Turnidge v. Comm'r

MEMORANDUM OPINION

GOEKE, Judge: Respondent determined deficiencies in petitioner's Federal income taxes and additions to tax as follows:

                  Additions to Tax



          ______________________________________________

Year  Deficiency  Sec. 6651(a)(1)  Sec. 6651(a)(2)   Sec. 6654____  __________   _______________   _______________   _________

1996   $ 10,679    $ 2,402.78        ¹       $ 568.41

1997    3,927      883.58        1        210.09

1998    5,084     1,143.90        1        232.62

1999    5,180     1,165.50        1        262.00

*168 After concessions, ¹ the issues for decision are: (1) Whether petitioner must include in gross income amounts received as compensation for services and as interest during the years in issue; (2) whether petitioner is liable for the self-employment tax for the years in issue; (3) whether petitioner is entitled to a dependency exemption deduction for one of his daughters for the years in issue; and (4) whether petitioner is liable for the addition to tax under section 6651(a)(1)² for failing to timely file Federal income tax returns for the years in issue.

*169 Background

The parties submitted this case fully stipulated pursuant to Rule 122. The stipulation of facts, the supplemental stipulation of facts, and the attached exhibits are incorporated herein by this reference. Petitioner resided in La Grande, Oregon, at the time he filed his petition.

During 1996, petitioner worked as a pipe layer and equipment operator in Eugene, Oregon. Petitioner initially performed this work as a consultant and then as an independent contractor. Petitioner received compensation for services of $ 38,000 in the taxable year 1996. During 1997, 1998, and 1999, petitioner worked for Blue Mt. Conservative Baptist Association's Camp Elkanah as a groundskeeper/maintenance supervisor. During these years, petitioner performed his work as an independent contractor. Petitioner received compensation for services of $ 19,007, $ 22,412, and $ 23,295 in the taxable years 1997, 1998, and 1999, respectively.

Petitioner received interest of $ 11, $ 8, $ 9, and $ 8 in the taxable years 1996, 1997, 1998, and 1999, respectively.

During the years in issue, petitioner was married and resided with and supported his minor child, Jessy Turnidge (Jessy). ³ For these years, Jessy*170 was a dependent of petitioner within the meaning of section 152(a). ⁴ Petitioner did not obtain a Social Security number (SSN) for Jessy during the years in issue.

Petitioner and his wife did not file Federal income tax returns for the years in issue. On November 7, 2000, respondent issued a notice of deficiency to petitioner for the taxable years 1996, 1997, and 1998. On the same date, respondent issued a separate notice of deficiency to petitioner for the taxable year 1999. Petitioner timely filed a petition to this Court seeking a redetermination.

Discussion ⁵

Gross income includes income from whatever source derived, including compensation for services and interest. Sec. 61(a)(1), (4). The parties stipulated that petitioner received compensation for services*171 of $ 38,000, $ 19,007, $ 22,412, and $ 23,295 in the taxable years 1996, 1997, 1998, and 1999, respectively. The parties further stipulated that petitioner received interest of $ 11, $ 8, $ 9, and $ 8 in the taxable years 1996, 1997, 1998, and 1999, respectively. Accordingly, petitioner must include these amounts in his gross income for the years in issue.

Section 1401 imposes a tax on the "self-employment income" of every individual. Section 1402(b) defines "self- employment income" as "net earnings from self- employment". Section 1402(a) generally defines "net earnings from self-employment" as gross income derived by an individual, less deductions allowed. It is well established that earnings derived from work*172 as an independent contractor are "self-employment income" subject to the self-employment tax. E.g., Jackson v. Commissioner, 108 T.C. 130, 133-134 (1997); Simpson v. Commissioner, 64 T.C. 974 (1975).

The parties stipulated that petitioner worked as an independent contractor during the years in issue. ⁶ Accordingly, we hold that petitioner is liable for the self- employment tax for the years in issue.

Petitioner argues that he is entitled to a dependency exemption deduction for Jessy for the years in issue. On brief, petitioner claims that "The Social Security Number was and is not to be used as identification", and he questions how an SSN can be required for tax deduction purposes.

A taxpayer is generally entitled to claim an exemption for*173 each child who qualifies as a dependent under sections 151 and 152. ⁷ However, no exemption is allowed for any individual unless the taxpayer identification number (TIN) of the individual is included on the return claiming the exemption. Sec. 151(e). ⁸ A TIN is "the identifying number assigned to a person under section 6109." Sec. 7701(a)(41). The SSN issued to an individual is the identifying number, except as otherwise specified under applicable regulations. Sec. 6109(d). The regulations specify that an individual required to furnish a TIN must use an SSN unless the individual is not eligible to obtain an SSN or is required to use an employer identification number. Sec. 301.6109-1(a)(1)(ii)(A), (B), and (C), Proced. & Admin. Regs.

*174 This Court has held that the SSN requirement is the least restrictive means of achieving the Government's compelling interests in implementing the Federal tax system in a uniform, mandatory way and in detecting fraud in regard to dependency exemptions. Miller v. Commissioner, 114 T.C. 511, 517-518 (2000). Without providing an SSN, a taxpayer cannot properly claim a section 151 dependency exemption deduction for his children. Id. at 513. Petitioner does not dispute that he did not file Federal income tax returns and did not provide an SSN for Jessy for the years in issue. Accordingly, we hold that petitioner is not entitled to the dependency exemption deduction for Jessy for the years in issue because he did not satisfy the requirements of section 151(e).

Section 6651(a)(1) imposes an addition to tax for the failure to file a required return on or before the specified filing date. The addition to tax is 5 percent of the amount required to be shown as tax on the return, and an additional 5 percent is imposed for each additional month or fraction thereof during which the failure continues, but not to exceed 25 percent in the aggregate. Sec. 6651(a)(1). This*175 addition to tax may be avoided only if the failure to file was due to reasonable cause and not willful neglect. United States v. Boyle, 469 U.S. 241, 245-246, 83 L. Ed. 2d 622, 105 S. Ct. 687 (1985).

Under section 7491(c), the Commissioner must come forward with sufficient evidence to show that an addition to tax is appropriate. ⁹Higbee v. Comm'r, 116 T.C. 438, 446 (2001). However, the Commissioner does not bear the burden of proof as to an addition to tax, and once the initial burden of production is met, the taxpayer must come forward with sufficient evidence to establish that the addition to tax does not apply. Id. at 447.

*176 The parties stipulated that petitioner received compensation for services and interest (which were of amounts sufficient to require him to file Federal income tax returns), and that petitioner did not file Federal income tax returns for 1996, 1997, 1998, and 1999. Thus, we find that respondent has met his burden of production. See, e.g., Spurlock v. Comm'r, T.C. Memo 2003-124. Petitioner did not specifically address his liability for the addition to tax, and the evidence in the record lacks any indication that his failure to file was due to reasonable cause and not willful neglect. Accordingly, we hold that petitioner is liable for the addition to tax under section 6651(a)(1) for the years in issue.

Decision will be entered under Rule 155.