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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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