Deductions 1099 vs. W-2 income

[KenB]

Have a client who does the same exact job for income and receives some of the pay on 1099-misc and some on W-2 form. Lots of expenses.

Do I prorate the expenses or can I take more off on the 1099-misc income, thus eliminating any SE tax?

If I do the non prorate method, any info or pub to back me up on this?

I really appreciate any help, Thanks, Ken

[jainen]

Come on, Ken

Come on, Ken, you know the answer to this one already. You might not like it, but you know it. You can allocate any specific expenses to the job that they relate to. Expenses that are shared must be prorated according to the income produced by each job.

[OldJack]

A W2 and a 1099 for the same worker of a corporation is only allowed when the worker/employee has provided some professional service not covered by normal employee duties. ie: An attorney is a shareholder/employee of the corporation with a W2 but is allowed to provide legal services that get a 1099. Your case does not seem to fit that situation and on IRS audit all income would be reported on the W2 with the IRS assessing appropriate payroll tax penalties. You maybe should warn your client.

[jainen]

I see what you mean

>>A W2 and a 1099 for the same worker of a corporation<<

Oh, I see what you mean. I was thinking of, like, a security guard who has several clients, some pay on a 1099 and others (the ones the IRS has already caught) on a W-2. So his cost for uniforms and so on has to be divided up.

[KenB]

My bad,

what if the W-2 income is for statutory employee and thus expenses listed on schedule C, can you combine the expenses on 1 C and thus get no SE tax on 1099-Misc income?

Jainen, I was wondering if there was a way to save taxpayer money, only investigating the possibility and was open to any input that would back that position within IRS code?

It has been suggested to me on another site that I could do 1 schedule C for the statutory W-2 income and the 1099-misc income, want to find out in code where is says that is possible to do or not possible to do.

Thanks Again for any input, Ken

[jainen]

you can't combine them

>>do 1 schedule C for the statutory W-2 income and the 1099-misc income<<

Sorry, you can't combine them. Statutory employees have FICA withheld on the W-2; they don't use Schedule SE for that activity.

How about a little more info? Does he only work for a single company? What type of work is it? What high expenses does his employer demand of him without reimbursement?

[KenB]

He is a financial planner, makes money from a variety of sources and doesn't get reimbursed for his E&O, mileage, M&E, etc....

[ChEAr$]

allocation

He is a financial planner, makes money from a variety of sources and doesn't get reimbursed for his E&O, mileage, M&E, etc....

Remember that allocation is appropriate for those expenses which pertain equally to both
activities. However you must take specific expenses for those which relate to only
one activity.

[jainen]

I was right

So I was right, he works for more than one company and gets W-2's from some jobs and 1099's from others. Does he have any independent clients, or does he only work through other companies?

Anyway, he is NOT a statutory employee (even if the W-2 is marked as such), so at least let's not confuse ourselves with that. Most of the expenses you mention can be easily allocated directly to one or another job--he is required to maintain records of the exact business purpose of every meal and his mileage. Insurance and other general expenses are usually allocated according to gross or net income unless there is some other formula that more clearly identifies it.