The most comprehensive resource available for human resources professionals providing HR news, white papers, custom research answers, webinars and OnDemand programs on the hottest HR topics,...
A Texas limited partnership that classified workers in an apartment complex as independent contractors instead of employees owes employment taxes for the building staff, as well as tax additions and penalties for not depositing the disputed employment taxes.
TFT Galveston Portfolio Ltd. owed unreported employment taxes for the fourth quarter of tax year 2004, the U.S. Tax Court said. The company was deemed not responsible for several other years of unpaid federal employment taxes and penalties as a successor in interest to six other limited partnerships involved in the apartment complex business.
The workers were not required to complete applications before securing their positions and did not sign written agreements for the work they performed. The partnerships did not deposit employment taxes for tax years 2000 to 2004.
The workers were being treated as independent contractors for filings of Forms 1065, U.S. Return of Partnership Income, for the partnerships for which TFT Gavelston was a successor in interest.
Regarding the 2004 fourth-quarter employment taxes owed, TFT Galveston argued that the workers were independent contractors, and that it was not responsible for withholding employment taxes.
However, the U.S. Tax Court viewed the workers as employees because it considered nearly every aspect of the work performed by the apartment workers to have been controlled by an employer.
The workers had little financial investment in TFT Galveston's business, were never at risk of suffering a personal financial loss and never had an opportunity for financial profit other that their salaries, the court said, ruling that the workers were to be classified as employees for tax purposes.
TFT Galveston also had not established reasonable cause for not filing the employment taxes and owed tax code Section 6651(a)(1) additions to tax, as well as Section 6656 penalties, the court said.
For more information, see Compensation and Benefits Library's “Employer's Guide to Federal Employment Taxes” chapter.
To contact the editor on this story: Michael Trimarchi in Washington at firstname.lastname@example.org.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)