T.C. Memo. 2000-239
UNITED STATES TAX COURT
ANTHONY S. D’ACQUISTO, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 1145-99. Filed August 4, 2000.
Edward X. Clinton, Jr., for petitioner.
David S. Weiner, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
GOLDBERG, Special Trial Judge: Respondent determined a
deficiency in petitioner’s Federal income tax for the taxable
year 1994 in the amount of $14,650. Unless otherwise indicated,
section references are to the Internal Revenue Code in effect for
the year in issue.
The sole issue in this case is whether petitioner is an
independent contractor and can claim Schedule C business expense
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deductions for the taxable year 1994. We find that petitioner is
an employee and not an independent contractor and therefore
cannot deduct his business expenses on Schedule C.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by this reference. At the time the petition
was filed, petitioner resided in Chicago, Illinois.
In 1994, petitioner, under the stage name Tony Russell,
worked as a voice actor providing voice announcements and/or
narration for commercials, corporate videos, radio and television
promotionals, video games, talking toys, and television shows.
Although petitioner provided services for television, cable, and
video, petitioner did not appear on screen. Petitioner began his
career as a voice actor by studying communications at the
University of Wisconsin. Between the years 1977 and 1983,
petitioner worked with NBC as both booth announcer on television
and a “swing personality” on radio stations. After working with
NBC, petitioner began providing services to various parties on a
contractual basis.
During the year in issue, petitioner was a member of both
the Screen Actors Guild and the American Federation of Television
and Radio Artists (unions). The unions set minimum standards for
performer fees based on a collective bargaining agreement and
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settled jurisdictional disputes. For example, only radio and
television commercials were subject to the unions’ fee schedule.
Health and disability insurance benefits were also provided
through the unions and not by the companies that retained
petitioner’s services. The unions continued coverage if
petitioner met a certain annual income requirement under the
union contract. If petitioner failed to meet the income
requirement in any given year, the unions would discontinue
coverage. Moreover, petitioner did not receive vacation time
from the unions or companies that retained his services.
Petitioner also participated in pension plans offered by the
unions. At the time of trial, petitioner was fully vested in
these pension plans; however, the record does not reflect whether
petitioner was fully vested during the year in issue.
During 1994, petitioner hired three agencies to procure work
assignments from interested companies: Don Buckwald in New York,
Voices Unlimited in Chicago, and Cunningham, Escott & Dipene in
Los Angeles. These agents worked with “buyers”, the producers of
commercials, video games, toys, television, cable or radio shows,
who engaged petitioner for his services. An interested company
would request demonstration tapes from an agent, review the
tapes, hold auditions, make its decision, and then call the agent
to negotiate the terms of the contract.
For radio and television commercials, petitioner’s agents
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negotiated the terms of the engagement based upon the unions’ fee
schedule. Compensation for all other assignments was negotiated
outside of the unions’ fee schedule. It is unclear from the
record whether fees were negotiated based on an hourly rate or on
a fixed amount per engagement. Nevertheless, petitioner received
a separate paycheck stub for each job completed and in most cases
a Form W-2, Wage and Tax Statement, for services rendered.1
In addition to work assignments procured by his agents,
petitioner solicited additional work by mailing promotional
compact disks containing samples of his commercials and
announcements directly to producers of various entertainment
companies. With regard to all types of engagements, petitioner
made the final determination whether to accept or to reject the
work. Most of petitioner’s assignments were completed at studio
facilities arranged by the company at a time mutually convenient
for both parties. Any tools or other materials necessary for the
assignment were provided by both petitioner and the hiring
company. Petitioner testified that he did not work “full time”
for a particular company during the year in issue.
Petitioner reported Schedule C gross income in the amount of
$189,173 on his 1994 Federal income tax return. It comprises
1
For 1994, 94.93 percent of petitioner’s Schedule C income
was reported on Forms W-2 and the remaining 5.07 percent of
petitioner’s Schedule C income was reported on Forms 1099.
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income reported on Forms W-2 in the amount of $179,578 and other
“talent fees” in the amount of $9,595. Although petitioner
testified that he performed jobs for “hundreds of different
agencies”, he received and filed with his 1994 return only 10
Forms W-2 issued from the agencies and in some cases directly
from the hiring companies. Petitioner claimed 1994 Schedule C
business expense deductions in the amount of $65,510.2 On
Schedule SE, Self-Employment Tax, petitioner computed his self-
employment tax liability as follows:
Gross profit from Schedule C $189,173
(Less expenses) (65,510)
Net profit from Schedule C 123,663
(Less “Statutory Wages”)3 (117,391)
Reported net profit on Schedule SE $6,272
In a notice of deficiency respondent determined that
petitioner was not a qualified performing artist within the
meaning of section 62(b)(1). Respondent determined that
petitioner was an employee, and recharacterized 94.93 percent of
petitioner’s Schedule C business expenses, or $62,187, as job-
related Schedule A miscellaneous itemized deductions, subject to
the 2-percent limitation under section 67. Based upon the
adjustments to Schedule A, respondent determined petitioner’s
2
The substantiation of petitioner’s business expense
deductions is not at issue in this case.
