                          T.C. Memo. 2008-263



                        UNITED STATES TAX COURT



              MICHAEL NEIL MCWHORTER, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 1365-07.                 Filed November 24, 2008.



     Michael Neil McWhorter, pro se.

     John P. Stemwedel, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     COHEN, Judge:   Respondent determined a deficiency of $44,941

in petitioner’s Federal income tax for 2002 and additions to tax

under sections 6651(a)(1) and (2) and 6654(a).    After

concessions, the issues for decision are whether petitioner

performed services as an employee and whether he is liable for

the additions to tax.    Unless otherwise indicated, all section
                               - 2 -

references are to the Internal Revenue Code in effect for the

year in issue, and all Rule references are to the Tax Court Rules

of Practice and Procedure.

                         FINDINGS OF FACT

     Some of the facts have been stipulated, and the stipulated

facts are incorporated in our findings by this reference.

Petitioner resided in Texas at the time that he filed his

petition.   During 2002 he resided in Arizona.

     Commencing in 2001 and ending in 2004, petitioner performed

services as a project manager for Boyle Energy Services and

Technology, Inc. (Boyle Energy).   Boyle Energy hired petitioner

because of his knowledge of power plants and specialized

knowledge and expertise in industrial pipe fitting.   His work for

Boyle Energy focused on industrial cleaning of steam piping in

power plants as part of the process of recommissioning the

plants.   Petitioner received no training from Boyle Energy

regarding either its procedures or on industrial pipe fitting.

Petitioner’s training by Boyle Energy was restricted to teaching

him the recommissioning process of the company.

     Petitioner’s work for Boyle Energy was on a project-by-

project basis.   He had authority to supervise the personnel of

Boyle Energy and of client companies.   Petitioner did not have

any hiring or firing authority over Boyle Energy personnel and

had to contact Boyle Energy before removing its personnel from a
                                - 3 -

job site.   Petitioner had a credit card with the name of Boyle

Energy on it and a business card with the company logo on it.

     Petitioner invoiced Boyle Energy for services rendered per

project.    The invoices and the subsequent payments were at a rate

of $500 per day for petitioner’s labor during 2002.   Petitioner

did not provide Boyle Energy with timesheets.   Boyle Energy paid

the amount shown on petitioner’s invoices and issued to

petitioner a Form 1099-MISC, Miscellaneous Income, for 2002,

reporting $126,760 as nonemployee compensation.   Petitioner

received a Form 1099 from Boyle Energy for each of the years

2001, 2002, 2003, and 2004.   He never received a Form W-2, Wage

and Tax Statement, from Boyle Energy.

     Petitioner failed to file a Federal income tax return for

2002.   For that year he received compensation of $126,760 from

Boyle Energy, $267.05 of short-term capital gain, and $2 of

interest income.   No Federal income tax was withheld from any of

the amounts that petitioner received, and he failed to make any

payments of estimated taxes during 2002.

     The Internal Revenue Service (IRS) prepared a substitute for

return under section 6020(b) with respect to petitioner’s Federal

income tax liability.   In the notice of deficiency, the IRS

determined that petitioner was liable for self-employment tax on

the income received from Boyle Energy.
                                - 4 -

                               OPINION

     Petitioner claims that he was an employee of Boyle Energy

and not an independent contractor liable for self-employment

taxes.    He initially claimed that Boyle Energy should be

responsible for the income taxes that were not withheld.     By the

conclusion of the trial, however, he understood that the issues

remaining in dispute were his liability for self-employment tax

and the additions to tax for failure to file a tax return,

failure to pay tax due on a return, and failure to make estimated

tax payments.

     Respondent contends that petitioner is liable for self-

employment tax under sections 1401(a) and 1402.    Respondent

argues that petitioner was not an employee under the definition

set out in section 3121(d).    See sec. 1.1402(c)-3(a), Income Tax

Regs.    Respondent relies on the test set out in Breaux & Daigle,

Inc. v. United States, 900 F.2d 49, 51 (5th Cir. 1990) (citing

United States v. Silk, 331 U.S. 704, 716 (1947)), and the

following factors:    (1) Degree of control, (2) opportunities for

profit or loss, (3) investment in facilities, (4) permanency of

relation, and (5) skill required in the operation in question.

The list is not exclusive, and no one factor is controlling.     Id.

     Respondent argues that the degree of control by Boyle

Energy, the lack of permanency in the relationship, and the skill

required in petitioner’s work supports respondent’s contention
                               - 5 -

that petitioner was an independent contractor during 2002.

Respondent concedes that the lack of opportunities for profit or

investment in the facilities supports petitioner’s contention

that he was an employee.   Recognizing that this is a close case,

respondent argues that the understanding of the parties to the

contract should be given weight.   See McCormick v. United States,

209 Ct. Cl. 331, 531 F.2d 554, 560 (1976); Herman v.

Commissioner, T.C. Memo. 1986-590; Steffens v. Commissioner, T.C.

Memo. 1984-592;   Bothke v. Commissioner, T.C. Memo. 1980-1;

Springfield Prods., Inc. v. Commissioner, T.C. Memo. 1979-23;

Harris v. Commissioner, T.C. Memo. 1977-358.

