If a taxpayer receives a Form W-2 marked as a Statutory Employee in box 13, you will need to enter this income in two places in TaxSlayer Pro:
- Enter the Form W-2 in the Form W-2 entry menu, ensuring "Statutory Employee" is checked in Box 13; The wages from Box 1 will not flow through to the Income Menu.
- Enter the W-2 Box 1 income on Schedule C, Profit or Loss From Business.
To create a Schedule C for this income, from the main menu of the tax return (Form 1040) select:
- Business Income/Loss (Sch C, 1099MISC)
- If queried, indicate who the Schedule C is for
- Enter a Principal Business Activity Code. This is a code used by the IRS to classify the type of business being operated. If you do not know the code, you have two options:
- You can select the PDF icon to view an entire list of activity codes, or
- You can select the magnifying glass icon to search by category. If you search by category, double-click on the business code that represents the type of business and the code will fill in automatically for you.
- Input the necessary information in the Schedule C Data Entry Menu. This will include the name of the business (if there is one) and the address. Enter an EIN if the employee has one.
- At the Schedule C Questions Menu, there are several items that need review. The questions on this menu are defaulted to the most common answers for most taxpayers. However, review these questions to make sure the answer provided is correct for the taxpayer's situation. You may need to adjust one or two items to reflect the way the taxpayer's business is operated.
- From the Schedule C Edit Menu select Income
- Enter the W-2 Box 1 amount in Income Reported on a Statutory Employee W-2
- If the employee has business expenses associated with these earnings, from the Schedule C Edit menu select Expenses
Statutory income reported on Schedule C. The statutory employee can deduct their trade or business expenses from the earnings shown on Form W-2. Earnings as a statutory employee are reported as income on line 1 of Schedule C rather than Form 1040 Line 1 "Wages, Salaries, Tips, etc.". A statutory employee's business expenses are not subject to the reduction of 2% of their adjusted gross income.
- Do not combine statutory employee income with self-employment income. Instead, file a separate Schedule C for each type of income.
- Do not carry net statutory income to Schedule SE. Social Security and Medicare tax should have been withheld and reported on Form W-2.
NOTE: This is a guide on entering statutory income into the TaxSlayer Pro program. This is not intended as tax advice.