Paying Personal Expenses Through A Business

I am looking at a tax case.

It reminds me of something.

There is a too-common belief that paying an expense through a business can somehow transmute an otherwise personal expenditure into a tax deduction.

Here are common ways I have heard the question:

(1)  My spouse is going to replace her car. Should we buy it through the business?

(2)  I run my business from my home. That makes my home a “headquarters,” right? Can’t I deduct all the expenses related to my business headquarters?

(3)  I am going to borrow money to [go on vacation/pay college tuition/buy a boat I’ve been wanting]. Should I have the business borrow the money to make it deductible?

Do not misunderstand, many times there is a more tax-efficient way to accomplish something. There may still be some tax though, and the goal is to minimize the tax. Making it disappear may not be an option, at least for a responsible practitioner.

Let’s look at the above questions.

(1) Realistically, if there is no business use of the vehicle, you are not allowed to deduct any of the ownership or operating expenses of a vehicle. Despite that, does it happen routinely? Of course. Practitioners do what they can, but it is like fighting the tide.

(2)  I consider this quackery, but it is a true story. No, working from home does not make your house fully deductible. You might get a home office deduction out of it, but that is a fraction of some – and not all – expenses. No, your house is not Proctor and Gamble. Get over it.

(3) This one might have traction, but in general the answer is no. Even if the interest is deductible, how is the company getting you the money? Is it going to lend it to you? If so, you will have to pay interest to the company, although you may be able to arbitrage the rate. Will the company bonus you the money? If so, I see FICA and income taxes in your future. Explain to me the win condition here.

Let’s look at Justin Maderia (JM).

JM lived in Florida and owned 50% of Lindy Inc (Lindy).

Lindy must be a C corporation, which is the type that pays its own taxes. I say this because the Court refers to earnings and profits (E&P), which is a C corporation concept. The purpose of E&P is to track a corporation’s ability to pay dividends. When it pays dividends, a corporation is sharing its accumulated profits with its shareholders. The corporation has already paid taxes on these profits (remember: a C corporation pays taxes). When it pays dividends, you are personally taxed on that previously taxed profit. This is the reason for “qualified dividends” in the tax Code: to cut you a break on that second round of taxation.

The IRS was looking at JM’s 2018 personal return. It was also looking at Lindy’s 2018 business return.

COMMENT: It is not unusual to include a closely held company with the audit of an individual tax return.

The IRS wanted to increase JM’s 2018 income by $192 grand of “stuff” that Lindy paid on his behalf.

COMMENT:  Sounds to me like Lindy was paying for EVERYTHING.

Let’s talk procedure here.

The IRS identified personal transactions in Lindy. Lindy was the type of corporation that could pay dividends, and the IRS argument was – to the extent Lindy paid for personal stuff – that such payments represented constructive dividends to JM.

Fair. Consider that the serve.

JM gets to return.

He would argue that the payments were not personal because … well, who knows why.

JM did nothing.

Huh?

JM did nothing because he had a previous audit, and the IRS never pursued the issue of Lindy payments. JM believed he was immunized.

Mind you, there is a kernel of truth here, but JM has googled the concept beyond all recognition.

IF the IRS looks at an issue AND makes no change to your tax return for that issue, you can challenge a later proposed assessment based on that same issue. You might not win, mind you, but you have grounds for the challenge.

Is this what happened to JM?

Let’s look at it.

The IRS examined his prior year return.

Score one for JM.

The IRS never looked at Lindy.

We are done.

There is no immunity. JM cannot challenge a proposed 2018 assessment on an issue the IRS did not examine in a prior year.

JM had to return on different grounds. He did not. He - procedurally speaking - automatically lost.

JM had $192 grand of additional income.

The IRS next wanted the accuracy-related penalty.

Well, of course they did. If they were any more predictable, we could just put it on a calendar.

The Court said “no” to the penalty.

Why?

Because the IRS had looked at JM’s previous return. The IRS either did not bring up or dismissed the Lindy issue, so JM kept reporting the same way. While this would not protect him from a challenge of additional income, it did provide a “reasonable basis” defense against penalties.

Our case this time was Maderia v Commissioner, T.C. Summary 2024-5.

Checks Not Cashed In Time Includible In Taxable Estate

 

Let’s talk about an issue concerning gifts.

We are not talking about contributions – such as to a charity - mind you. We are talking gifts to individuals, as in gift taxation.

