Statutory employee

[robertdcpa]

First return with a statutory employee and I have a few questions.  Thanks in advance for any help.

Husband & Wife joint return.  Wife is the statutory employee.  Entered her W-2 and the amount flowed to Sch. C. but the top of Sch. C shows husband's name and his social up top (since he's listed first on Form 1040).  Should that be manually changed to the wife's name and social?

Is it necessary to list a business name and address?  If so, should it be the wife's name and home address, or the name and address of the business that issued her the W-2?

If electing the de minimus safe harbor 1.263(a)-1(f) for expensing, the election shows both names since a joint return and the husband's social (since he's listed first on Form 1040).  Is that OK or should it be changed to the wife's name only and her social since only she is the statutory employee?

[Just-Lisa-Now-]

Be sure the W2 is assigned to the wife. 

At the top of Sch C is a checkbox if its for spouse, you may need to check that box as well, if it doesn't automatically assign it correctly.

At the top of the Sch C are other boxes to check if you use your own name and address for the business, I would check those rather than giving it any business name.

[robertdcpa]

Thanks for the reply.  Just to clarify though, the wife doesn't work for her own business.  She is an outside sales person for a non-related corporation.  That corporation issued her a W-2 with the Statutory Employee box checked off.  Given those facts, is it proper to list the wife's name and home address as the "business name and address", or should it list the name and address of the non-related corporation that issued her a W-2 since she is working on behalf of that corporation, not herself?  

I did find the checkbox so indicate it is her Sch. C and now her name and social appear at the top of that form.  The W-2 data entry does properly reflect that it is her W-2, so I am not sure why this was not automatic.

[sjrcpa]

Wife's name and address.

[qbteachmt]

"Just to clarify though, the wife doesn't work for her own business. She is an outside sales person for a non-related corporation."

Which is Treated the same as "her own business" and that is why you are using Sched C.

https://www.irs.gov/businesses/small-businesses-self-employed/statutory-employees

[robertdcpa]

Thanks.  I had previously read the information in the link you sent.  I guess what is throwing me and why I wasn't considering this relationship as "her own business" is that even though the outside sales position creates a statutory employee relationship, the wife still gets to participate in the corporation's medical and 401k plans and has payroll taxes withheld like "regular" employees.  The only difference being the corporation does not withhold federal income tax from her pay.  She takes care of that on her own.  

Plus, the sales she makes on behalf of the company are processed the same as those made by the corporation's inside sales team - they are invoiced in the name of the corporation, not her.  All these things taken together kind of led me to think that the business name and address would have been that of the corporation (same one that issued the W-2 to her).

Yes, it's reported on Sch C as outside sales is a special classification in the tax code, but to me the mechanics of the position indicate more of an employee/employer relationship (i.e., participating in the employer's benefit plans) than as as operating your own business situation.

[qbteachmt]

If she worked for WalMart, you are not filing a Sched C for WalMart. It is that simple. You are filing the tax payer's return, not the Employer's return.

[robertdcpa]

I understood your previous point.  All I was trying to convey is that the underlying relationship is an employer/employee one.  It's a quirk of the tax code that has outside sales positions reported as statutory employees.  It is not a "typical" Sch C situation in which the taxpayer "owns and operates" a separate business.  In this case, the only difference between this person and other, non-Statutory Employees in this corporation is that no federal income tax is withheld.  All other employer/employee features are the same (including participating in the employer corporation's benefit plans, withholding and payment of payroll taxes, attending corporate training and trade shows, with expenses paid for by the employer/corporation, etc.).  Since the Statutory Employee box on Sch C was checked off as the source of the income (Part 1, Line 1 of Sch C), I didn't find it unreasonable that the taxpayer's name and social would be at the top of the form and the employer (corporation) business name and address could be used since they are the source of the income for which the checkbox on Sch C was checked.  Again, this is my first time with a Statutory Employee return and I was just trying to get guidance.

I have just read that if the individual has no separate expenses to deduct against the Statutory Employee W-2 income, then Sch C would not even have to be used.  It would just be reported as Form 1040 wages.  Is that a correct?

[qbteachmt]

I would expect outside sales people to have some expenses. Traveling sales would have vehicle, supplies, etc. Or, work from home = home office, supplies. Unless the person submits and gets reimbursed under An Accountable Plan. What about health insurance premiums?

[robertdcpa]

The employer/corporation provides health insurance to all employees, including outside sales.  Employees contribute through payroll deduction.  In this case, statutory employee pays $200/month.  Employer/corporation also has a 401k plan and provides a company match, even to outside sales/statutory employees.

Yes, there are some expenses but they are quite minimal in relation to the W-2 income.  It is primarily home based with travel to customers within a localized geographic area.  Occasionally travel to employer/corporation's local office for meetings, to drop off checks collected from customers, etc.

[qbteachmt]

"In this case, statutory employee pays $200/month"

Which your client wants you to link to their Sched C income.

"Yes, there are some expenses but they are quite minimal in relation to the W-2 income"

Why are you not interested in reducing this person's taxable income by reporting their expenses as provided for?

[robertdcpa]

I don't know how you are drawing that conclusion.  All I pointed out was that the expenses are minimal in relation to the person's income and that I read that Sch C isn't needed if expenses are not being claimed.  Nowhere in my post did I say the expenses wouldn't be taken.   All expenses taxpayer provided are reflected on the Sch C and they have MINIMAL impact on the return.  Of course, you have no way of knowing as you do not know the amounts involved.  One shouldn't assume.

[qbteachmt]

"Of course, you have no way of knowing as you do not know the amounts involved. One shouldn't assume."

You are debating the need for Sched C and you told us the employee paid $200 a month for health insurance. That isn't any assumption on my part.

It's interesting that on another topic, $1,600 was described as immaterial. And here, $2,400 at a minimum can be expensed, deducted from this person's taxable income.

Honestly, if everyone wants to send me the funds they consider "minimal in relation to the person's income" I'd be fine with receiving it.

[robertdcpa]

Really?  Simply stating that I read online that Sch C is not needed in all Statutory Employee situations is "debating the need"?  That's a stretch to say the least.  And yes, in this case you do NOT have any clue as too materiality.  You are making an assumption.

[qbteachmt]

The Sched C is how the income tax on those earnings is calculated. The exclusion on the SE is how they are not taxed against for FICA purposes.

I hope that helps.