Frederick C. Kumpel - Page 13

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          contractors because he could not afford employees.  Respondent              
          argues that Smith and Mawson should be considered employees of              
          petitioner despite the parties’ understanding to the contrary.              
          It is respondent’s position that, although petitioner informed              
          Smith and Mawson that they were independent contractors, this is            
          not a significant factor in the analysis because petitioner                 
          failed to file Forms 1099-MISC for either secretary to                      
          demonstrate an intent to treat Smith and Mawson as independent              
          contractors.                                                                
               A contract between an employer and its staff establishing an           
          independent contractor relationship may be set aside if the                 
          common law principles defining an employer-employee relationship            
          dictate otherwise.  See Vizcaino v. U.S. Dist. Ct. for W. Dist.             
          of Wash. (In re Vizcaino), 173 F.3d 713, 716, 723 (9th Cir. 1999)           
          (applying common law analysis of Nationwide Mut. Ins. Co. v.                
          Darden, 503 U.S. 318, 323-324 (1992), in determining worker                 
          classification).  The parties’ characterization of the                      
          relationship is not controlling.  See Ewens & Miller, Inc. v.               
          Commissioner, supra at 268-269; sec. 31.3121(d)-1(a)(3),                    
          Employment Tax Regs.                                                        
               Petitioner did not follow consistent procedures in treating            
          Smith and Mawson as independent contractors, namely securing an             
          employer identification number and filing Forms 1099-MISC.  The             
          record confirms that he and his secretaries intended to avoid               
          rules applicable to employees, but the intent was inconsistent              
          with the reality of their relationship.  (His manner of reporting           




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