The IRS spots you a $16,000 annual gift tax exemption. This means that you can gift anyone you want – family, friend, stranger – up to $16,000 and there is no gift tax involved. Heck, you don’t even have to file a return for such a straightforward transaction, although you can if you want. Say that you give $16,000 to your kid. No return, no tax, nothing. Your spouse can do the same, meaning $32,000 per kid with no return or tax.

That amount covers gifting for the vast majority of us.

What if you gift more than $16,000?

Easy answer: you now have to file a return but it is unlikely there will be any tax due.

Why?

Because the IRS gives you a “spot.”

A key concept in estate and gift taxation is that the gift tax and the estate tax are combined for purposes of the arithmetic.

One adds the following:

·      The gifts you have reported over your lifetime

·      The assets you die with

One subtracts the following:

·      Debts you die with

·      Certain spousal transfers and charitable bequests we will not address here.

If this number is less than $12.06 million, there is no tax – gift or estate.

Folks, it is quite unlikely that the average person will get to $12.06 million. If you do, congrats. Chances are you have been working with a tax advisor for a while, at least for your income taxes. It is also more likely than not that you and your advisor have had conversations involving estate and gift taxes.

Let’s take a look at the Estate of William E. DeMuth, Jr.

In January, 2007 William DeMuth (dad) gave a power of attorney to his son (Donald DeMuth). Donald was given power to make gifts (not exceeding the annual exclusion) on his dad’s behalf. Donald did so from 2007 through 2014.

In summer, 2015, dad’s health began to fail.

Donald starting writing checks for gift in anticipation that his dad would pass away.

Dad did pass away on September 11.

Donald had written eleven checks for $464,000.

QUESTION: Why did Donald do this?

ANSWER: In an attempt to reduce dad’s taxable estate by $464,000.

Problem: Only one of the eleven checks was cashed before dad passed away.

Why is this a problem?

This is an issue where the income tax answer is different from the gift tax answer.

If I write a check to a charity and put it in the mail late December, then income tax allows me to claim a contribution deduction in the year I mailed the check. One could argue that the charity could not receive the check in time to deposit it the same tax year, but that does not matter. I parted with dominion and control when I dropped the check in the mail.

Gift tax wants more from dominion and control. One is likely dealing with family and close friends, so the heightened skepticism makes sense.

When did dad part with dominion and control over the eleven checks?

Gift tax wants to see those checks cashed. Until then, dad had not parted with dominion and control.

Only one of the checks had cleared before dad passed away. That check was allowed as a gift. The other ten checks totaled $436,000 and potentially includible in dad’s estate.

But there was a technicality concern an IRS concession, and the $436,000 was reduced to $366,000.

Still, multiply $366,000 by a 40% tax rate and the issue got expensive.

Our case this time was the Estate of William E DeMuth, Jr., T.C. Memo 2022-72.

The Sum Of The Parts Is Less Than The Whole

 

I am looking at a case involving valuations.

The concept starts easily enough:

·      Let’s say that your family owns a business.  

·      You personally own 20% of the business.

·      The business has shown average profits of $1 million per year for years.

·      Altria is paying dividends of over 7%, which is generous in today’s market. You round that off to 8%, considering that rate fair to both you and me.

·      The multiple would therefore be 100% divided by 8% = 12.5.   

·      You propose a sales price of $1,000,000 times 12.5 times 20% = $2.5 million.  

Would I pay you that?

Doubt it.

Why?

Let’s consider a few things.

·      It depends whether 8 percent is a fair discount rate.  Considering that I could buy Altria and still collect over 7%, I might decide that a skinny extra 1% just isn’t worth the potential headache.

·      I can sell Altria at any time. I cannot sell your stock at any time, as it is not publicly-traded. I may as well buy a timeshare.

·      I am reasonably confident that Altria will pay me quarterly dividends, because they have done so for decades. Has your company ever paid dividends? If so, has it paid dividends reliably? If so, how will the family feel about continuing that dividend policy when a non-family member shows up at the meetings? If the family members work there, they might decide to increase their salaries, stop the dividends (as their bumped-up salaries would replace the lost dividends) and just starve me out.

·      Let’s say that the family in fact wants me gone. What recourse do I – as a 20% owner – have? Not much, truthfully. Own 20% of Apple and you rule the world. Own 20% of a closely-held that wants you gone and you might wish you had never become involved.

This is the thought process that goes into valuations.

What are valuations used for?

