Images in Motion of El Paso, Inc. - Page 6

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          October 24, 2002, Mr. Leeper stated, in a facsimile sent to the             
          examining agent, that the instructors were independent                      
          contractors on the basis of the 20 common law factors used to               
          classify working relationships.  The one-page letter met the                
          requirements of a small case request as outlined in Publication 5           
          since the deficiency for each tax period at issue is less than              
          $25,000.                                                                    
               The examining agent did not forward this case to the Appeals           
          Office, and on February 20, 2003, respondent issued the notice of           
          determination, which stated his determination that petitioner’s             
          dance instructors were employees.  Accordingly, respondent                  
          asserted liabilities against petitioner under the Federal                   
          Insurance Contributions Act (FICA), the Federal Unemployment Tax            
          Act (FUTA), and the related income tax withholding provisions in            
          the total amount of $33,170.68 for its 2000 and 2001 tax years.             
               On May 22, 2003, petitioner’s petition challenging                     
          respondent’s assertions in the notice of determination was filed.           
          The case was then forwarded to the Appeals Office in Austin,                
          Texas.  In August 2003, the assigned Appeals officer contacted              
          petitioner’s counsel by telephone.  During this discussion,                 
          petitioner’s counsel agreed to submit a formal written protest              
          containing petitioner’s arguments supporting its position that              
          its instructors were independent contractors.  On September 4,              
          2003, petitioner submitted a 36-page document to the Appeals                






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