Statutory Employees

Statutory employees, as defined by the IRS, are typically certain types of independent contractors who are treated as employees for tax withholding purposes. They can deduct business expenses related to their work on Schedule C of Form 1040, just like any other self-employed individual. Common deductible expenses for statutory employees may include:

  1. Home Office Expenses: If they use a portion of their home regularly and exclusively for business purposes, they can deduct expenses related to the home office, such as a portion of rent, utilities, and insurance.
  2. Business Supplies: Expenses for items such as office supplies, equipment, and materials necessary for their work.
  3. Travel Expenses: Deductions for business-related travel, including transportation, lodging, meals, and other incidental expenses while away from home on business.
  4. Vehicle Expenses: Costs associated with using a vehicle for business purposes, including mileage, gas, maintenance, and insurance. They can choose between the standard mileage rate or the actual expense method.
  5. Professional Services: Fees paid for professional services related to their work, such as legal or accounting services.
  6. Insurance Premiums: Premiums paid for insurance necessary for their business, such as liability insurance.
  7. Marketing and Advertising: Expenses related to advertising and marketing their services, such as website costs, business cards, and online advertising.
  8. Education and Training: Costs for courses, seminars, or workshops that improve or maintain skills related to their work.
  9. Utilities: If they have a dedicated workspace, they can deduct a portion of utilities such as electricity, internet, and phone bills.
  10. Health Insurance Premiums: Premiums paid for health insurance coverage for themselves, their spouse, and dependents may be deductible.

Statutory employees need to keep detailed records and receipts of all business-related expenses to support their deductions in case of an IRS audit. They should also consult with a tax professional or accountant for specific guidance tailored to their circumstances.

The tax laws are very complex. Our short blog articles cannot cover in full all the nuances of the rules. Your specific facts may hold various opportunities and possible risks that only trained, experienced, and highly qualified tax specialists can spot. We encourage you to find such help, rather than trying to figure it all out on your own. Consider giving this marketplace a try by posting your project and signing up here.

If you are a licensed tax professional and are interested in helping others either part or full-time, or ad hoc, come on in! Happy to have you. Our marketplace has the full suite of tools to communicate with clients including compliance calendars, task and message management, and billing. You can also quickly connect to knowledgeable colleagues who can complement your services with the ones you do not provide. Register here.