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department. In particular, Exley’s work related to the sales
department’s activities of recording of sales, tracking and
confirming orders, and answering telephones. Petitioner retained
the benefits of Exley’s employment with the corporation.
Petitioner and E. Naylor were aware that Exley was working for
the corporation and being paid compensation for her work.
Petitioner continued to allow Exley to be paid compensation, even
if it was paid indirectly through A. Pavlik. The settlement
agreement, and subsequent amendments, provided Exley backpay and
continued her compensation in the future, while noting the
ongoing dispute over her status as an employee.
With respect to the relationship the parties thought they
were creating, petitioner focuses on the lack of board approval
over Exley’s rehiring. Petitioner also asserts that, because
Exley did not have the same benefits as other employees of
petitioner, she was not an employee.
Even where parties expressly agree to create an arrangement
for compensation outside of the employer-employee relationship,
the evidence, and not characterization of the relationship by the
parties, determines employment tax liability. See Charlotte’s
Office Boutique, Inc. v. Commissioner, 121 T.C. 89, 105-106
(2003); Ewens & Miller, Inc. v. Commissioner, supra at 268-269;
sec. 31.3121(d)-1(a)(3), Employment Tax Regs. A fortiori, an
ongoing family dispute cannot dictate Federal employment tax
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Last modified: May 25, 2011