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sales representative terminated his or her services, or if TAG
dismissed a sales representative, then that sales representative
would receive commissions on only 85 percent of that sales
representative's as-yet-unshipped orders. TAG retained the
commissions on 15 percent of unshipped orders to cover the cost
of orders that may be held back for credit reasons, or for any
other reason the order might be unshippable.
Tax Returns
Petitioners filed initial and amended joint tax returns for
1989 and 1990. On their initial 1989 and 1990 tax returns,
petitioners reported most of Hathaway’s TAG sales representative
expenses as employee business expenses itemized on Schedule A.
Petitioners filed their amended 1989 and 1990 tax returns on July
17, 1991. On these amended tax returns, petitioners shifted the
business expenses from Schedule A to Schedule C and explained as
follows: “TAXPAYER, PAUL E. HATHAWAY, IS A FULL-TIME TRAVELLING
SALESMAN AS DESCRIBED IN SECTION 3121(d)(3) OF THE INTERNAL
REVENUE CODE AND HE IS THEREFORE NOT AN EMPLOYEE FOR PURPOSES OF
SECTIONS 62 AND 67.”
TAG withheld $3,604.80 and $3,924.45 as F.I.C.A. taxes from
the commission compensation TAG paid to Hathaway for 1989 and
1990, respectively. Petitioners did not show any self-employment
tax liabilities on their initial 1989 and 1990 tax returns. Sec.
1402(b)(1).
ULTIMATE FINDING OF FACT
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