Tax Court Approves Of Consultant As Statutory Employee - Tax Act Makes Case Significant https://ift.tt/2Mk4Zc4 What was known as the Tax Cuts and Jobs Act has raised the stakes on the issue of whether someone is an employee or an independent contractor. Unreimbursed employee business expense will no longer be deductible at all and new Section 199A may allow a 20% deduction for independent contractors. This all makes the partial taxpayer victory in the Judge Pugh's Tax Court decision in the case of Slawomir and Alicia Fiedziuszko more significant. Mr. Fiedziusko successfully argued that his consulting gig with Space Systems Loral did not make him a "common law employee", despite the W-2 he received. What Is A Statutory Employee? One theory is that the concept of "statutory employee" was created to aggravate income tax preparers like me. We have this pile of paper in front of us and we say to ourselves - some W-2s, no 1099-MISC or 1099-NEC, so no Schedule C - piece of cake. Nah. That would be too easy. (One thinks of the Robin Williams routine in which the inventor of golf explains the game) Let's throw in a W-2 with a box checked that means you need a Schedule C. That is not actually it. You need to go to Code Section 3121(d) where employee is defined under Chapter 21 of the Internal Revenue Code - Federal Insurance Contributions Act. (The Income Tax is in Chapter 1) The definition lists any officer of a corporation, any individual who "under the usual common law rules" is an employee and a third, any person who provides services for remuneration:
So the "employer" pays FICA for those folks and sends them a W-2, but they are only employees for FICA purposes - Chapter 21 - not for computing income tax - Chapter 1. And that means that if there are expenses they get to deduct them on Schedule C as opposed to miscellaneous itemized deduction or from here on in not at all. And there is that Section 199A deduction to be thinking about. (We are still waiting for guidance on that) Business via Forbes - Entrepreneurs https://ift.tt/dTEDZf June 12, 2018 at 09:28AM
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