|What are the advantages to being
as a 'statutory employee'?
(Revised November 2012)
If you (as part of your job) travel or use an
to call on customers (and your employer does not reimburse you),
classification as a 'statutory employee' will probably save you on both
federal and state income taxes. In most situations, employee business
expenses cannot be deducted directly against your gross income -- they
are usually treated as miscellaneous itemized deductions, which include
items such as investment expenses and tax preparation fees. These types
of expenses are only deductible if you itemize. Taking employee
business expenses as a 'miscellaneous itemized deduction' (rather than
a direct deduction against gross income) usually results in less tax
If you are classified as a statutory employee, your employee
business expenses do not have to be deducted as a 'miscellaneous
itemized deduction.' Instead, your employee business expenses can be
deducted against your salary income. There are four categories of
- As a 'miscellaneous itemized deduction' the total of
expenses is reduced by 2% of your total income. For example, if your
miscellaneous deductions total $10,000, and your total income is
$50,000, only $9,000 of your total miscellaneous deductions is
- Many states, including Illinois and Indiana, tax your
income and give no allowances for any itemized deductions allowed on
your federal income tax return.
- High-income individuals could end up in an alternative
minimum tax situation. If this happens, you may not receive any tax
benefit for your employee business expenses.
- An agent driver or commission driver who distributes
types of grocery products or laundry.
- A full-time life insurance salesman.
- Certain types of home workers.
- Certain types of full-time traveling or city salesmen
sell merchandise for either sale or resale of supplies for use in their
customers' businesses. Also, your customers must be wholesalers,
retailers, contractors, hotels, restaurants or other similar types of
If your employer considers you to be a 'statutory employee,'
statutory employee box will be marked off on your W-2. If this box is
not marked and you feel that qualify as a 'statutory employee,' you
need to talk to your employer about filing an amended W-2 for you.
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