryland, 17 U.S. 316 (1819)

The  federal government is forbidden by the Constitution to regulate  or  abridge the exercise of a fundamental right, those rights that are   included in the “right to life, liberty and the pursuit of  happiness.”   Among those fundamental rights are your right to  freedom of speech, to  worship as you choose and your right to  earn a living for yourself and your family through any lawful  occupation.

U. S. Supreme Court in Butchers' Union Co. v. Crescent City Co.,  111 U.S. 746, 4 S.Ct.  652 (1884);  Yick Wo v. Hopkins, 118  U.S. 356 (1886);  Truax v. Raich, 239 U.S. 33  (1915);  Coppage v. Kansas, 236 U.S. 1;  Adams v.  Tanner, 244  U.S. 590, 37  S.Ct. 662 (1917);  Meyer v. Nebraska, 262  U.S. 390, 43  S.Ct. 625 (1923); and many other cases.

Because the power to tax is the power to destroy (Chief  Justice John Marshall in McCulloch v. Maryland,  above), and  because the federal government does not have the right to  restrict,  much less destroy, your fundamental rights, the exercise of a   fundamental right, such as your freedom of speech, your freedom of   religion and your freedom and right to earn a living through  any lawful occupation is EXEMPT from taxation by the federal  government!

U. S. Supreme Court in Grosjean v. American Press Co., 297  U.S. 233 (1936);  and, again, in Murdock v.  Pennsylvania, 319  U.S. 105 63  S.Ct. 870 (1943);  and, again, in Jones v.  Opelika, 316 U.S. 584, 56  S.Ct. 444 (1943);  Follett v. McCormick, 321  U.S. 573 64  S.Ct. 717 (1944);  and Harper v. Virginia Bd. Of  Elections, 383 U.S. 663, 86  S.Ct. 1079 (1966).

The law, as it is written, instructs us to EXCLUDE EXEMPT  INCOME (26 CFR § 1.861-8T), so even if part of your  personal earnings can be  separated as profit “derived from  compensation for services”, that exempt income should be  excluded from your gross income.