In Uncategorized on 08/13/2012 at 16:23

That’s the advice I would give Big Jim Dempsey, the V.P. of Atlantic Coast Masonry, Inc., which corporation gets short shrift in T. C. Memo. 2012-233, filed 8/13/12, with Judge Jacobs cementing IRS’ position that the masons Big Jim hired were employees, not independent contractors, so FICA, FUTA and ITW (income tax withholding), plus penalties and interest, fall on Big Jim like a ton of metaphoricals.

Of course, Big Jim and Blanche (Mrs. Big Jim, President) kept no records except a cash ledger book, did everything in cash, and made deals on a handshake. Big Jim bought the materials and supplies, which by the terms of the subcontracts under which Atlantic was employed belonged to the general contractors (a standard provision in subcontracts); the masons furnished their own tape measures, trowels, levels and hand tools. And being skilled workers, the masons didn’t need much supervising: apparently you point them at a pile of bricks and a tub of mortar, and they’ll build you a wall where you want, as high as you want. McNally, apparently a friend of Big Jim’s, ran the shape-ups of the masons and did whatever minimal supervision was required.

Oh, of course Big Jim and Blanche never filed 940s, 941’s, 1065s for their Sub S Atlantic, 1040s for themselves, or 1099-MISCs for the supposedly independent contractor-masons.

Now why hire  a lawyer, when it looks like Big Jim, Blanche and Atlantic are toast? Here’s why. Atlantic appears by Big Jim, who is an officer, with nobody else. The issue is whether Big Jim controlled the masons’ work. Judge Jacobs:  “The examining revenue agent testified without objection by petitioner that in interviews some of the masons and laborers stated they would receive instructions relating to the masonry jobs from Mr. Dempsey. None of the masons, laborers, or supervisors other than Mr. McNally testified at trial.” T. C. Memo. 2012-233, at p.15, footnote 6.

How do you spell “hearsay”? And how, Judge Jacobs, do you expect a bricklayer like Big Jim to know to object when the examining agent proffers objectionable evidence? Or who to call as a witness?

Granted, even without the objectionable hearsay, Big Jim’s walls were about to come tumblin’ down.

But it’s just another example of how the unrepresented taxpayer in Tax Court is in the position of certain predecessors of Big Jim’s, who were on a job in the Middle East making bricks without straw.

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