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Petitioner treated Kovacevich as an employee. Sec.
530(a)(1)(A). Petitioner’s board of directors voted to pay
Kovacevich a $60,000 salary and issued a Form W-2, Wage and Tax
Statement, relating to 1991. In addition, Kovacevich, in his
capacity as petitioner’s president, filed an amended Form 941 for
1991, with the following statement:
The amount of earnings of Employee Robert E. Kovacevich
was not clear, hence was left off. The Employee paid
all Income Tax due, hence the withholding is
unnecessary. However the Social Security Tax is due.
A completed W-2(c) term is included. [Emphasis added.]
Furthermore, petitioner did not file Forms 1099 relating to
payments made to Kovacevich. Sec. 530(a)(1)(B). Thus,
petitioner fails the first two requirements and, accordingly, is
not entitled to relief.
IV. Liability for Employment Tax
Petitioner paid Kovacevich $132,000 and $33,250 in wages
during 1994 and the first quarter of 1995, respectively. Because
we have determined that Kovacevich is an employee under sections
3121(d)(2) and 3306(i), petitioner is liable for FICA and FUTA
taxes as determined by respondent. See secs. 3306(a)(1) and (b),
3111(a) and (b).
V. Penalties Under Sections 6656 and 6662(a)
Section 6656 imposes a penalty equal to 10 percent of the
portion of an underpayment in tax that is required to be
deposited if the failure to deposit is more than 15 days beyond
the prescribed deadline. See sec. 6656(a); secs. 31.3402(b)-1,
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