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the boat owners were employers who were required to withhold
income and FICA tax from Mr. Anderson. In that vein, they argued
that the failure of the boat owners to withhold relieved
petitioners from any obligation to pay income or FICA tax.
Pursuant to the Appeals officer’s suggestion, petitioners
submitted Forms 1040X, Amended U.S. Individual Tax Returns, for
1996 and 1997, claiming that they were not liable for the income
tax that they had reported on their original 1996 and 1997
returns. The Appeals officer forwarded petitioners’ amended 1996
and 1997 tax returns to the examination division where
petitioners’ 1996 and 1997 original returns were already under
examination concerning whether they were liable for self-
employment tax. The examination division considered and denied
petitioners’ claims that they were not liable for the 1996 and
1997 income tax and notified them of the denial by sending
petitioners the revenue agent’s report, on August 3, 1999.
After review of the problem resolution officer’s notes, the
Appeals officer concluded that the problem resolution officer had
not sufficiently reduced petitioners’ 1995 self-employment
liability to the amount that Mr. Anderson would have owed if he
were an employee. On January 17, 2001, the Appeals officer
recommended that petitioners’ 1995 tax liability be reduced by an
additional $797.58. The $797.58 adjustment was made on March 12,
2001.
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