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Well, if i remember my contractor stuff from a few years ago. Withholding tax on someone who does not file the form is a gov't regulation, it does not make you an employee, it just makes you a non-form-filing contractor and as such ARS has to withhold the funds.
The gov't wants to make sure they get their money and of course they will go to any length to get it including making ARS withhold taxes from you.
Your theory sounds great but alas it doesn't hold water.
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