Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, February 25, 1991 TAG: 9102230027
SECTION: BUSINESS PAGE: A7 EDITION: METRO
SOURCE: Mag Poff
DATELINE: LENGTH: Medium
The company does not pay federal or Virginia unemployment tax on my earnings, making me ineligible for unemployment compensation. The Virginia Unemployment Compensation Act states that "service performed by a life insurance agent for remuneration solely by way of commission" is not included in the term employment.
My contention is that I should be considered a statutory employee instead of a common law employee. As a statutory employee, I could list my W-2 income and expenses on schedule C and still be able to take the standard deduction. If I list my business expenses on form 2106 and reduce them by 2 percent of my income, I will barely have enough deductions to itemize, thus losing about $3,000 in deductions.
A: From the facts you cite, the company has obviously determined that you are a common law employee. But Dianne Wilcox, a specialist in employee and tax law with the firm Woods, Rogers & Hazlegrove in Roanoke, said the company's opinion is not definitive. But neither are the facts you outline, which could apply either way.
It's a question of fact, Wilcox said, and no hard and fast rules apply.
The most important factor in determining whether you're a common law employee, Wilcox said, is whether the company has the right to control, direct and supervise your services. The right to discharge is an important factor.
If you're not a common law employee, Wilcox said, then a life insurance salesman is either an independent contractor or a statutory employee. The label on your contract doesn't determine the true nature of the relationship.
If you are not a common law employee, she said, you will be a statutory employee if the following conditions are met:
The contract contemplates the salesman will perform substantially all of the services personally.
The salesman has no substantial investment in the facilities for doing the work.
The services will be performed in a continuing relationship as opposed to a one-time transaction.
Wilcox said only the Internal Revenue Service, not the company, can make a conclusive determination. If you submit Form SS-8, she said, the IRS will rule in the matter. You might check your employer first to determine if the company has already filed Form SS-8 and received a ruling.
She also suggested that you review IRS Publication 525, Taxable and Nontaxable Income, and Publication 937, Business Reporting.
You can order both the form and the publications by calling 1-800-TAX-FORM (1-800-829-3676).
Incidentally, Wilcox pointed out that these special income and employment tax rules apply only to a full-time life insurance salesman and to nobody else - not even to salesmen of other types of insurance. \
Spread it around
\ Q: I recently became responsible for a relative who is 58 years old. She has in excess of $200,000 in savings and loan banks, and interest from this money is her only income. Since the savings and loans have so many problems, I would like advice on what I should do. I know very little about stocks and bonds, but I am interested primarily in:
Safety, preserving the principal.
Receiving income monthly.
Highest yield but with minimum risk.
My relative also has an IRA that will be available to her at the age of 59 1/2.
A: Your relative's money should be safe as long as no more than $100,000 is on deposit in any single institution. That amount represents the limit of federal deposit insurance. Because that coverage is a topic of various proposals to reform the banking industry, you should stay informed about the impacts on your situation. But in any case, you should spread the money among several savings banks so that her accounts are all fully covered.
Consider purchasing certificates of deposit with varying maturities so that you always have some money coming due for payment. This will give your relative liquidity and keep you from getting all the money locked in at a low interest rate.
U.S. Treasury bills, bonds and notes are safest of all investments because they are backed by the full faith and credit of the government. You can buy them directly from the government without paying any commission and, if you wish, arrange for automatic reinvestment. Six-month bills, which require a minimum investment of $10,000, are especially popular with the public. You can obtain the forms by writing to the Federal Reserve Bank, P.O. Box 27622, Richmond, Va. 23261-7622. Tell the bank you want to be a "Treasury Direct" customer.
by CNB