I have a person that sales life insurance and his w2 shows withholdings for soc and medicare . When entering my software is asking to assign it to a form. I am thinking it would goe to a Sch C since he does not work directly for the company. He has an LLC that he uses for his property and casualty insurance of which we do a partnership return. Would I be correct to assign the w2 stat to a sch c and take business miles that apply to that income and expenses related to this and then just take his llc business miles to his LLc or K1. Any comments.
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He does work directly for that company as an employee, but statutory employees are a special class that -- if you check that box in your software -- all income should go to a Sche C. And likewise, he normally takes all his expenses on a Sche C. If he has an LLC, same thing. However, you say partnership? Another person is involved? This is his income alone. You cannot take those expenses in two different places. If the income should be paid to a partnership, then he needs to furnish that info and EIN to the insurance company so it is processed correctly. Their contract would then have to be with the partnership, not him personally. -
Another thought. In cases like this, and they are common, sometimes these guys are a statutory employee with one company, and an independent contractor with others. Perhaps it is the independent contractor income that is going into the LLC? While you have to do a Sche C for the statutory employee income, you can pro-rate expenses that cannot be specifically allocated to one or the other. This method has held up in audit.Comment
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Over the weekend I learned from the client that the w-2 stat wages is the only way this life company will pay. Client said maybe 1/2 of his auto milage was for the life. This income goes directly into his personal checking acct from the w-2. The LLC that he has for his property and Cas and other insurance has the other 1/2 of miles. I had been just putting his milage on the k-1 as unreimbursed expenses and he has a note from the llc saying that is ok. He and his wife are 50/50 on the llc(actually she is silent) . Based on your last comment am I correct that I would just charge the milage that belongs to the llc in whatever way I am doing and the milage that applys to the W2 charge it to the sch C.
Sorry to get so involved , but I noticed if I apply all the milage to the K-1 it gives him a few hundred dollars better refund. I just seems that this is an unusual case and really part of the miles should go to the w-2 or sch c.
Thanks for your information
RonComment
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The correct way is to pro-rate based on the information the TP gives you. The mileage should be attributed to each entity based on actual records. Other expenses which cannot be directly attributed to each source should be apportioned on a ratio of income received (i.e, 60/40, 20/80, etc.) This would apply to office expenses, etc. Specific expenses like licenses, seminars, conferences etc CAN be attributed to one source or the other. For instance, if he only sells health ins as a statutory employee, then he would not deduct his Series 7 or NASD license on that entity.Comment
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