If a taxpayer receives a Form W-2 marked as a Statutory Employee in box 13, you will need to make two entries in the TaxSlayer Pro program. Enter the Form W-2 in the Form W-2 entry menu. Make sure that you place a check mark in the Statutory Employee box in box 13. When you have completed the Form W-2 entry, exit out to the main menu of the tax return (Form 1040).
From the Main Menu of the Tax Return (Form 1040) select:
- Income Menu
- Business Income/Loss (Sch C, C-EZ, 1099MISC)
- Select 'New' or double-click the entry you wish to 'Edit'. Select 'Pull' if you prepared the return using the software in the previous year and wish to pull the data forward.
- Select Schedule C or Schedule C-EZ
- 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 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 heading information in the Schedule C Data Entry Menu. This will include the name of the business, the business address, and the zip code. The city and state information will fill in automatically based on the zip code that is entered. An EIN number does not need to be entered if the employee does not have one. Do not enter the employee's SSN as the EIN. This will cause the return to reject.
- 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
- Input the amount of 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 (Profit or Loss From Business) or Schedule C-EZ (Net Profit From Business). 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 program. This is not intended as tax advice.