- 11 - C. Self-Employment Tax Section 1401(a) imposes a tax upon the self-employment income of every individual. Self-employment income consists of gross income an individual derives from carrying on any trade or business. Sec. 1402(a) and (b); Spiegelman v. Commissioner, 102 T.C. 394, 396 (1994). Petitioner’s self-employment tax has increased because of the increase in income from the disallowance of claimed Schedule C business expenses and the inclusion of unreported income. Petitioner admits that he was self-employed and he earned his income from his business as an insurance agent. Accordingly, we sustain respondent’s determination that petitioner is liable for self-employment tax.6 See Rule 142(a); Simpson v. Commissioner, 64 T.C. 974 (1975). D. Negligence Penalty Section 6662 provides for an accuracy-related penalty equal to 20 percent of the underpayment if the underpayment was due to a taxpayer’s negligence or disregard of rules or regulations. See sec. 6662(a) and (b)(1). A taxpayer is negligent when he or she fails “‘to do what a reasonable and ordinarily prudent person 6 We note that although full-time life insurance salesmen are statutory employees and not liable for self-employment tax, the record does not establish that petitioner was a full-time salesman or a life insurance salesman in 1996. Secs. 1402(b), (c)(2), and (d), 3121(a), (d)(3)(B).Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
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