# T .C . Memo . 2008-26 3

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URL: https://www.frixlaw.com/law-library/documents/agency%3Atax-court%3Accb216f222c7593f

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

T .C . Memo . 2008-26 3

UNITED STATES TAX COURT

MICHAEL NEIL MCWHORTER, Petitioner v .
COMMISSIONER' OF INTERNAL REVENUE, Responden t

Docket No . 1365-07 .

Filed, Novemb -er 24~, 2008 .

Michael Neil McWhorter, pro se .
John P . Stemwedel , for respondent .

MEMORANDUM FINDINGS OF-FACT,AND OPINIO N

COHEN,

Judge : Respondent determined a deficiency of $44,941

.in petitioner's Federal income tax for 2002 and additions to ta x
under sections 6651(a)(1) and (2) and 6654(a) . After
concessions, the issues for decision are whether petitioner
performed services as an employee and whether he is liable for
the additions to tax . Unless otherwise indicated, all section .

SERVED NOV 2 4 2008

2
references are to the Internal Revenue Code in effect for the
year}in .issue, and all Rule references are to the, Tax Court Rule s
of Practice and Procedure .
FINDINGS OF FACT

Some of :the factshave been stipulated ,

and the stipulate d

facts are,iricorporated in our findings by this reference .
Petitioner resided in Texas at the time that he filed hi s
petition . --During 2002 he resided in Arizona .
Commencing in 2001 and ending in 2004, petitioner performed
services as a project manager for . Boyle Energy Services and
Technology, Inc . . (Boyle Energy) . Boyle .Energy hired petitioner
because of his knowledge of power plants and specialized
knowledge and expertise in industrial pipe fitting . . His .,work for
Boyle Energy focused on industrial cleaning of steam piping in
power plants as part of the process of recommissioning theF
plants . Petitioner received nol .training from Boyle Energy
regarding either its procedures or on industrial pipe fitting .
Petitioner's training by Boyle Energy' was restricted to teaching .
him the recommissioning process of the company .

Petitioner's work for Boyle Energy was on a project-byproject basis . He had authority to supervise the personnel o f
Boyle Energy and of client companies . Petitioner did not have
any hiring or,firing authority over Boyle Energy personnel an d
had to contact Boyle-Energy before removing its personnel from a

job site . Petitioner had a credit card with the name of Boyle
Energy on it'and a business card with, . the company logo on it .
Petitioner invoiced Boyle Energy for' services rendered pe r
project . The invoices and the subsequent payments-were at a rate-,of $500per dayfor petitioner's labor during 2002 . Petitioner,
ddid not provide Boyle'Energywith timesheets . Boyle Energy pai d

the •amount shown on :-petitioner' s' invoices and-issued t o
petitioner a-Form 1099-MISC,YMiscellaneous Income, for 2002 ,
reporting $126,760 as nonemployee compensation ., Petitioner
received a Form 1099 from Boyle Energy for each of the years''
2001, 2002, -2003,, and =2004 .'He never received a<Form W-2, .-Wa4 e

and Tax Statement ;' from Boyle Energy .Petitioner'=failed to file a Federal income tax return for
2002 . For thattyear,he`received compensation'of $126',760 fro m

Boyle Energy,--$267 .05 ofshort-termcapital gain, and'°$2 of :
interest income . 'No :Federal income tax'waslwithheld from, any=of
the amounts that petitioner received,`and .he failed to-make any
payments of estimated taxes- .during'2002 .
The Internal . Revenue'Service ,(IRS) prepared :a substitute for
return under section 6020(b)}with',respect :to'petitioner .s Federal
income tax liability ., In, the notice of deficiency, the IRS .
determined that petitioner was liable' for . self-employment tax on

the income received fromBoyle Energy .

OPINION
Petitioner claims that-he was an-employee of .Boyle Energ y
and not an independent contractor liable for self-employment
taxes . He initially-'claimed -that . Boyle . Energy should be,
responsible :for the .income taxes ..that .were . .not withheld . By the
conclusion of the trial, however, he understood that the issues
remaining in .dispute were his liability for,-self-employment, tax
and the additions to tax for failure . to file a tax return ,
failure to 'pay, tax due on a return,,,,and . failure to make estimated
tax payments .
-Respondent contends that petitioner is liable fore selfemployment tax under sections 1401(a) and 1402 ., Respondent
argues=that petitioner was . not an employee under the definition` .
set .out in .section 3121(d) . See sec . 1 .1402(c)-3,(a),,Income Tax
Regs . Respondent relies on the test set'out .,in . Breaux & Daigle,
Inc . v . . United States , 900 F .2d 49, 51 (5th Cir . 1990) .4 (citing
United States V . Silk , 331,U .S . ;704, 716 (1947)), . and they
following factors : (1) Degree of control, (2) opportunities for,
profit or loss, (3) investment in facilities, (4) permanency of
relation, and (5) skill required_in .the operation in question .
The list is not exclusive, and no- .one factor is controlling . I
Respondent'argues that the degree of control .by,Boyl e
Energy, the lack of permanency in the, relationship, and- .the-skill
required in petitioner's work supports respondent's-contention

5 that petitioner was an independent contractor during 2002 .
Respondent concedes that the lack of opportunities for profit or
investment in the facilities supports petitioner's .,contention .
that he was an employee . Recognizing that this is a close case,
respondent argues that the understanding of the parties to the
contract should-be given :weight . See McCormick v . United States ,
209 Ct .

Cl .

331, .531 F .2d 554, 560 (1976) ;

Commissioner , . T .C . Memo . 1986-590 ;
Memo . . 1984-59 .2 ;

Herman v .

Steffens v . Commissioner , T .C .

