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ascertaining the facts regarding petitioner’s business, business
payroll, and workers. It appears that petitioner used fictitious
names and/or other companies to hide the nature and extent of its
business activity from respondent during the years at issue.
Respondent’s determinations were necessarily based on the best
information available, including information obtained from a
visit to petitioner’s business location, a review of petitioner’s
Forms W-2, 940, and 941 for prior taxable periods, an analysis of
bank records of petitioner and others, and information obtained
from at least one of petitioner’s suppliers. We conclude,
therefore, that respondent’s determinations were not arbitrary or
capricious, and the burden of proof remains with petitioner.
B. Employment Status
The employment tax sections of the Internal Revenue Code are
in subtitle C. Under subtitle C, an employer is obligated to pay
certain taxes imposed on employers and must also withhold from
employees’ wages certain taxes imposed on employees. Sections
3111 and 3301 impose the employer-level taxes under FICA and
FUTA, respectively. Section 3101 imposes a FICA tax on
employees, which section 3102 requires the employer to collect.
Section 3402 requires an employer to withhold from employees’
wages the employees’ shares of Federal income tax and to deposit
the amounts withheld with the Internal Revenue Service. An
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Last modified: November 10, 2007