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he acted as a “private independent contractor” on behalf of
Watson, Inc. (as opposed to an employee or a self-employed
individual) and, therefore, has “no liability for tax under Title
26 USC, Sub Chapter [sic] C, Employment Taxes”. In the Watson,
Inc., letter, petitioner states that he is providing the letter
to Watson, Inc., for its records, pursuant to section 31.3402(n)-
1, Employment Tax Regs. Section 31.3402(n)-1, Employment Tax
Regs., is concerned with employees incurring no income tax
liability; it provides that an employer shall deduct and withhold
no tax if there is in effect with respect to an employee a
withholding exemption certificate furnished to the employer by
the employee containing statements that the employee incurred no
income tax liability for the employee’s preceding taxable year
and the employee anticipates that he will incur no income tax
liability for his current taxable year. In the Watson, Inc.,
letter petitioner acknowledges that he will be paid for his work
for Watson, Inc., during 1998.
1999
Petitioner obtained an extension of time to file his 1999
Federal income tax return until August 15, 2000. Sometime
thereafter, petitioner submitted to the IRS a Form 1040 for 1999
signed by him and dated August 17, 2001 (the 1999 Form 1040).
Petitioner reported $3,342.12 on line 20b (taxable Social
Security benefits), which was his only item of reported income
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Last modified: November 10, 2007