                                  T.C. Memo. 2018-36



                            UNITED STATES TAX COURT



                  MARK CLIFTON TRIMBLE, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 865-15.                               Filed April 2, 2018.



      Mark Clifton Trimble, pro se.

      Karen Lynne Baker, for respondent.



               MEMORANDUM FINDINGS OF FACT AND OPINION


      PARIS, Judge: In a notice of deficiency dated October 16, 2014,

respondent determined a deficiency in petitioner’s Federal income tax of $3,345

for 2012. After stipulations by the parties,1 the issue for decision is whether


      1
          On December 5, 2016, the parties filed a stipulation of settled issues. The
                                                                          (continued...)
                                              -2-

[*2] petitioner failed to report his correct income from Auto Center for the year in

issue.2

                                     FINDINGS OF FACT

          Some of the facts are stipulated and so found. The first stipulation of facts

and the accompanying exhibits are incorporated by this reference. Petitioner

resided in Texas when he timely filed his petition.

          Petitioner is an auto body technician and was employed at Auto Center from

August to December 2012. During that period Auto Center issued petitioner

checks totaling $9,134.3 Auto Center did not withhold tax from those checks. In


          1
        (...continued)
parties agreed that petitioner was an employee of Auto Center of Clear Lake (Auto
Center) and not liable for self-employment tax on income he received from Auto
Center or entitled to a self-employment tax deduction.
          2
       Petitioner argues that the issue for decision in this case is who is
responsible for payment of his 2012 employment tax, including Federal Insurance
Contribution Act (FICA) taxes. This is a deficiency case for income tax, however,
not a collection case for employment tax. See infra pp. 5-6.
          3
              Petitioner was issued checks in 2012 as follows:

                            Date             Amount

                            9/11              $500
                            9/17              1,000
                            9/24                300
                            9/28              1,000
                                                                           (continued...)
                                         -3-

[*3] January 2013 Auto Center issued petitioner a Form 1099-MISC,

Miscellaneous Income, reporting compensation of $22,049.55 (original Form

1099). In April 2013 Auto Center issued petitioner a second Form 1099-MISC

labeled “corrected” reporting compensation of $12,738 (corrected Form 1099).4

      Petitioner timely filed his 2012 Form 1040, U.S. Individual Income Tax

Return, claiming a filing status of married filing separately and reporting total

income of $27,736.5 Petitioner reported withholding credits of $9,793.6

      3
          (...continued)
                        10/05            1,000
                        10/18            1,000
                        10/26            1,000
                        11/05            1,000
                        11/09            1,000
                        11/26              300
                        11/30              534
                        12/07              500
      4
       Petitioner filed a Form SS-8, Determination of Worker Status for Purposes
of Federal Employment Taxes and Income Tax Withholding, with the
Commissioner. Before the notice of deficiency was issued, on January 6, 2014,
the Commissioner determined that petitioner was not an independent contractor
but an employee of Auto Center for Federal income tax purposes and that Auto
Center had not withheld FICA or income tax from petitioner’s wages.
      5
      Petitioner reported wages of $27,712 ($5,662.40 from Forms W-2, Wage
and Tax Statement, and the $22,049.55 reported on the original Form 1099 from
Auto Center) and unemployment compensation of $24.
      6
       The withholding credits were not reflected on the Forms W-2 or Forms
1099, and petitioner’s testimony was unclear and confusing as to how that amount
                                                                    (continued...)
                                       -4-

[*4] On October 16, 2014, respondent issued petitioner a notice of deficiency

determining a deficiency in Federal income tax of $3,345. Respondent calculated

the deficiency by including amounts reported on all information returns as income;

i.e., petitioner’s income included both the $22,049 reported on the original Form

1099 and the $12,738 reported on the corrected Form 1099 from Auto Center.

Parties’ Arguments

      After reviewing the documentation respondent adjusted his original position

from the notice of deficiency and argued that petitioner’s income from Auto

Center was only $9,134--the total amount of the checks Auto Center issued to

petitioner--and conceded that both Forms 1099 Auto Center issued to petitioner

were erroneous. Respondent also argued that the Court has no jurisdiction to

determine the amount of petitioner’s Federal income tax withholding and share of

FICA taxes.