Bothke v . Commissioner , T .C . Memo . 1980-1 ;

Springfield Prods ., Inc . v . Commissioner , T .C Memo . 1979-23 ;
Harris v . Commissioner , T .C . Memo . 1977-358 .
Respondent as.s.erts : ,
Petitioner contends that there was an ongoing
dispute with Boyle Energy regarding his status .
Petitioner acknowledges, however, that he worked under
this arrangement from 2001 until he ended the
relationship in 2004 for unrelated reasons . If there
was a valid dispute as to his status, petitioner
essentially acquiesced to Boyle Energy's understanding .
of his status by continuing to work under this
arrangement . And despite the availability of . persons
aware of his employment status and relationship with
Boyle Engineering [sic] over the period in question,
such as Mike Boyle and Diane Gagnon, petitioner did not
obtain any evidence to .corroborate his testimony where
it is at variance with documentary evidence .
Of course, respondent also could have called

witnesses concerning

the nature of the relationship between petitioner and Boyl e

Energy . Because petitioner's testimony was credible with respect

6 to his arrangements with Boyle Energy, . the absence of
corroborating evidence is-not determinative . Cf .
Commissioner ,' 122 T .C . 305,

320

Boyd-v .

(2004) .

as an independent contractor-for tax purposes is troubling .
discussed below „he has'"presented no reasonable ' excuse for his
failure to file,a .return and pay the income tax due .',On the
limited record thatwe-have, however, we conclude that petitioner'' .
was an employee of Boyle Energy during .2002 and should ., have been
treated as such for tax purposes .
In respondent's pretrial memorandum, respondent referred-to
section 7491(a) and asserted that petitioner had failed to,
produce any evidence that he was an employee and not an
.independent contractor of Boyle,Energy . At . trial, however, th e
nature of=petitioner's employment-was the subject of his
testimony, and his testimony was credible : In the posttrial
brief, respondent does not challenge the credibility of
petitioner's testimony and acknowledges=that some of the relevant
factors favor petitioner .-Respondent does not address section
7491(a)(1) in the posttrial brief . Thus respondent does not
claim that any of the limitations in section 7491(a)(2) preven t
application of the general rule that :
SEC .-7491 . BURDEN OF PROOF .
(a) Burden Shifts Where Taxpayer Produces
Credible Evidence .--

- 7 (1) General rule .--If, in any court
proceeding, a taxpayer introduces credible
evidence with respect to any factual issue
relevant to ascertaining the liability of th e
,taxpayer for any tax imposed by subtitle A or
B, the Secretary shall have the burden of
proof with respect to such issue .

We conclude that the burden of proof in this case shifted to
respondent .
We are not persuaded that the factors relied on by
respondent prove-that petitioner was an independent contractor
with respect to the services 'that he :performed for Boyle Energy .
Neither the degree of control exercised by Boyle Energy nor theamount of skill possessed by petitioner distinguishes his
situation from that of a supervisory employee . We are not
persuaded that .a job that continued from 2001 into 2004 can be
described as "impermanent" . .Respondent acknowledges that other
factors favor petitioner . On the record that has been made, we
conclude that. respondent did not carry the burden of proof .
Petitioner is not liable for self-employment tax for 2002 .
Respondent also had the burden of production with-respect t o
the additions to tax under sections 6651(a) and 6654 . See sec .
7491(c) . Petitioner stipulated that he failed to file a return
for 2002 and that a substitute tax return was prepared unde r
section 6020,(b) . Respondent introduced evidence that petitione r
also failed to file a return for 2001 .

- 8 -

Section 6651( a) 'imposes additions to ,tax for failure to fil e
a return and failure to pay the .amount shown as-tax on a-return .
Petitioner's-only explanation' of .,his failure to file a return for
2002 is that he did not want to sign-a return saying that he was
an independent contractor . He has no?reasonable cause, however,,
for failing to file a return reporting that he received $126,760,
in compensation and other-amounts of income during 2002 . The .
failure of Boyle .-,Energy to withhold taxes that should have been
withheld neither excuses petitioner's,failure to file .the return .
and pay the taxes .nor relieves-him . of the . additions . to tax under ; :
section 6651(a) .-- See .- Escandon-y . Commiss .ioner , .T .~C . Memo .,2007-~ ._
128 ;

Lucas v .-Commissioner,

T .C . Memo :°x2000-14 .

Section 6654-imposes an addition .-to tax,when a-taxpayer
fails to make` a required installment of estimated income-tax .
Each required installment is equal .to 25'" .percent,of the required
annual payment . Sec . 6654(d) (1) (A) , -The required annual,payment .,
is the lesser of (1) .90 percent,of'the tax shown on thereturn
for the taxable year (or ., .if the taxpayer filed no return, 90 .._
percent of the tax" for that year),- or (2)" . 100 ,percent of the . tax d.,_ . .
shown on the return for the preceding . taxable, year . . Sec .
6654(d) (1) (B) . Because .petitioner failed • to file a return for
2001,' his required annual :payment .for .,.2002 was 90 percent ,of-the

9 tax for that year . Because petitioner failed to pay any Federal
income tax for 2002, the section 6654 addition to tax applies to
the recomputed deficiency .
The implication of our holding that petitioner was an
employee of-Boyle Energy for 2002 is that he may be liable for
his share of taxes under the Federal Insurance Contributions Act,
section 3101(a) and (b) . That determination, however, is not
within our jurisdiction in this case . See Lucas v . Commissioner ,
supra n .3 ;

Grooms v . Commissioner , T .C . Memo . 1992-291 .

To reflect the foregoing,

Decision will be entere d
under Rule 155 .

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Atax-court%3Accb216f222c7593f. Public record. Not legal advice.