SSR 63-18: SECTION 209. -- WAGES -- TRAVEL EXPENSES EXCEEDING ALLOWANCE FOR TRAVEL

20 CFR 404.1026

SSR 63-18

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

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.

man 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:

* * * * * * *

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.

el 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.