Write a professional tax memo to be filed with the records for your client regarding the issue discussed below.
Your memo should use 12 point font, be single-spaced (except where you need space for headings, etc), and be not more than 2 pages in length.
The format should be:
Step1. Determine the facts
Step 2. Identify issues
Step 3. Locate applicable authorities (sources)
Step 4. Evaluate tax authorities and choose which ones take precedence if they conflict.
Step 5. Conclusion and analysis: detailed review and evaluation of sources and how they apply to current situation.
Applicable Court Case
Enrique Diaz v. United States of America, 90-1 USTC ¶50,209 (DCt. Cent. Dist. Calif.) (71A AFTR 2d 93-3563 (90-1 USTC P 50209) (DC-CA), 03/19/1990)
Taxpayer Scenario
Trisha is a fitness class instructor at multiple local gyms where she teaches yoga, aerobics, Zumba, pilates, and weight-training classes. She is required to teach a certain minimum number of classes, and she is paid monthly for the number of classes she has taught. Although the gyms have a minimum enrollment policy for participants taking the classes, Trisha is not responsible for maintaining records of enrollment or for recruiting participants. The gyms advertise the classes with their members, and then members can sign-up to take classes at the front desk or online. The gyms generally set the fitness schedule, but Trisha may express her preferences for teaching at certain times. Trisha assists training new instructors but does not have any supervisory authority. Trisha pays for her certifications and training required to teach certain fitness classes, while the gym pays her monthly license fee. The gyms do not give her any specific guidelines about how to teach her classes or what exercises to include. Should Trisha be considered an employee of the gyms or is she considered an independent contractor (i.e. self- employed)? If Trisha is an employee, then the gyms must withhold employment taxes and income taxes from her checks. If she is self-employed, then she is responsible for sending tax payments to the government for both her employment taxes (including both the employee and employer portions) and her income taxes. Therefore, it is important for her to know the correct tax treatment.