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Year Gross Receipts1 Total Expenses Net Profit
1999 2$526,773 $98,890 $427,883
2000 441,898 76,540 365,358
1 Gross receipts included the amounts reflected on the
respective Forms W-2 issued by Manulife as well as self-
employment income from other sources.
2 In 1999, petitioner received self-employment income of
$3,400 from Manulife, which was reported on a Form 1099-MISC,
Miscellaneous Income.
Expenses consisted of advertising, automobile expenses,
commissions and fees, depreciation, insurance, legal and
professional services, office expenses, rent or lease of
equipment, supplies, travel, meals and entertainment, utilities,
and other expenses.8
Petitioner consulted with his return preparer, W.R. Frey
(Mr. Frey), and discussed the nature of his work. Following the
consultation, Mr. Frey advised petitioner to file as a statutory
employee.
In the notice of deficiency, respondent determined that
petitioner was a common law employee and, therefore, not
permitted to report income and expenses on Schedule C.
Respondent further determined that petitioners are liable for the
accuracy-related penalty under section 6662(a).
8 We note that petitioner did not report on his return any
reimbursement income or its associated expense because he
considered it a “wash”.
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Last modified: May 25, 2011