That was the issue in Twin Rivers Farm, Inc. (T.C. Memo. 2012-184). The taxpayer operated an horse farm and engaged two workers. The workers lived in a trailer on the property, did not appear to have paid rent, and were paid $300 and $150 per week. They cleaned the barn, barn area and grounds, groomed and watered the horses and moved them between pastures. All equipment was owned by the taxpayer. The taxpayer paid workers' compensation and employer's liability insurance, but did not file Form 943 (for agricultural workers), make deposits of employment taxes, and did not file Forms 1099 with respect to the workers.

The Tax Court examined seven factors including degree of control, investment in facilities, opportunity for profit or loss, right to discharge, whether the work was part of the principal's regular business, permanency of relationship, and the relationship the parties thought they created and held that the workers were employees of the taxpayer. The Court found the taxpayer liable for employment taxes, additions to tax under Sec. 6651(a) and penalties under Sec. 6656 for all the years at issue.

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