Aaron, a resident of Minnesota, has been a driver for GreenDelivery Service for the past six years. For this purpose, he leases a truck fromGreen, and his compensation is based on a percentage of the income resulting fromhis pickup and delivery services. Green allows its drivers to choose their 10-hour shifts and does not exercise any control on how these services are carried out (e.g.,the route to be taken or the order in which parcels are delivered or picked up).Under Greens operating agreement with its drivers, Green can terminate thearrangement after 30 days notice. In practice, however, Green allows its truckers toquit immediately without giving advance notice. The agreement also labels the driv-ers as independent contractors. Green maintains no health or retirement plans for itsdrivers, and each year it reports their income by issuing Forms 1099MISC (and not Forms W2). Green requires its drivers to maintain a commercial drivers license andbe in good standing with the state highway law enforcement division.

Citing the employment tax Regulations in 31.3121(d)1(c)(2) and 31.3306(i)1(b), an IRS agent contends that Aaron is an independent contractor and, therefore,is subject to the self-employment tax. Based on Peno Trucking, Inc. (93 TCM 1027,T.C.Memo. 200766), Aaron disagrees and contends that he is an employee (i.e., not self-employed). Who is correct? Why?