Statutory insurance agent wins the 199A tax deduction

How does the tax code treat a W-2 statutory employee for income tax, payroll tax, business deduction, and Section 199A qualifications?

This is the question we’ve been asked by a concerned insurance agent. He wants to know if he’ll qualify for the Section 199A deduction on his W-2 statutory income.

He also wants to know how he should handle his net 1099 mutual-fund sales commissions.

You’ll find answers that shed light on these important questions when you read my new article titled Q&A: Statutory Insurance Agent Wins the 199A Tax Deduction.

Three ways our fact-filled article can help you:

1. You’ll learn how the law deals with statutory income. Good news for the insurance agent. IRS notice 2018-64 states that money paid to statutory employees are not wages for Section 199A purposes. And because the agent is an independent contractor, treated as an employee for FICA purchases, he is considered to be operating a trade or business. You’ll get the whole story when you read the full after-tax-reform article.
2. We’ll explain how taxable income can limit Section 199A deductions. Gross taxable income can trigger the beginning of trouble when joint 1040 taxable income exceeds $315,000. For the out-of-favor-specified trade or business, there’s no Section 199A deduction on that business income once the 1040 taxable income (for a joint return) exceeds $415,000. You’ll get all the details when you read the full after-tax-reform article.
3. You’ll learn if the insurance agent in question is running an “out-of-favor” business. Given the facts, the insurance agent is in the “in-favor” business category for his statutory W-2 life insurance sales. As to his 1099 annuity and mutual fund sales, there are two possibilities which we’ll explain when you read the full article.