A ton of stuff:

·      To buy or sell a company

·      To determine the taxable consequence of nonqualified deferred compensation

·      To determine the amount of certain gifts

·      To value certain assets in an estate

What creates the tension in valuation work is determining what owning a piece of something is worth – especially if that piece does not represent control and cannot be easily sold. Word: reasonable people can reasonably disagree on this number.

Let’s look at the Estate of Miriam M. Warne.

Ms Warne (and hence the estate) owned 100% of Royal Gardens, a mobile home park. Royal Gardens was valued – get this - at $25.6 million on the estate tax return.

Let’s take a moment:

Q: Would our discussion of discounts (that is, the sum of the parts is less than the whole) apply here?

A: No, as the estate owned 100% - that is, it owned the whole.

The estate in turn made two charitable donations of Royal Gardens.

The estate took a charitable deduction of $25.6 million for the two donations.

The IRS said: nay, nay.

Why?

The sum of the parts is less than the whole.

One donation was 75% of Royal Gardens.  

You might say: 50% is enough to control. What is the discount for?

Here’s one reason: how easy would it be to sell less-than-100% of a mobile home park?

The other donation was 25%.

Yea, that one has it all: lack of control, lack of marketability and so on.

The attorneys messed up.

They brought an asset into the estate at $25.6 million.

The estate then gave it away.

But it got a deduction of only $21.4 million.

Seems to me the attorneys stranded $4.2 million in the estate.

Our case this time was the Estate of Miriam M. Warne, T.C. Memo 2021-17.

Income, Clearly Realized

 

What is income?

Believe it or not, there is a line of cases over decades developing the tax concept of income.

Some instances are clear-cut: if you receive wages or salary, for example, then you have income.

Some instances may not be so clear-cut.

For example, let’s say that you receive a stock dividend. The company has a good year, and you receive – as an example – 1 additional share for every 5 shares you own.  

Do you have income?

Let’s talk this out. Let’s say that the company is worth $25 million before the stock dividend and has 1 million shares outstanding. After the stock dividend it will have 1.2 million shares outstanding. What are those extra 200,000 shares worth?

This is an actual case – Eisner v Macomber - that the Supreme Court decided in 1920. Congress had changed the tax law to tax this stock dividend, and someone (Myrtle Macomber) brought suit arguing that the law was unconstitutional.

Her argument:

·      The company was worth $25 million before the dividend

·      The company was worth $25 million after the dividend

·      She may have more shares, but her shares represent the same proportional ownership of the company.

·      She did not have any more money than she had before.

She had a point.

The Bureau of Internal Revenue (that is, the IRS) came at it from a different angle:

There was income – the income generated by the company.  The company was “distributing” said income by means of a stock dividend.

The Court reasoned that one could have income from labor or from capital. The first did not apply, and it could find nothing to support the second had happened to Mrs Macomber.

The Court decided that she did not have income.

Let’s continue.

The Glenshaw Glass Company sued the Hartford-Empire Company for damages stemming from fraud and for treble damages for business injury.

The two companies settled, and Hartford was paid approximately $325 thousand in punitive damages.

Glenshaw had no intention of paying tax on that $325 grand. That money was not paid because of labor or because of capital. It was paid because of injury to its business - returning Glenshaw to where it should have been if not for the tortious behavior.

Not labor, not capital. Glenshaw was draped all over that earlier Eisner v Macomber decision.

But the IRS had a point – in fact, 325 thousand points.

Here is the Court:

Here we have instances of undeniable accessions to wealth, clearly realized, and over which taxpayers have complete dominion. The mere fact that the payments were extracted from the wrongdoers as punishment for unlawful conduct cannot detract from their character as taxable income.”

The Court levered away from its earlier labor/capital impasse and clarified income to be:

·      An increase in wealth

·      Clearly realized, and

·      Over which one has (temporary or permanent) discretion or control

In time Glenshaw has come to mean that everything is taxable unless Congress says that it is not taxable. While not mathematically precise, it is precise enough for day-to-day use.

I have a question, though.

At a conceptual level, what are the limits on the “clearly realized” requirement?

I get it when someone receive a paycheck.

I also get it when someone sells a mutual fund.

But what if your IRA has gone up in value, but you haven’t taken a distribution?

Or the house in which you raised your family has appreciated in value?

Do you have an increase in wealth?

Do you have discretion or control over said increase in wealth?

Do you have “income” that Congress can tax under Glenshaw?

