Tax Court Reiterates Employee/Independent Contractor Distinction
Seems like an issue which just won’t go away – the question of whether a worker bee is an employee, or an independent contractor. Makes a big difference in how the bloke reports his expenses. If he’s an employee, those expenses go on Schedule A as itemized deductions, and are likely to be subjected to some limitations in the deductible total. If he’s a contractor, the expenses go on his Schedule C, and further any net profit he reports there can qualify him for retirement plan deductible contributions as well.
So here comes taxpayer Jorge Quintanilla who, the Court notes, is an exceptionally skilled production worker on approximately 150 commercials shot in Southern California. Jorge believed he qualified as a contractor and reported his expenses on Schedule C as noted above. The Court further notes that the legal distinction between an independent contractor and a common-law employee is settled as a general matter, though it’s often murky in application. Courts of various stripes, however, have set forth certain factors over the years, intended to guide one to the proper conclusion as to employee versus contractor, including:Read More
Cat Grabs IRS’ Tongue
Seems the Revenooers plan to go silent – they just don’t want to talk to you anymore.
The National Taxpayer Advocate, in her recent report to Congress, notes that for the past year and a half, IRS has devoted significant resources to creating a “future state” plan which details how the agency will operate in five years. The plan is explained and developed in a document known as a Concept of Operations (CONOPS).
But CONOPS gives the Advocate a bit of heartburn – implicit in the plan (and explicit in internal discussion) is an intention of the part of the Revenooers to substantially reduce telephone and face-to-face interaction with taxpayers. IRS is hoping that taxpayer interactions with IRS through online accounts will address a high percentage of taxpayer needs.
Consider:
- Taxpayers place more than 100 million telephone calls to IRS each year and have done so in every year since fiscal year 2008.
- Taxpayers make more than five million visits to IRS walk-in sites each year.
- Taxpayers send an average of about ten million pieces of correspondence to IRS in response to proposed adjustment notices each year, to which IRS must respond.
Seems the Advocate thinks that if IRS substantially reduces the opportunity for folks to actually talk with IRS employees, many taxpayers will find it much harder to resolve their problems and will have to pay third parties to assist them. (No doubt!) Hence, the Advocate has recommended to Congress that IRS make the CONOPS available for public review and comment (heretofore not done). Indeed, the Advocate has designated the future of taxpayer service (an oxymoron if ever there was one) as the number one most serious problem presently confronting taxpayers. Quoth the Advocate: “Of considerable concern….is what is not stated in the CONOPS. Nowhere in the CONOPS is there a statement that the IRS plans to reduce telephone service or close walk-in sites, even though that is a central component of its strategy……The widespread expectation is that traditional taxpayer services – telephone assistance and face-to-face assistance – will be scaled back dramatically. Based on our internal discussions with IRS officials, Taxpayer Advocate Service has been left with the distinct impression that the IRS’s ultimate goal is ‘to get out of the business of talking with taxpayers.’”
Who knows – maybe this is a good thing.
And the latest from Hillary, this week: a proposed 4 percent ‘fair share surcharge’ tax on the wealthy – now defined as folks making more than $5 million per year.
“This surcharge is a direct way to ensure that effective rates rise for taxpayers who are avoiding paying their fair share, and that the richest Americans pay an effective rate higher than middle-class families,” says a Clinton aide.
We’d call this a “broken record” argument, but who knows what vinyl is any more.
CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters. You should consult your CPA regarding the implications to your own particular situation.
Jeff Quinn, the author of this article is a CPA recently retired from the firm of Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno. He welcomes comments at [email protected].
Watch out for “Hillarytax”
So, here we go – head first into another election year! And you Hillary fans, out there, should not forget her recent promise to go even beyond Obama’s desired tax schemes, and “to make sure the effective tax rate paid by millionaires reflects a truly fair tax system,” according to one of her aide’s recently.
Recall that Obama, once upon a time, propounded the so-called “Buffett Rule” (named for his buddy, Warren Buffett, billionaire investor.) Obama thinks taxpayers with adjusted gross incomes exceeding $2 million should pay a minimum tax rate of 30% – vastly higher than the rate applicable to various forms of investment income presently taxed at a top rate of 23.8%.
“The Buffett Rule says that millionaires should pay at least 30% income tax rates….and I want to go even farther,” chirped Hillary recently. “I want to be the president of the struggling, the striving and the successful.”
Nice.
And obviously former Congressional Budget Office Director Doug Elmendorf likes Hillary’s prescription. Quoth Doug, “If we make changes to federal spending and taxes, we should make them in ways that impose most of the burden on the affluent, because those are the people who have benefited the most from growth in output and income over the past few decades.”
Unstated by Dougie: those are also the folks who take the risks and invest the capital which fuels growth and provides jobs, whom he and Hillary would propose to punish.
And isn’t it time somebody stood up to the morons pleading for abolition of the IRS? We hold the Revenooers in as low esteem as anybody, but let’s get real. Even National Taxpayer Advocate Nina Olson, in recently suggesting that IRS could, indeed, be smaller, points out the notion that the agency could be abolished is basically impractical.
“I don’t know how people think that would happen,” quoth Nina. “People talk about, ‘Oh, all we need is a postcard’ (to file taxes on). Well, you’re going to need some agency that you send a postcard to, and you’re going to need some employees to process that postcard.”
Not to mention someone to administer the system’s complex laws and regulations.
CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters. You should consult your CPA regarding the implications to your own particular situation.
Jeff Quinn, the author of this article, is retired from the firm of Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno. He welcomes comments at [email protected].