Employee classification case and annotations

Two blogs are posted today. The first deals with a very common issues: whether an individual should be classified as an employee or a contractor. This is one of the most common examination issues, and return preparers need to be on top of the latest developments and case law. The second deals with return preparer tax fraud.

doctor was a common law employee rather than an independent contractor and was not entitled to deduct claimed business expenses on Schedule C. He entered into an employment contract that expressly identified him as an employee. Further, he received a fixed salary without regard to the medical fees he generated, paid vacations, employee benefits, and reimbursement for expenses. He participated in an employee retirement plan, and received Forms W-2 reporting his compensation. He was required to work normal office hours, maintained a long-term relationship with his employer, and did not perform medical services for a fee except for patients assigned by his employer. The employer provided his office space, paid for hospital staff privileges and provided a substantial portion of his medical equipment. Although the taxpayer substantiated that he paid legal fees and professional dues in connection with his employment, they were miscellaneous itemized deductions and the two-percent limitation prevented any deduction of these expenses for the tax year at issue.