Chips-R-Us is a computer technology corporation that designs hardware and software for use in large businesses. The corporation regularly pays individuals to install programs and give advice to companies that buy their software. In the current year, Simone, a computer expert, was sent to a customer of Chips-R-Us to perform computer services. Simone is not a regular employee of the corporation and the corporation did not train Simone for the task. Simone keeps track of the time spent on the job at the customer and reports to the corporation, which pays Simone for her services. The corporation specifies the work to be done for their client. The corporation can also replace Simone with another individual if her work is not satisfactory. Chips-R-Us treats Simone as an independent contractor for employment tax purposes.
In the current year the IRS challenges the corporation that it has failed to remit FICA taxes and income taxes that should have been withheld with respect to Simone’s employment. Chips-R-Us refuses to pay the amount, stating that it is not required to do so because Simone is not an employee of the corporation. What will be the likely outcome of the IRS’s challenge concerning Simone’s status as an employee or independent contractor? Who may be liable for payment of the employment taxes, interest, and penalties to the government? What ethical responsibilities should be followed in the remittance of withheld employee taxes?