3
Petitioner arrived at “Statutory Wages”, or $117,391, by
applying the fraction from Forms W-2 income in the amount of
$179,578 over the total income reported on Schedule C in the
amount of $189,578, which equals 94.93 percent.
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alternative minimum tax liability in the amount of $11,906.
Respondent determined petitioner’s total deficiency in the amount
of $14,650.
OPINION
Respondent contends that petitioner is an employee of the
companies he provided services to, that these companies treated
him as an employee by issuing Forms W-2 to petitioner for his
services, and that petitioner failed to pay self-employment tax
on his total income from self-employment. Respondent further
contends that petitioner did not have the requisite control over
his activities to be considered an independent contractor.
Petitioner concedes that he is not a qualified performing
artist within the meaning of section 62(b)(1). Petitioner
contends that he is an independent contractor entitled to
Schedule C business expense deductions even though most of his
1994 income was reported as employee wages on Forms W-2.
To determine whether a taxpayer is an independent contractor
or an employee, common-law rules apply. See Weber v.
Commissioner, 103 T.C. 378, 387 (1994), affd. per curiam 60 F.3d
1104 (4th Cir. 1995). Courts consider various factors to
determine whether an employment relationship exists between the
parties, including: (1) The degree of control exercised by the
principal; (2) which party invests in work facilities used by the
individual; (3) the opportunity of the individual for profit or
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loss; (4) whether the principal can discharge the individual; (5)
whether the work is part of the principal’s regular business; (6)
the permanency of the relationship; and (7) the relationship the
parties believed they were creating. See id. All the facts and
circumstances of each case should be considered. See id.
The right of control is ordinarily the crucial factor in
determining whether an employer-employee relationship exists.
See Matthews v. Commissioner, 92 T.C. 351, 361 (1989), affd. 907
F.2d 1173 (D.C. Cir. 1990). To retain the requisite control over
the details of an individual’s work, the principal need not stand
over the individual and direct every move made by the individual.
See Weber v. Commissioner, supra at 388.
Petitioner failed to establish that he had sufficient
control over the relationship at the time service was rendered to
be classified as an independent contractor. According to
petitioner’s own testimony, upon acceptance of a job, the hiring
company provided a script and instructed petitioner to read it
according to the company’s specifications. If the company
preferred a change in how the script was read, petitioner would
be required to make the requested adjustments.
Petitioner argues that having the right to pick and choose
the jobs of his choice demonstrates he had control over his
services. However, petitioner failed to establish the details of
control he had over the engagement agreement once petitioner
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accepted a job. For instance, petitioner’s services were
negotiated through agents and memorialized in written agreements
or contracts. At trial petitioner referred to a number of
agreements he entered into with the various companies he worked
for during the year in issue but failed to introduce them into
evidence. Without the contracts in the record for our review, we
cannot assume that petitioner had the requisite control over his
services.
Furthermore, the record reflects that petitioner willingly
accepted Forms W-2 for services. Although he may not have
considered himself an employee of the companies for which he
provided services, it is clear that the companies considered him
an employee during the engagement because they issued Forms W-2
and withheld FICA, FUTA, and State employment taxes. The record
also reflects that three different companies checked the “pension
plan” box on petitioner’s Forms W-2, although petitioner
testified he had no independent knowledge of participation in any
pension plan other than the unions. Petitioner admits that he
failed to correct the companies’ alleged “error” in treating him
as an employee by issuing him Forms W-2 for his services.
Finally, petitioner’s argument that working for a number of
companies demonstrates a lack of continuity in the employer-
employee relationship is without merit. In Kelly v.
Commissioner, T.C. Memo. 1999-140, this Court found that working
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for a number of employers during a tax year does not necessitate
treatment as an independent contractor.
The case before us is a factual one. Petitioner’s failure
to have corrected Forms W-2 issued to him and failure to pay
self-employment tax under petitioner’s own theory militates
against his case before us. Moreover, without the contracts
before us, we cannot find that their provisions corroborate
petitioner’s claim that he was an independent contractor. In
sum, petitioner did not demonstrate that he is entitled to
treatment as an independent contractor. Consequently, we find
that petitioner was an employee for the 1994 taxable year and is
therefore not entitled to claim business expense deductions on
Schedule C for the year in issue.
To reflect the foregoing,
Decision will be entered
for respondent.