Government hired contractor treated as employee

[Openfire]

I have a client who contracted with the Government for a limited job, and because of screening purposes (to expedite security, etc) had him go though an employment agency. The agency reported his income on a W-2. The taxpayer drove over 300 miles per day for this temporary assignment. He owns his own business in this field. He took a deduction for mileage, and of course is being audited. Does anyone have any ideas on this? The use of the agency was protocol for screening purposes, and he was interviewed and contracted on his own.

[Koss]

Contractor?

How did he take the mileage deduction?

And did he do his own tax return?

Does he have other income from "his own business in this field"?

Has he filed a Schedule C in previous years for the same business?

And most important of all:

Does he have a written contract that describes the terms and conditions of the work for which he received Form W-2?

The chances of winning this argument are slim to none, unless there is a written contract that clearly supports his position that he was an independent contractor. Even then, an auditor is not likely to budge; it might have to go the appellate level within the IRS.

He should have raised the issue with the employment agency when he received the first paycheck. If he had done so, and created a paper trail to document his efforts to get the agency to recognize that he is an independent contractor, then he might have a stronger argument.

BMK

[Openfire]

government contract

Thanks for your reply.

He took the mileage deduction on the Schedule C.

He did his own taxes.

He does not have a copy of the government contract.

He did not claim other income for the year, but did move closer to the proximity of like kind businesses and searched for additional contracts.

He did not recognize that the filing of a W-2 would be a problem.

Thanks so much for replying. You have brought up some additional questions that I did not think about. I appreciate your time.