- 6 -
petitioner. The amount of the check included petitioner’s weekly
$500 draw, plus whatever amounts were owed to the workers. After
depositing petitioner’s $500 draw to his individual account, Ms.
Gerber received the remainder of the check proceeds in cash. She
in turn distributed the cash to the workers in the amounts they
were owed. As a result of this practice, the amounts paid to the
workers were reflected on the company’s books as distributions to
petitioner. Petitioner was not aware that the cash payments to
the workers were being accounted for in this manner.
Ms. Gerber withheld no employment taxes from the amounts
paid to the workers. In addition, Ms. Gerber did not issue Forms
1099 to the workers, as such was the responsibility of
petitioner’s outside accountant. Petitioner did not instruct nor
suggest to Ms. Gerber that the cash payments were not to be
reported to the Internal Revenue Service.
Petitioner’s External Accountant
Kenneth Messmer, a certified public accountant, served as
petitioner’s outside accountant starting in 1986. Mr. Messmer
was responsible for preparing petitioner’s Form 1040, Individual
Income Tax Return (which included the activities of the company
on Schedule C, Profit or Loss From Business), and all of the
company’s required employment tax returns. Additionally, Mr.
Messmer prepared the necessary Forms W-2, Wage and Tax Statement,
and Forms 1099 pertaining to the company.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011