U.S. Employee of International Organization Liable for U.S. Self-Employment Tax (Sisson, TCM)

first_imgA U.S. citizen, who performed services in the U.S. as an employee of an international quasi-governmental agency, was liable for self-employment taxes for the year his bankruptcy case was open. Contrary to the taxpayer’s argument, the bankruptcy estate was not liable for the individual’s tax liability because the payments he received from the international organization were not wages for employment tax purposes, but earnings from self-employment. While his bankruptcy estate was open, his earnings were property of the estate and the estate paid his personal living expenses. Moreover, the bankruptcy estate was a separate taxpayer and the trustee was required to pay the tax computed on its taxable income, which included the debtor’s earnings from services performed after filing his bankruptcy petition. Thus, the debtor should not have reported the earnings from his employment on his own return for the year at issue because the estate was liable for tax on that income. However, the self-employment tax is imposed on gross income derived from a trade or business, less deductions (i.e. net earnings from self-employment). Since the self-employment tax is not a tax on taxable income, it is not the tax imposed on the bankruptcy estate by Code Sec. 1398(c)(1) and there is no other provision that imposes self-employment tax on the estate. Therefore, the estate was not liable for the individual’s self-employment taxes.C.A. Sisson, TC Memo. 2016-143, Dec. 60,661(M)Other References:Code Sec. 1398CCH Reference – 2016FED ¶32,414.50Code Sec. 1402CCH Reference – 2016FED ¶32,578.298Tax Research ConsultantCCH Reference – TRC INDIV: 63,100CCH Reference – TRC INDIV: 66,052.05last_img

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