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her compensation. In petitioner’s books and records, E. Naylor
treated Exley’s compensation payments and the employer’s share of
Social Security taxes as increased loans to A. Pavlik. A. Pavlik
withheld Federal income taxes and Social Security taxes
attributable to Exley’s compensation. A. Pavlik also secured
Federal tax deposit coupons under petitioner’s employer
identification number and petitioner’s corporate name. In order
to make the employment tax deposits, A. Pavlik used the address
of his personal residence on the Federal tax deposit coupons.
A. Pavlik provided Exley with time cards to record the hours
that she worked, and he provided her with pay stubs. He also
provided her with Forms W-2, Wage and Tax Statement, for 1993
through 1999. The Forms W-2 reported the Federal income tax, the
Social Security tax, and the Medicare tax withheld for Exley.
The time cards, pay stubs, and Forms W-2 were slightly different
than the system maintained by E. Naylor for petitioner’s other
employees.
Because E. Naylor did not recognize Exley as an employee,
Forms 940, Employer’s Federal Unemployment (FUTA) Tax Return, and
Forms 941, Employer’s Quarterly Federal Tax Return, as prepared
by E. Naylor’s administrative office, did not reflect Exley’s
compensation for 1993 through 1999. The Forms 940 and Forms 941
did not show the employment tax liability resulting from Exley’s
compensation or the deposits made by A. Pavlik. No unemployment
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Last modified: May 25, 2011