      At trial and on brief petitioner argued that his income from Auto Center was

$34,787.55.7 Petitioner also argued that he was not responsible for any taxes on


      6
      (...continued)
was computed.
      7
     On April 22, 2013, petitioner filed a claim with the Texas Workforce
Commission (TWC) Appeal Tribunal to determine his unemployment
compensation rate. On May 16, 2013, TWC determined that petitioner was
                                                                   (continued...)
                                         -5-

[*5] that amount because Auto Center paid him only $9,134 and “withheld” the

remainder. See supra note 6.

                                     OPINION

I.    Jurisdiction

      A.     Deficiency and Overpayment

      The Tax Court is a court of limited jurisdiction, and it may exercise its

jurisdiction only to the extent authorized by Congress. Naftel v. Commissioner,

85 T.C. 527, 529 (1985). Petitioner received a notice of deficiency and invoked

the Court’s jurisdiction by filing a petition for redetermination of a deficiency

under section 6213(a).8 Section 6214(a) grants the Court jurisdiction to

redetermine the correct amount of a deficiency and to determine whether any

additional amounts or any additions to tax should be assessed if the Commissioner

asserts an increased amount at or before the hearing or rehearing. Section 6211(a)

defines “deficiency”, in general, as the correct tax for a year, minus the sum of the




      7
        (...continued)
entitled to total “wage credits” of $34,787.55 from Auto Center that counted
toward his unemployment entitlement benefits.
      8
      Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect at all relevant times, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
                                          -6-

[*6] amount of tax shown on the return plus the amount of tax previously assessed

less any rebates.

      Pursuant to section 6512(b)(1), the Court also has jurisdiction to determine

the amount of an overpayment of tax for the same taxable year or years for which

the Commissioner has issued a notice of deficiency and with regard to which the

taxpayer has timely filed a petition for redetermination of the deficiency.

      B.     Section 31 and FICA Tax

      Under section 6211(b)(1) a deficiency is determined “without regard to

payment on account of estimated tax, without regard to the credit under section

31”. Although section 31 provides that the amount withheld by an employer as

tax from an employee’s wages “shall be allowed to the recipient of the income as a

credit” against his income tax liability for that year, this credit is available only

“[i]f the tax has actually been withheld at the source.” Sec. 1.31-1(a), Income Tax

Regs. It is well established that an employer’s failure to withhold income tax does

not relieve an employee from his or her obligation to pay income tax. Church v.

Commissioner, 810 F.2d 19, 20 (2d Cir. 1987); Chenault v. Commissioner, T.C.

Memo. 2011-56, slip op. at 11 (holding that a third party’s withholding obligation

“does not excuse the taxpayer from his or her duty to report income and pay the

resulting tax”). The Commissioner may collect payment from either the employee
                                          -7-

[*7] or the employer, but the employee remains ultimately liable for his own taxes

even though his employer was obligated to withhold.9 Edwards v. Commissioner,

39 T.C. 78 (1962), aff’d in part, rev’d in part, 323 F.2d 751 (9th Cir. 1963);

Karagozian v. Commissioner, T.C. Memo. 2013-164, aff’d, 595 F. App’x 87 (2d

Cir. 2015); Goins v. Commissioner, T.C. Memo. 1997-521, aff’d without

published opinion, 151 F.3d 1029 (4th Cir. 1998). Because the withholding credit

issue is not a factor in determining the tax deficiency, the Court has no jurisdiction

to consider it and therefore may not decide whether petitioner is entitled to a

Federal income tax withholding credit for 2012. See Forrest v. Commissioner,

T.C. Memo. 2011-4.

      This Court has no jurisdiction over FICA taxes imposed on petitioner as an

employee of Auto Center for 2012. See Chatterji v. Commissioner, 54 T.C. 1402,

1405 (1970); Ietto v. Commissioner, T.C. Memo. 1996-332.

