Spicer Accounting, Inc. v. United States

Taxpayer accounting corporation seeks a refund for FICA and FUTA taxes paid to the IRS on behalf of Mr. Spicer. Taxpayer contends that payments paid to Mr. Spicer were dividends, since payments made to stockholders in a subchapter S corporation are not wages. We find that because payments received by Mr. Spicer were for substantial services rendered, these payments are “wages” subject to FUTA and FICA. Taxpayer asserts, in the alternative, that it was not liable for FICA and FUTA because Mr. Spicer was an independent contractor, not an employee. We deny Taxpayer’s claim finding that there is no evidence that Mr. Spicer was an independent contractor. Finally, we hold that section 530 of the Revenue Act of 1978 does not relieve Taxpayer from FICA and FUTA liability for the years 1981 and 1982, because Taxpayer’s treatment of Mr. Spicer as a stockholder, not as an employee, was unreasonable. We, therefore, affirm the district court’s decision.

FACTUAL AND PROCEDURAL BACKGROUND

Mr. Spicer is the president, treasurer, and director of taxpayer corporation, Spicer Accounting, Inc. (Taxpayer). In 1985, the Internal Revenue Service (IRS) made assessments against Taxpayer for Federal…