If you get a government payout, government may have a REAL right to call you a government employee. It is government employees (or those who say that they are even if they are not) who owe the income tax. Peruse http://www.supremelaw.org/rsrc/alert.htm and look for the definitions of "United States", "Employer", and "Employee." Also, look to see that the 50 states are not among those areas where residents must pay Social Security tax.