Another IRA-As-A-Business Story Gone Wrong

 

I am not a fan.

We are talking about using your IRA to start or own a business. We are not talking about buying stock in Tesla or Microsoft; rather we are talking about opening a car dealership or rock-climbing facility with monies originating in your retirement account. The area even has its own lingo – ROBS (Rollover for Business Start Ups), for example - of which we have spoken before.

Can it be done correctly and safely?

Probably.

What are the odds that it will not be done – or subsequently maintained - correctly?

I would say astronomical.

For the average person there are simply too many pitfalls.

Let’s look at the Ball case. It is not a standard ROBS, and it presents yet another way how using an IRA in this manner can blow up.

During 2012 Mr Ball had JP Morgan Chase (the custodian of his SEP-IRA) distribute money.

COMMENT: You have to be careful. The custodian can send the money to another IRA. You do not want to receive the money personally.

Mr Ball initiated disbursements requests indicating that each withdrawal was an early disbursement ….

         COMMENT: No!!!

He further instructed Chase to transfer the monies to a checking account he had opened in the name of a Nevada limited liability company.

         COMMENT: That LLC better be owned by the SEP-IRA.

Mr Ball was the sole owner of the LLC.

         COMMENT: We are watching suicide here.

Mr Ball had the LLC loan the funds for a couple of real estate deals. He made a profit, which were deposited back into the LLC.

At year-end Chase issued Forms 1099 showing $209,600 of distributions to Mr Ball.

         COMMENT: Well, that is literally what happened.

Mr Ball did not report the $209,600 on his tax return.

COMMENT: He wouldn’t have to, had he done it correctly.  

The IRS computers caught this and sent out a notice of tax due.

COMMENT: All is not lost. There is a fallback position. As long as the $209,600 was transferred back into an IRA withing 60 days, Mr Ball is OK.

ADDITIONAL COMMENT: BTW, if you go the 60-day route – and I discourage it – it is not unusual to receive an IRS notice. The IRS does not necessarily know that you rolled the money back into an IRA within the 60-day window.

This matter wound up in Tax Court. Mr Ball had an uphill climb. Why? Let’s go through some of technicalities of an IRA.

(1) An IRA is a trust account. That means it requires a trustee. The trustee is responsible for the assets in the IRA.

Chase was the trustee. Guess what Chase did not know about? The LLC owned by Mr Ball himself.

Know what else Chase did not know about? The real estate loans made by the LLC upon receipt of funds from Chase.

If Chase was the trustee for the LLC, it had to be among the worst trustees ever. 

(2)  Assets owned by the IRA should be named or titled in the name of the IRA.

Who owned the LLC?

Not the IRA.

Mr Ball’s back was to the wall. What argument did he have?

Answer: Mr Ball argued that the LLC was an “agent” of his IRA.

The Tax Court did not see an “agency” relationship. The reason: if the principal did not know there was an agent, then there was no agency.

Mr Ball took monies out of an IRA and put it somewhere that was not an IRA. Once that happened, there was no restriction on what he could do with the money. Granted, he put the profits back into the LLC wanna-be-IRA, but he was not required to. The technical term for this is “taxable income.”

And – in the spirit of bayoneting the dead – the Court also upheld a substantial underpayment penalty.

Worst. Case. Scenario.

Is there something Mr Ball could have done?

Yes: Find a trustee that would allow nontraditional assets in the IRA. Transfer the retirement funds from Chase to the new trustee. Request the new trustee to open an LLC. Present the real estate loans to the new trustee as investment options for the LLC and with a recommendation to invest. The new trustee – presumably more comfortable with nontraditional investments – would accept the recommendation and make the loans.

Note however that everything I described would take place within the protective wrapper of the IRA-trust.

Why do I disapprove of these arrangements?

Because – in my experience – almost no one gets it right. The only reason we do not have more horror stories like this is because the IRS has not had the resources to chase down these deals. Perhaps some day they will, and the results will probably not be pretty. Then again, chasing down IRA monies in a backdrop of social security bankruptcy might draw the disapproval of Congress.

Our case this time was Ball v Commissioner, TC Memo 2020-152.

The Tax Doctrine Of The Fruit And The Tree

 

I am uncertain what the IRS saw in the case. The facts were very much in the taxpayer’s favor.

The IRS was throwing a penalty flag and asking the Court to call an assignment of income foul.

Let’s talk about it.

