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Petitioner described the workers to the revenue agent as
independent contractors. Petitioner further informed the revenue
agent that the workers had provided services to other people and
that they reported directly to the appropriate job sites.4
Petitioner cooperated with the revenue agent in every aspect
requested and provided her with all pertinent documents and
records.
Petitioner and respondent settled all matters relating to
the examination of petitioner’s individual income tax return. As
part of the settlement agreement, petitioner stipulated various
aspects of the relationship which the workers maintained with the
company,5 and respondent allowed the payments to the workers to
be included in the labor component of cost of goods sold. At
this point, petitioner provided respondent with Forms 1099-MISC,
Miscellaneous Income, concerning the payments to the workers.
Notice of Determination
On June 11, 1998, respondent mailed to petitioner a Notice
of Determination Concerning Worker Classification Under Section
7436 in which respondent determined that (1) the workers were
4 The revenue agent was equivocal in her recollection that
petitioner had described the workers as having submitted bids to
him for particular jobs.
5 Specifically, petitioner stipulated that (a) the workers
were required to comply with petitioner’s instructions about
when, where, and how their work was to be performed; (b)
petitioner had the right to discharge each of the workers; and
(c) the workers could have terminated their relationship with
petitioner at any time without incurring liability.
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Last modified: May 25, 2011