II.   Burden of Proof

      Generally, the Commissioner’s determination of a taxpayer’s liability in a

notice of deficiency is presumed correct, and the taxpayer bears the burden of

proving that the determination is incorrect. Rule 142(a); Welch v. Helvering, 290


      9
        See sec. 3402(d) (relieving the employer of liability for the tax if it is paid
directly by the employee).
                                        -8-

[*8] U.S. 111, 115 (1933). Although section 7491(a) provides for shifting the

burden of proof, this case is decided on the preponderance of the evidence and is

not affected by the burden of proof or section 7491(a).

III.   Income10

       Section 61(a) defines gross income for purposes of calculating taxable

income as “all income from whatever source derived” and includes compensation

paid for services, whether furnished by the taxpayer as an employee, a self-

employed person, or an independent contractor. A taxpayer must maintain books

and records establishing the amount of his or her income. Sec. 6001. If a taxpayer

fails to maintain the required books and records, the Commissioner may determine

the taxpayer’s income by any method that clearly reflects income. See sec. 446(b);

Petzoldt v. Commissioner, 92 T.C. 661, 693 (1989). The Commissioner’s

reconstruction of income “need only be reasonable in light of all the surrounding

facts and circumstances.” Petzoldt v. Commissioner, 92 T.C. at 687.

       To reconstruct the amount of income petitioner received from Auto Center

for 2012, respondent relies on the 12 checks it issued to petitioner totaling $9,134.


       10
        After respondent conceded that the Forms 1099 issued to petitioner were
erroneous, this case no longer involved unreported income. Therefore, the issue
for decision is whether petitioner failed to report his correct income from Auto
Center for 2012.
                                         -9-

[*9] Respondent argues that those checks are the best evidence to determine

petitioner’s income from Auto Center.

      Petitioner argues that the TWC determination of $34,787.55 as “wage

credits” is the best evidence of his income.11 There is nothing in the record or in

the TWC determination to explain how the TWC arrived at $34,787.55 for “wage

credits”. Further, TWC’s determination applied to petitioner’s unemployment

compensation benefits, which is not the topic of this Federal income tax case.

      Additionally, the documents in the record are inconsistent as to petitioner’s

income. Before the notice of deficiency was issued, the Commissioner determined

in the SS-8 Determination Analysis that petitioner was guaranteed $1,000 a

week.12 TWC determined that petitioner’s pay rate was $18 “per estimated repair

hour”. Petitioner testified that Auto Center agreed to pay him $18 a labor hour

plus commission but paid only $1,000 a week.13 However, the checks Auto Center

issued to him are for varying amounts, several of which are for less than $1,000.14


      11
           See supra note 7.
      12
           See supra note 4.
      13
        Petitioner testified that he worked 12 to 16 hours a day, but did not testify
how many days a week he worked or whether he worked those days and hours
consistently.
      14
           See supra note 3.
                                         - 10 -

[*10] The Court finds that the 12 checks Auto Center issued petitioner are the best

evidence of his income from Auto Center for 2012. Therefore, petitioner’s income

from Auto Center was $9,134 for 2012. The Court concludes that petitioner did

not underreport his income for 2012, but overreported it.15

IV.   Rule 155 Computations

      Rule 155(a) provides for computations to be submitted by the parties

“pursuant to the Court’s determination of the issues, showing the correct amount

to be included in the decision.” For the Court’s purposes in this case, the amount

to be included in the decision will reflect the tax due for 2012 on the corrected

income that petitioner received during that year. The Rule 155 computation

ordered here will not be an invitation for the parties to reargue their previous

litigation positions. See Rule 155(c).

      The Court has considered all of the arguments made by the parties, and to

the extent they are not addressed herein, they are considered unnecessary, moot,

irrelevant, or without merit.




      15
       Although petitioner overreported his income, there is not enough
information in the record to determine whether there is an overpayment of tax.
The parties shall address this issue in their Rule 155 computations.
                                       - 11 -

[*11] To reflect the foregoing and the concessions of the parties,


                                                Decision will be entered

                                      under Rule 155.