The tax concept for assignment-of-income is that a transaction has progressed so far that one has – for all real and practical purposes – realized income. One is just waiting for the check to arrive in the mail.

But what if one gives away the transaction – all, part or whatever – to someone else? Why? Well, one reason is to move the tax to someone else.

A classic case in this area is Helvering v Horst. Horst goes back to old days of coupon bonds, which actually had perforated coupons. One would tear-off a coupon and redeem it to receive an interest check. In this case the father owned the bonds. He tore off the coupons and gave them to his son, who in turn redeemed them and reported the income. Helvering v Horst gave tax practitioners the now-famous analogy of a tree and its fruit. The tree was the bond, and the fruit was the coupon. The Court observed:

… The fruit is not to be attributed to a different tree from that on which it grew.”

The Court decided that the father had income. If he wanted to move the income (the fruit) then he would have to move the bond (the tree).

Jon Dickinson (JD) was the chief financial officer and a shareholder of a Florida engineering firm. Several shareholders – including JD – had requested permission to transfer some of their shares to the Fidelity Charitable Gift Fund (Fidelity). Why did they seek permission? There can be several reasons, but one appears key: it is Fidelity’s policy to immediately liquidate the donated stock. Being a private company, Fidelity could not just sell the shares in the stock market. No, the company would have to buy-back the stock. I presume that JD and the others shareholders wanted some assurance that the company would do so.

JD buttoned-down the donation:

·      The Board approved the transfers to Fidelity.

·      The company confirmed to Fidelity that its books and records reflected Fidelity as the new owner of the shares.

·      JD also sent a letter to Fidelity with each donation indicating that the transferred stock was “exclusively owned and controlled by Fidelity” and that Fidelity “is not and will not be under any obligation to redeem, sell or otherwise transfer” the stock.

·      Fidelity sent a letter to JD after each donation explaining that it had received and thereafter exercised “exclusive legal control over the contributed asset.”

So what did the IRS see here?

The IRS saw Fidelity’s standing policy to liquidate donated stock. As far as the IRS was concerned, the stock had been approved for redemption while JD still owned it. This would trigger Horst – that is, the transaction had progressed so far that JD was an inextricable part. Under the IRS scenario, JD would have a stock redemption – the company would have bought-back the stock from him and not Fidelity – and he would have taxable gain. Granted, JD would also have a donation (because he would have donated the cash from the stock sale to Fidelity), but the tax rules on charitable deductions would increase his income (for the gain) more than the decrease in his income (for the contribution). JD would owe tax.

The Court looked at two key issues:

(1)  Did JD part with the property absolutely and completely?

This one was a quick “yes.” The paperwork was buttoned-up as tight as could be.

(2)  Did JD donate the property before there was a fixed and determinable right to sale?

You can see where the IRS was swinging. All parties knew that Fidelity would redeem the stock; it was Fidelity’s policy. By approving the transfer of shares, the company had – in effect – “locked-in” the redemption while JD still owned the stock. This would trigger assignment-of-income, argued the IRS.

Except that there is a list of cases that look at formalities in situations like this. Fidelity had the right to request redemption – but the redemption had not been approved at the time of donation. While a seemingly gossamer distinction, it is a distinction with tremendous tax weight. Make a sizeable donation but fail to get the magic tax letter from the charity; you will quickly find out how serious the IRS is about formalities. Same thing here. JD and the company had checked all the boxes.

The Court did not see a tree and fruit scenario. There was no assignment of income. JD got his stock donation.

Our case this time was Dickinson v Commissioner, TC Memo 2020-128.

The Gig Economy

Say that I retire. Perhaps my wife wins the lottery or marries well.

I get bored. Perhaps I would like a little running-around money. Maybe I flat-out need extra money.

I find a website that connects experienced tax practitioners to people needing tax services. There might be specializations available: as a practitioner I might accept corporate or passthrough work, for example, but not individual tax returns. I could work as much or as little as I want. I might work Friday and Saturday afternoons, for example, but not accept work on weekdays. I could turn down or fire clients. I could take time off without fear of dismissal.

There would have to be rules, of course. Life is a collection of rules. I might have to provide my state license to substantiate my credentials. I might have to post an E&O policy. It seems reasonable to expect the website to impose standards, such as for professional conduct, client communications, timeliness of service and so on

How would I get paid?

I am thinking that I would bill through the website. An advantage is that the website can devote more resources than I care to provide, making the arrangement a win-win-win for all parties involved. The website would collect from the client and then electronically deposit to my bank account.

