Juan Ramirez - Page 5

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          I.  Employment Status                                                       
               Under subtitle C of the Internal Revenue Code, an employer             
          is obligated both to pay certain employment taxes imposed on                
          employers and also to withhold from employees’ wages certain                
          taxes imposed on employees.  Sections 3111 and 3301 impose the              
          employer-level taxes under FICA (pertaining to Social Security)             
          and FUTA (pertaining to unemployment), respectively, based on               
          wages paid to employees (employment taxes).  Section 3101 imposes           
          a FICA tax at the employee level as well, which section 3102                
          requires the employer to collect from the employee’s wages.                 
          Section 3402 requires an employer to withhold from his employee’s           
          wages the employee’s share of Federal income tax, and section               
          3501 requires the employer to deposit amounts withheld with the             
          Treasury of the United States.  If the employer fails to withhold           
          as required, he is liable for the amounts owed by the employee,             
          but required to be withheld by the employer.  Sec. 3403.                    
               With regard to employment taxes, the term “employee”                   
          includes “any individual who, under the usual common law rules              
          applicable in determining the employer-employee relationship, has           
          the status of an employee”.  Sec. 3121(d)(2); accord sec.                   
          3306(i).  Sections 31.3121(d)-1(c)(2) and 31.3306(i)-1(b),                  
          Employment Tax Regs., define an “employer-employee relationship”            
          as follows:                                                                 

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Last modified: March 27, 2008