SSR 63-18: SECTION 209. -- WAGES -- TRAVEL EXPENSES EXCEEDING ALLOWANCE FOR TRAVEL
20 CFR 404.1026
- A salesman employee received commissions of $1900 and a travel allowance of $800 during the year but had actual travel expenses of $1510. Held, the travel expenses in excess of the identified allowance for travel may not be deducted in figuring the amount of his wages for the year.
T, born in January 1895, became entitled to old-age insurance benefits of $90 a month beginning January 1960. He did not work in 1960 but returned to work in January 1961 as a commission salesman for the X Company, a dress manufacturer, and performed services for them until May 1961 when his relationship was terminated. During this 5-month period, T worked as a traveling salesman and was engaged on a full time, exclusive basis in the solicitation on behalf of, and the transmission to, his principal, of orders from retailers of women's wearing apparel; his contract contemplated that substantially all of his services were to be performed personally by him; he had no substantial investment in the facilities used in connection with such services other than in facilities for transportation; and his services were part of a continuing relationship with the company.
T was reimbursed for his services on the basis of an 8 percent commission on sales and was provided with a drawing account of $100 per week and an additional $42 per week specifically designated by the X Company for travel expenses. Pursuant to this agreement, which was in writing, T received a total of $1900 during 1961 from which income and social security taxes were withheld by the company. T used the calendar year as his taxable year. T also received a total of $800 which was paid separately and expressly for his traveling expenses. T alleged, however, that his actual traveling expenses for the period were $1510 and that his net earnings or wages for the year were, as a result, only $1190. He contended that, since this amount was under $1200, his social security benefits for 1961 were not subject to deductions under section 203 of the Act. That section provides in effect that if "excess earnings" for a taxable year ending after June 30, 1961, are chargeable to a month in that year the amount so charged must be deducted from benefits for that month. An individual's earnings for a taxable year, for purposes of work deductions under section 203 of the Act, are the sum of his wages for services rendered in such year and his net earnings from self-employment for such year minus any net loss from self-employment for such year. For a 12-month taxable year, earnings in excess of $1200 are chargeable against the person's benefits at the rate of $1 for $2 of the first $500 excess earnings and $1 for $1 of any additional excess earnings. However, no excess earnings are charged to a month if the person is not entitled to benefits for that month, or if he is age 72 or over in that month, or if he has neither rendered substantial services in self-employment nor rendered services for wages of over $100 in that month.
Under section 210(j)(3)(D) of the Act, a person is an employee if (1) he is engaged on a full-time and continuing basis as a traveling salesman in the solicitation, on behalf of and for transmittal to his principal, of orders from retailers or other specified types of establishments for goods for resale, (2) he has no substantial investment in the facilities used in connection with the performance of the services other than for transportation , and (3) he is required to perform substantially all of the services personally.
Since the arrangement under which T worked conformed in all respects to this provision of the law, he was an employee of the X Company. His remuneration was wages under section 209 and was not earnings from self-employment. Accordingly, the provisions of section 209 (as modified by section 203(f)(5)(C) which relates to circumstances not present in this case) and the regulations relating to wages are determinative of T's earnings as a traveling salesman.
Section 209 provides in pertinent part:
- For the purposes of this title, the term "wages" means remuneration paid * * * for employment, including the cash value of all remuneration paid in any medium other than cash * * *
- (2) The term "wages" means all remuneration for employment unless specifically excepted under section 209 of the act.
(3) The name by which the remuneration for employment is designated is
immaterial. Thus, salaries, fees, bonuses, and commissions on sales or on
insurance premiums, are wages within the meaning of the act if paid
compensation for employment.
* * * * * * *
- (7) Amounts paid specifically -- either as advances or reimbursements -- for traveling or other bonafide ordinary and necessary 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.
The quoted regulations exclude from wages only those amounts identified as being paid specifically as an allowance for or in reimbursement of traveling expenses. They do not provide for figuring the amount of the employee's wages by deducting any amount not specifically paid and identified as such. Therefore, no amount in excess of the amount so designated and paid may be deducted as travel expenses in figuring the person's wages.
None of the specific exclusions of section 209 of the Act are pertinent in T's case. Therefore, all of the remuneration he received for his services as an employee of the X Company is wages. However, the separate traveling expense allowance paid to him is not remuneration for his services; and, therefore, this amount does not constitute wages.
The X Company identified and paid T only $800 as traveling or other expenses. Neither the law nor the regulations include provisions which would permit the deduction of the expenses which he incurred in excess of that amount from the $1900 paid to him as wages by the company in computing his earnings for social security purposes during 1961.
Accordingly, it is held that T was an employee of the X Company from January to May 1961; that he rendered services for wages in excess of $100 per month in each of those 5 months; that his total earnings for 1961 amounted to $1900; and that work deductions under section 203 of the Act are applicable against his benefits for each of those months.