Historic Tax Case | Ewens And Miller, Inc. V. Commissioner

• Published date: 23 September 2022
• Law Firm: Freeman Law
• Author: Freeman Law

Ewens and Miller, Inc. v. Commissioner, 117 T.C. No. 22 | December 11, 2001 | J. Vasquez | Docket No. 13069-99

Short Summary:

Prior to and during 1992, Ewens and Miller, Inc. (Petitioner) manufactured bakery products. Petitioner had multiple categories of workers: bakery workers¹; cash payroll workers²; route distributors³; outside sales workers.⁴

On November 4, 1991, Petitioner issued a memorandum to all workers stating, among other things, that some workers had been treated as employees and some as independent contractors, however, starting January 1, 1992, all workers would be treated as independent contractors. Those that wished to remain employed as independent contractors would be required to sign a statement accepting responsibility for their own payroll taxes, and those that did not wish to remain employed following the change, would be discharged prior to the start of 1992. After January 1, 1992, there were no changes in the activities Petitioner's various categories of workers performed. Petitioner's reason for the conversion was to protect itself from lawsuits and to have better control over the activities of its workers.

Roger Miller, one of the named partners of Ewens and Miller, Inc., a CPA, prepared Petitioner's Federal corporate income tax returns for 1991 and 1992, and signed Petitioner's Federal employment tax returns for 1992. For 1991, Petitioner reported salaries and wages of $196,433 on its Federal corporate income tax return; issued 51 Forms W-2 to its employees reporting total wages of $196,432.60; reported $81,143 of sub-contractual labor; and issued 10 Forms 1099-MISC reporting total payments of $37,930.74. For 1992, Petitioner reported no salaries and wages on its Federal corporate income tax return; reported $115,287 of sub-contractual labor; and issued 36 Forms 1099-MISC reporting total payments of $115,287.05.

Petitioner filed Forms 941, Employer's Quarterly Federal Tax Return, for the four quarters of 1992 and reported no wages subject to withholding, no withheld income tax, no Social Security nor Medicare tax. The final Form 941 filed in 1992 indicated that final wages were paid December 31, 1991, that Petitioner had no employees, and was out of business. Petitioner's Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, for 1992 also reported no wages, that Petitioner had no employees, and was out of business.

The Commissioner of Internal Revenue (Commissioner) concluded that, for 1992, all of Petitioner's...