Writing Assignment Research Problem / Writing Assignment Fall 2019 ACCT 308 Sam, a resident of California, has been a driver for Blue Delivery Service for the past six years. For this purpose, he...

Tax Filing Memorandum
Dated: November 1, 2019
Subject: Levy of Self Employment Tax
This is a case of Sam, a resident of California, has been a driver for blue delivery services. Sam leases a truck from blue. The compensation is based on percentage of income from his services. Blue has no control over the work done by Sam. Blue issues form 1099- miscellaneous to Sam blue does not provide any benefits. Now IRS deemed Sam as an independent contractor hence need him to pay self-employment tax but Sam contends himself as a salaried person.
ISSUE: Whether Sam is an employee or an Independent contractor?
FINDINGS: The IRS has specific guidelines on determining the status of a worker. Treasury Regulation 31.3401(c)-1(b) states: “Generally, the relationship of employer and employee exists when the person for whom the services are performed has the right to control and direct the individual who performs the services not only as to the result to be accomplished by the work, but also as to the details and means by which that result is accomplished. That is, an employee is subject to the will and control of the employer not only as to what shall be done but as to how it shall be done. In this connection, it is not necessary that the employer actually direct or control the manner in which the services are performed; it is sufficient if he has the right to do so.”
Treasury Regulation 31.3401(c)-1(b) lists a twenty-question test that the IRS uses in determining the worker’s correct classification status. These questions include:
1) Does worker need to follow instructions of the employer to do the job?
No, in our case Sam is not required to follow any instructions, so he cannot be treated as employee.
2) Does the worker require any training to do his job?
No training was given in our case to Sam, so again Sam is not an employee.
3) Is the worker’s specific personal services required to complete the job?
No. Here Sam cannot be termed as an employee.
4) Is the worker’s services integrated to the success or continued existence of the business?
No, so the Sam is not an employee.
5) Is worker required to work set hours of work?
No, so Sam is not an employee.
6) Type of relationship between employer and employee? Is it a continuing relationship?
Sam was working with the company for six years but he was allowed to leave at any time without any prior notice. Hence, he cannot be treated as an employee.
7) Can the worker hire, supervise and pay for the assistants?
Yes, in our case Sam can hire supervisor and pay for the assistance, so he was not an employee.
8) Is worker prevented from seeking employment elsewhere?
No, Sam can seek another work also, so he is not an employee.
9) Do company specify the...