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Sections 3111 and 3301 impose FICA (Social Security) and FUTA
(unemployment) taxes on employers for wages paid to their
employees. For Federal employment tax purposes, section 3121(d)
defines an employee in part as any officer of a corporation.
However, there is an exception to employee status for an officer
who does not perform any services (or performs only minor services)
and who neither receives nor is entitled to receive remuneration.
Sec. 31.3121(d)-(1)(b), Employment Tax Regs. For Federal
employment tax purposes, the term “wages” is defined as “all
remuneration for employment”.2 Secs. 3121(a), 3306(b). The form
of payment is immaterial, the only relevant factor being whether
the payments were actually received as compensation for employment.
Secs. 31.3121(a)-1(b), 31.3306(b)-1(b), Employment Tax Regs.
Consequently, an officer who performs substantial services for a
corporation and who receives remuneration in any form for those
services is considered an employee, whose wages are subject to
Federal employment taxes.
With respect to the case at hand, Dr. Sadanaga is an officer
of petitioner, and therefore he is an employee of petitioner under
the general rule of section 3121(d)(1). Additionally, Dr. Sadanaga
performed substantial services for petitioner, working
approximately 33 hours a week for petitioner. Indeed, he was the
2 There are some exceptions to this definition that are
not relevant to this case.
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Last modified: May 25, 2011