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self-employment tax, but would be liable for additional FICA
tax.1 Respondent did not immediately communicate these
conclusions to petitioner.
On July 10, 1995, respondent mailed petitioner a letter
encouraging petitioner to settle at the Appeals level and to
provide documentation supporting her position. On July 27, 1995,
respondent mailed petitioner a letter offering a settlement and
enclosed a proposed stipulation of facts for petitioner's
signature or comment. Respondent offered to concede that $631.75
of income was overreported by Dr. Imhoff and that petitioner was
an employee liable for only the employee portion of FICA tax.
The tax treatment of the three checks totaling $1,088.50 was not
mentioned in the letter. Respondent also did not address
petitioner's contention that a portion of the alleged
understatement was attributable to the $2,427.25 that petitioner
had reported as miscellaneous income.
On September 27, 1995, petitioner provided respondent with
wage statements for 1990. Petitioner also explained that the
$703.50 check, dated January 2, 1991, was earned in 1990. The
$703.50 was reported on petitioner's 1990 income tax return but
was erroneously included on both the 1990 Form 1099-MISC and the
1 This information is derived from the Appeals officer's
handwritten notes. Although the notes are undated, we find that
they were written after June 11, 1995 (i.e., the date petitioner
mailed information incorporated in the notes) and before July 27,
1995 (i.e., the date respondent proposed a settlement offer that
incorporated calculations from the notes).
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