SSR 76-33: SECTIONS 203(b) and (f) and 209 (42 U.S.C. 403(b) and (f) and 409) DEDUCTIONS -- EXCLUSION OF TRAVELING OR OTHER EXPENSES FROM WAGES -- OUTSIDE SALESMEN
20 CFR 404.1026(a)(8)
SSR 76-33
- The claimant performed services as an outside salesman for his employer who treats all salesmen as employees and does not allow for any business expenses. The claimant contends his expenses should be deducted from his wages before deductions are applied against his retirement insurance benefit. Held, Social Security Regulations, 20 CFR section 404.1026(a)(8) permit exclusion of travel and other expenses from wages only where identified specifically as such by the employer; since the employer did not specifically designate amounts for expenses in salary payments made to claimant, all remuneration received by him constitutes wages for deduction purposes.
The claimant filed an application for retirement insurance benefits on March 11, 1969, showing his date of birth as February 21, 1907, and indicated that he was employed by the "E" Foods Corporation and had not been self-employed in either 1969,1968, or 1967. He stated that he had total earnings of $8,830.57 in 1968 and had earned more than the exempt amount in each month of that year, but expected to earn under $1,680 in 1969 since he would be working part time only in 1969. He agreed to file annual reports of earnings when required. His entitlement was established. Thereafter, claimant indicated that his earnings would also preclude payment for 1969, and that he desired no payment for that year. His employer advised the Social Security Administration by letter of January 31, 1971, that (1) the claimant had been an outside salesman with them during 1970; (2) the employer does not allow for any business expenses, i.e., no meals, car expense or any other expense in connection with selling activities; and (3) the claimant's salary is entirely on a commission basis.
The claimant filed an annual report for 1970 showing his total wages earned as $3,560.81 with earnings in excess of the exempt monthly amount in all months except April, November, and December. He showed his 1971 earnings (wages) as $1,772.56 with all months indicated as work months. (These earnings are posted to his earnings record). The claimant indicated that he earned less than the yearly exempt amount in 1972.
Pertinently, the "E" Foods Corporation indicated that many years ago the company opted to treat its approximately 10,000 sales representatives such as claimant, as "employees," withholding Federal income taxes, and making payments under the FICA and Unemployment Tax Act. The company gives its sales representatives training in the use of its equipment and the methods of door-to-door selling. The company could change the methods used by its salespeople in doing the work. The corporation gives its salespeople further training, both in the office and on the job, whenever new methods appear necessary. The salespeople work under the firm's name, do not advertise or maintain business listings, and do not hold themselves out to the public as available to do this or similar work. The information provided supports a finding of employer-employee status.
Remuneration shown by the employer as that earned by claimant in 1972, 1973, and 1974 through October 31, 1974, was $1,335.17, $1,699.20 (supported by the wage and tax statement from this employer submitted by claimant), and #2,041.33, respectively. Another wage and tax statement for 1973 (the pertinent year) claimant submitted shows that he was also paid $1,037.89 by another employer. At the hearing, claimant said that in 1974 he had been paid commissions of $2,208.21 by the Foods Corporation and had been paid wages of $828.12 by another employer. e said his gas expenses alone had approximated $900 per year, and that he, of course, had other business expenses.
While claimant no longer contends that he was self-employed, but was an employee of "E", and does not dispute that he earned over the exempt yearly amount in pertinent years of entitlement, he believes that it is inequitable to include his expenses of operating (selling) for this employer when figuring his earnings for deduction purposes.
Section 202(a) of the Social Security Act, as amended, 42 U.S.C. § 402(a), provides that every fully insured individual who has attained the age of 62 and who has filed application for old-age insurance benefits shall be entitled to an old-age insurance benefit for each month in which he is so entitled. Section 203 of the Act, 42 U.S.C. § 403, however, provides in pertinent part:
- "(b) Deductions, ***shall be made from any payment or payments under this title***on the basis of such individual's wages and self-employment income,***if for such month he (claimant) is charges with excess earnings, under the provisions of subsection (f) of this section, ***
- "(f) For purposes of subsection (b) --
- "(3) ***(A)n individual's excess earnings for a taxable year shall be 50 percent of his earnings for such year in excess of the product of $175[1] ***multiplied by the number of months in such year.***
- "(5)(A) An individual's earnings for a taxable year shall be (i) the sum of his wages for services rendered in such year and his net earnings from self-employment for such year.***"
The term "wages" for social security purposes is defined by section 209 of the Act, 42 U.S.C. § 409, as "...remuneration paid after 1950 for employment, including the cash value of all remuneration paid in any medium other than cash..." While section 209 also provides for various statutory exclusions from wages, none are relevant in this case.
With particular regard to the exclusion of business expenses from wages for services rendered, however, Social Security Administration Regulations No. 4, section 1026(a)(8) provides that:
- "Amounts paid specifically -- either as advances or reimbursements -- for traveling or other bona fide ordinary expenses incurred or reasonably expected to be incurred in the business of the employer are not wages. Traveling and other reimbursed expenses must be identified either by making a separate payment or by specifically indicating the separate amounts where both wages and expense allowances are combined in a single payment." (Emphasis supplied.)
The record in this case indicates that, during the relevant period, claimant was an outside salesman with "E" Foods, a company that did not and does not allow for any business expenses, e.g., meals, car expenses or any other expenses in connection with the selling activities of its employee sales representatives. Claimant's salary was entirely on a commission basis. While claimant believes that expenses he incurred in connection with his employment should be deducted from his gross wages for social security work deduction purposes, the above cited section of Social Security Administration Regulations and the facts in this case do not permit such a conclusion.
Therefore, it is held that under the applicable law and regulations, the total remuneration received by claimant from his employers constituted "wages," and must be considered for purposes of determining the amount of claimant's excess earnings for deduction purposes under section 203 of the Social Security Act.
[1] $200 for 1974; $210 for 1975; $230 for 1976.