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  • Statutory employee California

    I am considering filing a lawsuit against my employeer, concenring violation of California Labor laws. The company deducted "cost of doing business" from my commissions over the last 3 years. I sold MEDICAL INSURANCE to small companies.
    My employer told me that I have no standing as an employee because I am classified as a "statutory employee" I have used this status to file my income taxes over the last 2 years and have benefited by being able to use a schedule C.
    I have checked with the IRS and found that I AM NOT staturory because in order to have that status, an employee must be: A full-time LIFE INSURANCE agent whose principal business activity is selling life insurance and/or annuity contracts for one life insurance company.
    My question is: Can my employer keep me from going to the labor dept because I used "statutory employee" status to file my taxes? If I used that status, does it disqualify me from being an employee? Also, am I opening a can of worms with the IRS by admitting I'm not statutory?
    tloc
    Junior Member
    Last edited by tloc; 10-30-2007, 09:07 AM.

  • #2
    No idea, other then IRS enforces the Internal Revenue Code and CA-DLSE enforces the California Labor Code, which are very much apples and oranges. I know how to handle the employer side of statutory employees but I have no idea what you are talking about on the 1040 side. I am sure that CA-DLSE will not care about this issue. No guarentee that they will find in your favor, but this really is not their issue. Your employer certainly cannot stop you from filing a wage claim with CA-DLSE.

    Now will your employer drop a dime on you to IRS, assuming that there is really a dime to be dropped, and will IRS even care if this occurs, no idea what-so-ever. This really is not a board that speciallizes in 1040 related issues. If you never reported this income to IRS, you have problems. If the employer never reported FICA to SSA, you both have problems. Other then that, I have no clue what problem you could have with IRS, not that I am a 1040 expert.

    From the employer side only, if I thought you were a "statutory employee", I would not withhold FIT, but would handle normal FICA/FUTA. Life insurance is one of the 4 classifications. You may or may not fall under the "Traveling or city salesperson" exception. The other two exceptions related to certain drivers and homeworkers. While I have not bothered to look it up, I would assume that the federal income taxable wages would be reported on a 1099 for statutory employees.

    Statutory and non-statutory employees are mostly just a question on the CPP exam for most payroll professionals, not something we generally have to actually deal with. I have a book that spells out this type of stuff, should push come to shove.
    "Reality is that which, when you stop believing in it, doesn't go away".
    Philip K. **** (1928-1982)

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    • #3
      Irs

      I did report all my income but because of my status, I was able to take 100% of my deductions.
      My company sells Medical Insurance. I am sure the company has been bending the rules by checking the 'statutory box' on employee's W-2. They have been taking all taxes out on payroll (fed, state, FICA, Med). The reason they do this is to help employees with deductions. As a statutory employee, you get to use Schedule C for job related deductions. Without this status, you must exclude the first 2% of your AGI,on your 1040. Do you think they have any liability by doing this?
      tloc
      Junior Member
      Last edited by tloc; 10-30-2007, 11:21 AM.

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      • #4
        As I said before, I am not a 1040 expert. I will never be a 1040 expert, although I do now understand what you mean about it making a difference on whether or not you are a statutory employee. I do know that your former employer's problems are legally none of your business. Concentrate on your issues. If your employer had monkies randomly type number on the W-2, it would still legally be your fault if you incorrectly filed your 1040/540. IRS has plenty of pikes to put people's heads on. There is not rule that says just the employer or just the employee is at fault. IRS will be thrilled to nail both parties for the same offense.

        Start at the beginning and find out from someone who is not your former employer whether or not you are really a statutory employee. I would not take their word for what direction the rises in the morning at this point. The following publication is the horse's mouth.
        http://www.irs.gov/publications/p15a/index.html

        Once you determine that, then you will know whether or not you have a 1040/540 problem. If you have a 1040/540 problem, see an expert on that subject. And one more time, this is not a 1040 website.

        You are apparently assuming that if you do not file a wage claim that this will somehow protect you from maybe a bad 1040/540 filing. Maybe. Maybe not. Maybe if there is a bad 1040/540 filing, it is going to catch up with you no matter what you do or do not do with a CA-DLSE wage claim.
        DAW
        Senior Member
        Last edited by DAW; 10-30-2007, 02:54 PM.
        "Reality is that which, when you stop believing in it, doesn't go away".
        Philip K. **** (1928-1982)

        Comment


        • #5
          Umm, no, the IRS does not limit the definition of statutory employee to those selling life insurance. That was merely one example they use.

          http://www.irs.gov/charities/article...131138,00.html
          Senior Professional in Human Resources and Certified Staffing Professional with over 30 years experience. Any advice provided is based upon experience and education, but does not constitute legal advice.

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          • #6
            I've been at this site

            Originally posted by ScottB View Post
            Umm, no, the IRS does not limit the definition of statutory employee to those selling life insurance. That was merely one example they use.

            http://www.irs.gov/charities/article...131138,00.html
            Thanks for the reply. I've seen this site. I know there are 4 groups that qualify for 'statutory status'. You see, I sell medical insurance, not life insurance. My company is playing with the rules, so the brokers get more deductions on their taxes.

            Comment

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