UI Test - Prior to January 1, 2011

Unemployment Insurance - Worker Classification

Prior to January 1, 2011

Condition Two - Tax Returns (Case Studies)

The individual has filed business or self-employment income tax returns with the federal Internal Revenue Service based on such services in the previous year or, in the case of a new business, in the year in which the services were first performed

Case Studies Relevant to Condition Two

Wis. LIRC UC Decision: Janeck, Robert October 30, 2009

Start Renting is a distributor of free rental publications. Robert Janeck delivered these publications to grocery stores and stands for Start Renting.

Janeck began performing these services for Start Renting in 1991 under an oral agreement, and, beginning in 2003, under a written agreement.

The issue whether Janeck performed his services for Start Renting as an employee or an independent contractor. One of the conditions Start Renting had to satisfy to demonstrate that Janeck was an independent contractor was that he filed business or self-employment income tax returns.

The commission determined that Janeck filed a Schedule C every year since 1991, as required to satisfy Condition Two. Janeck argued that he had no choice because Start Renting issued him a 1099, not a W-2. The commission determined that the only question is whether business or self-employment tax returns have been filed, and the motivation for having done so is irrelevant.

Wis. LIRC UC Decision: Zander, Ryan May 7, 2009

Ryan M. Zander worked for a number of years as a laborer and foreman for a landscaping business, Zingg Landscaping. He last worked for that employer on October 13, 2008, when it laid him off. He then filed a claim for unemployment benefits. Zingg Landscaping is the only entity that has any potential liability for unemployment benefits which may be paid to Zander pursuant to this claim. Zingg was not made a party to this case.

Shortly after becoming unemployed and filing his claim for unemployment benefits, Zander began performing snow-clearing services for Mortenson Investment Group LLC ("Mortenson"), a property management business which is responsible for a number of apartment buildings. Under his agreement with the Mortenson, Zander uses his personal truck, to which he mounts a plow and salter, to clear parking lots and other areas of the grounds of the apartment buildings. He does his work after hours; Mortenson has its own staff that does similar snow-clearing work from 8 AM to 5 PM. Zander is paid a fixed amount ($900) per snowfall. After each such snow-clearing job, he sends an invoice to Mortenson.

The department's initial determination found that Zander performed his snow-clearing services as an employee of Mortenson, such that he would be required to report the amounts paid to him by Mortenson as wages received when he filed his weekly UI benefit claims. Zander did not appeal this determination. Mortenson, which was not actually affected by the determination, did file an appeal. Following hearing, an ALJ affirmed the determination that Zander was Mortenson's employee. Zander then appealed to LIRC.

The commission determined that as of the date of the hearing in this matter, February 23, 2009, Zander's federal income tax return for tax year 2008 had been prepared by his tax preparation service and was ready for filing. That return included a Schedule C ("Profit or Loss from Business") and a Schedule SE ("Self-Employment Tax"). Zander testified that he intended to file that return as soon as he could pay the tax due. However, it is clear that as of the date of the hearing, he had in fact not yet filed the return. In deciding cases before it, the commission is limited to the record made at the hearing and it cannot rely on speculation, including speculation about what may have happened after the hearing. There is thus no evidence in the record, that Zander "has filed" the required return. This condition was not met.

Wis. LIRC UC Decision: O'Brien, Kevin July 9, 2007

Kevin O'Brien is a licensed social worker and marriage/family therapist.

During 2006, he performed social work/therapy services as a member of the staff of Family Service of Waukesha. This employment relationship ended on November 10, 2006.

On February 3, 2007, O'Brien entered into a one-year contract to perform social work/therapy services for Angel Adams.

This contract provided that O'Brien would be paid 60% of the amount Angel Adams received as government/private insurance reimbursement for the therapy services he provided; O'Brien would be responsible for his own insurance, including professional liability insurance, and for maintaining required professional licensing; and Angel Adams would provide administrative support for scheduling and confirming therapy appointments.

Angel Adams maintained a list of approximately 36 qualified social work/therapy providers, including O'Brien. When it accepted a patient, Angel Adams would contact a provider it considered a good match, and offer this patient to the provider. O'Brien was free to accept or decline a patient he was offered by Angel Adams.

The issue is whether O'Brien performed his services for Angel Adams as an employee or an independent contractor. One of the conditions that Angel Adams had to satisfy to show that O'Brien was an independent contractor was that he filed business or self-employment income tax returns.

O'Brien testified that he filed a quarterly estimated self-employment tax return based on his projected earnings from Angel Adams for the first quarter of 2007, his first year of business. The commission determined that Condition Two was satisfied.

Further Reading and Research

If you want to read and research further LIRC and circuit court cases on Condition Two, please click on the following hyperlink from the LIRC Decision Digest:

EE 410.02 - Employee Federal Business Income Tax Return

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