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Respondent contends that petitioner was not a statutory
employee but was engaged in a self-employed trade or business
activity. Accordingly, respondent determined that, after
adjustments to the claimed expenses, the net income from the
activity was subject to self-employment tax under section 1401.
Corben did not consider petitioner to be an employee and,
therefore, withheld no income tax and paid no Social Security
taxes on the compensation paid to petitioner.
Adjusted gross income generally consists of gross income
less trade or business expenses, except in the case of the
performance of services by an employee, generally referred to as
a common law employee. Sec. 62. An individual performing
services as a common law employee deducts such expenses as
miscellaneous itemized deductions incurred in the performance of
services as an employee but only to the extent the expenses
exceed 2 percent of the employee’s adjusted gross income. Sec.
67(a). A statutory employee, on the other hand, pursuant to
rulings by the Commissioner, is not an employee for purposes of
sections 62 and 67, and, therefore, a statutory employee under
section 3121(d)(3) is not subject to the section 67(a) 2-percent
limitation for expenses incurred by such employee in the
performance of services as an employee. Rev. Rul. 90-93, 1990-2
C.B. 33. Thus, an individual who is a statutory employee under
section 3121(d)(3) is allowed to deduct expenses from gross
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