how to use schedule C with W2 income

[Giles Farmer]

could W2 receipts be validly claimed as "business income"? I see a box marked "statutory employee" so this does happen sometimes apparently.

is it the case that sometimes service professionals will be paid as an employee (W2) but still use schedule c (business expenses) to reduce the gross?

what legal objection might be had to claiming business expenses on a salary income?

[Giles Farmer]

bump bumpo

tax professionals please?

[Pattymd]

Wages are earned income, period. It does not mean you are in business for yourself. The "statutory employee" box is only marked for very limited types of employees, those who don't meet the "common law" definition of an employee, but have been determined to be an employee by law. And the only thing that means is that the wages are not subject to federal income tax withholding (although the wages are still reported in box 1). That's it. The only types of workers who are eligible to have this box marked are"

1. A driver who distributes beverages (other than milk),
a section 125 (cafeteria) plan. However, do not include or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning if the driver is your agent or is paid on commission.
2. A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company.
3. An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name if you also furnish specifications for thework to be done.
4. A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailerrs, contractors, or operators of hotels, restaurants, or other similar establishments. The goods sold must be
merchandise for resale or supplies for use in the buyer’s business operation. The work performed for you must be the salesperson’s principal business activity.

http://www.irs.gov/pub/irs-pdf/iw2w3_09.pdf

You're grasping at nonexistent straws.

[Giles Farmer]

thanks very much for the reply.

apart from the definition of "statutory employee", what stops anyone from 'being a business' while receiving a salary? I mean, does the nature of the income item truly control the taxpayer status?

obviously the goal here is simply to obtain the benefit of schedule c deductions for someone who is otherwise an employee... and just to make the point its a job that was at first self employment, 1099 etc, then was changed fiscally to a w2.

but nothing has actually changed about the job itself. so clearly any given job (and this one is nothing special, its computer programming) can otherwise be categorized as 'employment' or 'self employment'.

the question is: whats the consistent legal standard to allow use of a schedule c?

[Pattymd]

You cannot be an employee AND an independent contractor for the same work.

[Giles Farmer]

You cannot be an employee AND an independent contractor for the same work.

the box just says "gross receipts".


http://www.irs.gov/pub/irs-pdf/i1040sc.pdf

Use Schedule C (Form 1040) to report income or loss from a business you operated or a Profit or Loss profession you practiced as a sole proprietor. An activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit and you are involved in from the activity with continuity and regularity.

"a profit or loss profession..." now what stops me from electing to be treated as a sole proprietor?

[Scott67]

Patty has explained it quite well. You can reword the question as often as you wish and it will not change the answer. If you are looking for someone to research the tax code for you and find all clauses which you may wish to try to come up with an off-the-wall challenge, I doubt that anyone is willing to take the time to do that for you.

You have a better chance winning the old issue claiming income taxes are unconstitutional so you don't have to pay them. That is a guaranteed loser argument also.

[LdiJ]

I will also add that an employee can deducted unreimbursed employment expenses on form 2106, which would then transfer to Schedule A.

Of course, that only effects federal taxes and is only helpful if the employee already itemizes or the expenses are high enough to exceed the employee's standard deduction, but the option does exist.