Here is my question: is the website my employer?

Don’t scoff. We are talking the gig economy.

The issue has gained notoriety as states – New Jersey and California come to mind – have gone after companies like Uber and Lyft. From these states’ perspective, the issue is simple: if there is more than a de minimis interdependence between the service recipient and provider, then there must be an employment relationship between the two. Employment of course means FICA withholding, income tax withholding, unemployment insurance, disability insurance (in some cases), workers compensation and so on.

Let us be honest: employment status is Christmas day for some states. They would deem your garden statue an employee if they could wring a dollar out of you by doing so.

New Jersey recently hit Uber with a tax bill for $650 million, for example.

The employee-independent contractor issue is a BIG deal.

What in the world is the difference between an employee and an independent contractor?

People have been working on this question for a long time. The IRS has posited that employment means control – of the employer over the employee – and also that control travels on a spectrum. As one moves to the one end of the spectrum, it becomes increasingly likely that an employer-employee relationship exists.

The IRS looks at three broad categories:

(1)  Behavioral control

(2)  Financial control

(3)  Relationship of the parties

The IRS then looks at factors (sometimes called the 20 factors) through the lens of the above categories.

·        Can the service recipient tell you what, where, when and how to do something?

·        Is the service recipient the only recipient of the provider’s services?

·        Is the service relationship continuing?

Answer yes to those three factors and you sound a lot like an employee.

Problem is the easy issues exist only in a classroom or at seminar. In the real world, it is much more likely that you will find a mix of yes and no. In that event, how may “yes” answers will mean employee status? How many “no” answers will indicate contractor status?

Answer: no one knows.

Some states have taken a different approach, using what is called an “ABC” test. There was a significant case (Dynamex) in California. It interpreted the ABC test as follows:

(1)  The service provider is free from the direction and control of the service recipient in connection with the performance of the work.

(2)  The service provider performs work outside the usual course of the service recipient’s business.

(3)  The service provider is customarily engaged in the independent performance of the services provided.

I get the first one, but I point out that it is rarely all or nothing. If we here at CTG Command bring on a contractor CPA – say for the busy season or to collaborate on a tax area near the periphery of our experience – we would still have expectations. For example,

·        our office hours are XXX

·        reviewer turnaround times to tax preparers are XXX

·        responses to client calls are to occur with XXX hours or less

·        responses to me are to occur within X hours or less

·        drop-dead due dates are XXX

How many of these can we have before we fail the A in the ABC test?

Let’s look at B.

We are a CPA firm. Odds are we are interested in experienced CPAs. It is quite unlikely that we will have need of a master plumber or stonemason.

Have we automatically failed the B in the ABC test?

And what does C even mean?

I am a 30+ year tax CPA. I am a specialist and have been for many years. I would say that I am “customarily engaged” in tax practice. Do I have “independent performance,” however?

If I interpret this test to mean that I have more than one client, it somewhat makes sense, although there are still issues. For example, upon semi-retirement, I would like to be “of counsel” to a CPA firm. I have no intention of working every day, or of being there endless hours during the busy season. No, what I am thinking is that the firm would call me for specialized work – more complex tax issues, perhaps some tax representation. It would provide a mental challenge but not become a burden to me.

Would I do this for more than one firm?

Doubt it. I point to that “burden” thing.

Have I failed the C test?

I am still thinking through the issues involved in this area.

Including non-tax issues.

If I take an Uber and the driver gets into an accident – injuring me – do I have legal recourse to Uber? Seems to me that I should. Is this question affected by the employee-contractor issue? If it is, should it be?

This prompts me to think that the law is inadequate for a gig economy.

There is, for example, always some degree of control between the parties, if for no other reason than expectation is a variant of control. Not wanting to lose the gig is – at least to me – an incident of control to the service recipient. Talk to a CPA firm partner with an outsized client about expectation and control.

Why cannot CTG Command gig an experienced tax professional – say for a specific engagement or issue - without the presumption that we hired an employee? I can reasonably assure you that I will not be an employee when I go “of counsel.” You can forget my attending those Monday morning staff meetings.

Am I “independently performing” if I have but one client? What if it is a really good client? What if I don’t want a second client?

Problem is, we know there are toxic players out there who will abuse any wiggle room you give them. Still, that is no excuse for bad tax law. Not every person who works – let’s face it – is an employee. The gig economy has simply amplified that fact.