John R. Bullis: Property manager held to be employee

In a Tax Court Memo Decision, the property manager of a 60-unit apartment complex was found to be an employee, not an independent contractor.

The owner, Hampton Software Development LLC (Hampton), didn’t issue form 1099-MISC or any other 1099 form to the manager, Mr. Herndon, for the $2,000 per month he was paid.

The court looked at various factors to determine the relationship was of employer-employee.

The court looked at the degree of control by Hampton, who provided the lawn mower and most of the tools, indicating employee status.

Mr. Herndon was paid $2,000 per month whether he worked a few or many hours. The court found that also indicated employee status.

Hampton had the right to fire Mr. Herndon at any time and he had the right to resign at any time, which indicated employee status.

The work done by Mr. Herndon was an integral part of Hampton’s business. He did general maintenance work, placed ads for apartments for rent, showed apartments to prospective tenants, accepted applications to rent after reviewing those applications, decided whether to evict a tenant (sometimes consulting with the owners), answered telephone calls and processed rental payments.

Only Hampton had authority to change any policies, rules or regulations for the apartments.

The court found Hampton was an employer and was liable for various payroll taxes (FICA, Medicare, etc) and failed to file the payroll tax returns as well as failed to make the timely deposits of employment and unemployment payroll taxes.

The main factor is the degree of control Hampton had.

Hampton could have taken some corrective actions and reduced the problems and costs if they had acted timely to correctly report and pay the payroll taxes.

Since Hampton hadn’t issued any form 1099-MISC, the possible relief under Section 530 wasn’t available.

Did you hear? “In order that people may be happy in their work, these three things are needed: They must be fit for it, they must not do too much of it, and they must have a sense of success in it,” by John Ruskin.

John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.