In the case of Nebeker v. Commissioner, TC Memo 2016-155 a taxpayer had changed its method of reporting payments for independent contractors in 2004. That sets up a case where the IRS would prevail—but perhaps in the end it might end up with a result that reduced the taxpayer’s tax for the year in question.

The taxpayer had operated a business since 1995. In his business he would bill clients (often governments) for his work and various expenses incurred, including the expenses related to payments to independent contractors.