     Respondent asserts:

          Petitioner contends that there was an ongoing
     dispute with Boyle Energy regarding his status.
     Petitioner acknowledges, however, that he worked under
     this arrangement from 2001 until he ended the
     relationship in 2004 for unrelated reasons. If there
     was a valid dispute as to his status, petitioner
     essentially acquiesced to Boyle Energy’s understanding
     of his status by continuing to work under this
     arrangement. And despite the availability of persons
     aware of his employment status and relationship with
     Boyle Engineering [sic] over the period in question,
     such as Mike Boyle and Diane Gagnon, petitioner did not
     obtain any evidence to corroborate his testimony where
     it is at variance with documentary evidence.

Of course, respondent also could have called witnesses concerning

the nature of the relationship between petitioner and Boyle

Energy.   Because petitioner’s testimony was credible with respect
                               - 6 -

to his arrangements with Boyle Energy, the absence of

corroborating evidence is not determinative.     Cf. Boyd v.

Commissioner, 122 T.C. 305, 320 (2004).

     Petitioner’s acquiescence in Boyle Energy’s treatment of him

as an independent contractor for tax purposes is troubling.       As

discussed below, he has presented no reasonable excuse for his

failure to file a return and pay the income tax due.     On the

limited record that we have, however, we conclude that petitioner

was an employee of Boyle Energy during 2002 and should have been

treated as such for tax purposes.

     In respondent’s pretrial memorandum, respondent referred to

section 7491(a) and asserted that petitioner had failed to

produce any evidence that he was an employee and not an

independent contractor of Boyle Energy.     At trial, however, the

nature of petitioner’s employment was the subject of his

testimony, and his testimony was credible.     In the posttrial

brief, respondent does not challenge the credibility of

petitioner’s testimony and acknowledges that some of the relevant

factors favor petitioner.   Respondent does not address section

7491(a)(1) in the posttrial brief.     Thus respondent does not

claim that any of the limitations in section 7491(a)(2) prevent

application of the general rule that:

     SEC. 7491.   BURDEN OF PROOF.

          (a) Burden Shifts Where Taxpayer Produces
     Credible Evidence.--
                               - 7 -

                (1) General rule.--If, in any court
           proceeding, a taxpayer introduces credible
           evidence with respect to any factual issue
           relevant to ascertaining the liability of the
           taxpayer for any tax imposed by subtitle A or
           B, the Secretary shall have the burden of
           proof with respect to such issue.

We conclude that the burden of proof in this case shifted to

respondent.

     We are not persuaded that the factors relied on by

respondent prove that petitioner was an independent contractor

with respect to the services that he performed for Boyle Energy.

Neither the degree of control exercised by Boyle Energy nor the

amount of skill possessed by petitioner distinguishes his

situation from that of a supervisory employee.   We are not

persuaded that a job that continued from 2001 into 2004 can be

described as “impermanent”.   Respondent acknowledges that other

factors favor petitioner.   On the record that has been made, we

conclude that respondent did not carry the burden of proof.

Petitioner is not liable for self-employment tax for 2002.

     Respondent also had the burden of production with respect to

the additions to tax under sections 6651(a) and 6654.   See sec.

7491(c).   Petitioner stipulated that he failed to file a return

for 2002 and that a substitute tax return was prepared under

section 6020(b).   Respondent introduced evidence that petitioner

also failed to file a return for 2001.
                                - 8 -

     Section 6651(a) imposes additions to tax for failure to file

a return and failure to pay the amount shown as tax on a return.

Petitioner’s only explanation of his failure to file a return for

2002 is that he did not want to sign a return saying that he was

an independent contractor.    He has no reasonable cause, however,

for failing to file a return reporting that he received $126,760

in compensation and other amounts of income during 2002.      The

failure of Boyle Energy to withhold taxes that should have been

withheld neither excuses petitioner’s failure to file the return

and pay the taxes nor relieves him of the additions to tax under

section 6651(a).    See Escandon v. Commissioner, T.C. Memo. 2007-

128; Lucas v. Commissioner, T.C. Memo. 2000-14.

     Section 6654 imposes an addition to tax when a taxpayer

fails to make a required installment of estimated income tax.

Each required installment is equal to 25 percent of the required

annual payment.    Sec. 6654(d)(1)(A).   The required annual payment

is the lesser of (1) 90 percent of the tax shown on the return

for the taxable year (or, if the taxpayer filed no return, 90

percent of the tax for that year), or (2) 100 percent of the tax

shown on the return for the preceding taxable year.    Sec.

6654(d)(1)(B).    Because petitioner failed to file a return for

2001, his required annual payment for 2002 was 90 percent of the
                                 - 9 -

tax for that year.   Because petitioner failed to pay any Federal

income tax for 2002, the section 6654 addition to tax applies to

the recomputed deficiency.

     The implication of our holding that petitioner was an

employee of Boyle Energy for 2002 is that he may be liable for

his share of taxes under the Federal Insurance Contributions Act,

section 3101(a) and (b).   That determination, however, is not

within our jurisdiction in this case.    See Lucas v. Commissioner,

supra n.3; Grooms v. Commissioner, T.C. Memo. 1992-291.

     To reflect the foregoing,


                                           Decision will be entered

                                      under Rule 155.
