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attached to his tax return, petitioner claimed to be a statutory
employee and reported income of $37,243 and expenses of $32,638
for a profit of $4,605. On his return, petitioner included the
$4,000 distribution of IRA funds, but he did not include the
10-percent additional tax on the early distribution. Petitioner
also included unemployment compensation of $2,208 and deductions,
as claimed on Schedule A, Itemized Deductions, of $19,929. He
did not report any interest income or State tax refunds on his
return.
The Forms W-2, Wage and Tax Statement, issued by Metamor and
Robert Half did not have the “Statutory employee” box checked.
However, petitioner claimed to be a statutory employee when
completing Form W-2 information for his electronically filed
Form 1040 for 2001.
The Internal Revenue Service (IRS) sent a statutory notice
of deficiency to petitioner on June 1, 2004. In the notice, the
IRS disallowed petitioner’s claim to be a statutory employee and
transferred his wage income from the Schedule C to Form 1040 and
disallowed the expenses claimed against that income. The notice
explained:
Since your employer did not indicate on Form W-2 that
you were a statutory employee, we disallowed the
expenses you claimed against that income on Schedule C
or Schedule C-EZ. If you are not a statutory employee,
you must include the income as wages on your tax
return.
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Last modified: May 25, 2011