TAX 3300 Chapter Notes - Chapter 9: Itemized Deduction, Independent Contractor, Business Travel
Document Summary
When one person performs service for another, the person performing the service is either an employee or self-employed (independent contractor). Failure to recognize one"s work status correctly can cause serious consequences such as tax deficiencies, or penalties. Unlike employees, self-employed persons do not have to be included in various fringe benefit programs. Because they are not covered by fica and futa, these payroll costs are avoided. In terms of tax consequences, employment status makes a great deal of difference to the persons who perform the services. Expenses of self-employed taxpayers, to the extent allowable, are classified as deduction for agi. Expenses of employees are deduction from agi with the exception of reimbursement under an accountable plan. A common law employee-employer relationship exists when the employer has the right to specify the end result and the ways and means by which that result is to be attained.
