- 4 - Alexander’s work space. Steven worked 378 hours and was paid $4,000, for an hourly rate of $10.58.3 Although Steven worked only during the summer, petitioners paid him the $4,000 over the course of the year. For example, from January through April 1998, petitioners made payments to Steven totaling $481. Petitioners treated these payments as wage advances. In November and December 1998, petitioners made payments to Steven totaling $2,526. Petitioners paid the majority of the $4,000 directly to Steven, although a portion was paid to third parties on his behalf. Petitioners reported gross receipts of $1,301 for the seamstress business on Schedule C, Profit or Loss From Business, attached to their 1998 tax return. Petitioners claimed expense deductions totaling $4,666, of which amount $4,000 represented the payments to Steven. There is no indication that petitioners paid employment taxes on Steven’s earnings or that they issued him a Form W-2, Wage and Tax Statement. There is no indication petitioners filed a Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, or Forms 941, Employer’s Quarterly Federal Tax Return. Respondent disallowed the claimed wage expense deduction in full. 3 Petitioners introduced a document they prepared titled “Steven’s Hours”, which indicates that Steven earned $4,158, or $11 per hour. Petitioners did not explain the discrepancy between the earnings shown on this document and the amount they actually paid Steven.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011