Judge nixes ex-Well Fargo broker’s tax write-off claim

When Francisco Gil was an advisor at Wells Fargo, he twice used a tax form for independent contractors to try to write off expenses related to meals, travel and a Mercedes SUV.

But the IRS rebuked those attempts, and now a federal judge has agreed that Gil’s status as a direct employee clearly did not entitle him to claim those business expenses. Judge Gerald Austin McHugh for the Eastern District of Pennsylvania last month denied Gil’s request for nearly $75,000 in tax reimbursements he said he and his wife were owed for write-offs they should have been able to claim for costs incurred at Wells Fargo Advisors in 2020 and 2021.

Those included expenses related to marketing, travel and meals and to depreciation on a Mercedes sport-utility vehicle that Gil said he drove mainly to take clients to and from meetings. In a lawsuit filed against the IRS in February 2024, Gil argued he should have been reimbursed more than $74,000 for those costs. He also challenged a $5,000 fee he was charged for filing what the IRS deemed a frivolous return.

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Independent contractors versus employees

When reporting to the IRS roughly $186,000 in business expenses for 2020 and 2021, Gil used a Schedule C form, which is used by independent contractors. Judge McHugh provided a list of reasons why Gil’s status at Wells Fargo was in fact that of a direct employee.

Among other tell-tale signs, the judge noted that Gil could be fired whenever the firm wanted to, that the firm withheld parts of his paycheck for income taxes and Social Security and that he took part in Wells Fargo’s 401(k) retirement plan for employees. Gil also could work out of an office that was equipped and provided by Wells, had the use of office assistants employed by the firm and had to report regularly to a Wells branch manager.

Judge McHugh noted that Wells Fargo did allow direct employees like Gil to claim business expenses related to “travel, prospect and client entertainment and promotional events used for business development.” But that was only permitted if they were producing $1 million or more in revenue for the firm. Gil did not hit that threshold in either 2020 or 2021, according to McHugh.

McHugh noted that Gil did have a great deal of freedom to set his own working hours and decide which clients he wanted to work with and how he wanted to provide them with services. He also did not receive a salary but was instead paid commissions from helping his clients enact financial transactions.

But these factors were outweighed by the many ways that “Wells Fargo oversaw Gil’s work in a fashion typical of an employer-employee relationship,” McHugh wrote.

“Specifically, Gil was required to make regular reports to his supervisor, who in return, conducted annual performance reviews,” the judge wrote. “Gil’s calendar was always reviewable by his employer — a serious intrusion into his personal privacy if he were not an employee. Gil was also obligated to complete annual trainings for Wells Fargo, selected and paid for by the firm.”

Neither Gil nor his lawyer, Howard Soloman, returned requests for comment. Wells Fargo declined to comment.

Gil gets a refund, just not as much as he wanted

The IRS said in its filings that Gil was actually entitled to a refund — but not as much as he had requested. The agency agreed to pay him $17,074 for 2020 and$14,413 for 2021, plus interest. It also agreed he should be reimbursed for his $5,000 filing charge.

McHugh noted that Gil applied several times to be granted independent contractor status at Wells. Those requests were all denied.

Gil said in an affidavit that one reason he eventually left Wells Fargo was to gain independent contractor status. He’s now at Raymond James Financial Services, the firm’s channel for independent advisors.

Gil, who works mainly out of Jenkintown, Pennsylvania, started his career in 1989 at Prudential Securities, which was sold in 2003 to Wachovia. Wachovia, in turn, was bought by Wells Fargo in 2009.