Friday, January 20, 2012

Function Trumps Label: On Winning My Case With the IRS

I was employed at Information Ventures, Inc. in Philadelphia in the spring of 1983.  My employer classified me as an independent contractor, which meant that I would be responsible for a higher FICA tax than if I had been classified as an employee.  I argued to the IRS that the label "independent contractor" mischaracterized my function as an employee.  The IRS accepted my argument.  What do you think of that, Mr. Sheldon S. Cohen?

Also, note the consistency of my legal philosophy.  For me function is more important than manifest label.  For example, I argued before the D.C. Court of Appeals in Freedman v. D.C. Dept. Human Rights that although the D.C. Government did not make an express finding that I suffered from a psychiatric disorder, the Department of Human Rights' no probable cause finding functioned as a de facto mental health determination thereby rendering my case before the Court a "contested case" in that the agency action altered my legal status (i.e., barring my service on a jury, qualifying me for Social Security disability, requiring me under tort principles to advise a prospective employer that I posed a "direct threat" in the workplace, etc.).

Statement Regarding Inapplicability of Schedule SE and C

I was employed as an employee and not as an independent contractor or sole proprietor by Information Ventures, Inc. from March 14, 1983 until May 27, 1983.

The services performed, for which I was compensated at the rate of $8.00 per hour, consisted of editorial services--preparing abstracts of technical literature, editing, proofreading, and typing.

While the employer has reported this income on Form 1099 rather than Form W2, the conditions of my employment as set forth below indicate that I was employed as an employee and not sole proprietor or independent contractor.

--the services were performed on a continuous and regular basis (usually 40 hours per week)

--the employer furnished all supplies and materials with the intent that said supplies and materials be used for the employer's benefit

--the employer provided instruction in the use of word processing equipment located on the employer's premises

--the employer prescribed and supervised on a continuous basis all work activities and reviewed all work product to ensure that said work product complied with the employer's specifications

--all services for which I was compensated were performed on the employer's premises located at 1500 Locust Street, Suite 2613, Philadelphia, Pennsylvania 19102

Moreover, I am not nor have I ever engaged in the business of providing editorial services as an independent contractor or sole proprietor.

For the reasons stated herein, the wage income reported on Form 1040 paid by Information Ventures, Inc. is not subject to Social Security Self-Employment Tax at the rate of 9.35 percent.  Said income constitutes wages received for performing services as an employee and are subject to Social Security tax in the amount of 6.7 percent.

Gary Freedman

April 9, 1984


Gary Freedman said...

Sheldon S. Cohen is a former IRS Commissioner, a Washington, DC attorney, and trustee of the George Washington University.

Gary Freedman said...

The D.C. Superior Court denied me the right to serve on a jury on two occasions (in 2000 and 2002) because of mental health reasons -- ultimately stemming from the Department of Human Rights determination that my former employer, Akin Gump found that holding certain beliefs about the workplace indicated that I suffered from a psychiatric disorder that rendered me potentially violent and unemployable.

Gary Freedman said...