Independent contractor tax relief

Seventh Circuit classifies computer programmer as an independent contractor

Suskovich v. Anthem Health Plans of Virginia, Inc., (CA 7 1/22/2009) 103 AFTR 2d ¶2009-385

The Court of Appeals for the Seventh Circuit, affirming a district court, has concluded that a computer programmer was an independent contractor and not an employee.

Facts. Anthony Suskovich worked for WellPoint/Anthem (WellPoint) at various times over several years, beginning in ’96. While no record exists of any contractual agreement between Suskovich and WellPoint, Suskovich stated on a form he used to access WellPoint’s computer system that he was a “contractor.” Suskovich billed WellPoint for his time on an invoice form that he had created, stating that he was a “salesperson” who sold “computer consulting” to WellPoint. He was paid at an hourly rate of $60, resulting in an annualized salary of about $200,000, and received no benefits. For tax purposes, his salary was reported on Form 1099 rather than Form W-2. He had a similar relationship with Trasys, Inc., beginning in 2000.

Prior to his death in January of 2006, Suskovich was under investigation by IRS for failure to file tax returns. At the time of his death, he owed $100,000 to IRS and $33,000 to the state of Indiana. His wife requested “innocent spouse” relief, but was denied. The estate then filed a lawsuit, arguing that Suskovich should have been classified as an employee, rather than as an independent contractor, and that the money owed to IRS and the state of Indiana should have been withheld by WellPoint and Trasys. On the other hand, WellPoint and Trasys contended that Suskovich was an independent contractor and that he owed back taxes because of his own failure to file proper tax returns or pay his withholding taxes. A federal district court had granted summary judgment to WellPoint and Trasys. Suskovich’s estate appealed the decision.

Appellate court’s ruling. The Seventh Circuit upheld the district court’s decision based on an analysis of the following factors:

  • Degree of control. The Court pointed out that neither WellPoint nor Trasys had control over the details of Suskovich’s work. Suskovich was accountable to Trasys and WellPoint only for his final performance on projects. This factor supported a finding that Suskovich was an independent contractor.
  • Length of employment. The Court noted that although Suskovich worked for WellPoint and Trasys over an extended period of time, he only worked on short projects, usually lasting six to twelve months. The record demonstrated that he never enjoyed any guarantees that his work would extend beyond this limited duration, and, accordingly, this factor favored independent contractor status.
  • Method of payment. The Court had ruled previously that the use of Form 1099 was appropriate for a finding that a worker was an independent contractor. The Court also pointed out that Suskovich was never added to WellPoint’s or Trasys’ payroll. Instead, he had to invoice his hours in order to be paid. In addition, Suskovich listed his income on his own tax returns as income from a sole proprietorship, and he claimed business deductions related to that proprietorship.
  • Belief of the parties. The Court said that the tax returns, resumes, tax forms, and contractual agreements with the defendants overwhelmingly favored the conclusion that Suskovich considered himself to be an independent contractor.
  • Other factors. Three other factors, the “distinct occupation or business” factor, the “kind of occupation” factor, and the “skill required” factor, all supported a finding of independent contractor status, as Suskovich had the sort of advanced programming skills that allowed him to contract his work out to a number of companies.

Contact Mike Habib, EA at 1-877-78-TAXES for any payroll tax problem or CLICK HERE.

Client Reviews
★★★★★
Mike has given us peace of mind! He helped negotiate down a large balance and get us on a payment plan that we can afford with no worries! The stress of dealing with the IRS is huge and Mike helped us through it all. The peace of mind is invaluable, thank you Mike!April S.
★★★★★
Mike Habib - Thank you for being so professional and honest and taking care of my brothers IRS situation. We are so relieved it is over and the offer in compromise process went just as you said. Mike is very professional and will give you honest answers to the OIC process and you can really trust him. You won't be sorry you chose him!Joe and Deborah V.
★★★★★
Mike is a true professional. He really came thru for me and my business. Dealing with the IRS is very scary. I'm a small business person who works hard and Mike helped me see that they are not that scary after all. He was always there with the answers I needed and was very good about calling me back which I appreciated since your first reaction is to freak out and ask a million questions. He solved a messy case and worked very hard to resolve it. His rates are VERY reasonable for the amount of work he does! I give him my highest recommendation!Marcie R.
★★★★★
Mike was incredibly responsive to my IRS issues. Once I decided to go with him (after interviewing numerous other tax professionals), he got on the phone with the IRS immediately (as in the same day I signed with him) to squash an impending issue. And he worked directly with them to quickly come to a resolution I am very happy with. I'd highly recommend reaching out to Mike to see if he can help you with any IRS issues. I'm very satisfied!Marshall W.
★★★★★
I’ve seen and heard plenty of commercials on TV and radio for businesses offering tax help. I did my research on many of them only to discover numerous complaints and unresolved tax issues. I found Mike Habib through my own online search and contacted him. He was very professional with great communication, always answering my questions and concerns. Mike resolved my complicated tax problem just as he said he would. I would definitely recommend his services to family and friends.Nancy & Sal V.

BBB Accredited Business
Trust Link
California Society of Enrolled Agents
NAEA
NATP
Enrolled Agent