Rev. Rul. 64-36

Advice has been requested whether a salesman-employee of an insurance agency is required to file information returns with respect to commissions received from other insurance companies which, under his employment contract, he is required to turn over to his employer.

The individual here involved is a salesman-employee of an insurance agency. Under the contract between them, he is permitted to sell insurance for various companies but must turn over to his employer all commissions received for such services. The insurance companies file information returns with respect to commissions paid to him and these returns name him as the payee. He has paid over such commissions to his employer insurance agency and it reports them on its income tax return.

Section 6041 of the Internal Revenue Code of 1954 provides, with certain exceptions not relevant to this ruling, that all persons engaged in a trade or business and making payment, in the course of such trade or business to another person, of rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income of $600 or more in any taxable year shall render a true and accurate return to the Secretary of the Treasury or his delegate, under such regulations and in such form and manner and to such extent as may be prescribed by the Secretary or his delegate.

Section 1.6041-1(a)(1) of the Income Tax Regulations provides, in part, that every person engaged in a trade or business must make an information return for each calendar year after 1962 with respect to payments made by him during the calendar year in the course of his trade or business to another person of fixed or determinable income aggregating $600 or more.

The required return shall be made on Form 1099, U.S. Information Return For Calendar Year --, and Form 1096, U.S. Annual Information Return. Section 1.6041-1(a)(3) of the regulations.

The phrase `trade or business' includes services performed as an employee.

The employee in this case is engaged in the insurance business and his payments to his employer of commissions received by him are made in the course of such business. Since such payments constitute income to the employer, the employee must report on Forms 1096 and 1099 such payments as aggregate $600 or more during any calendar year.

However, if the employer is a corporation, the employee is not required to file information returns with respect to such payments. See section 1.6041-3(c) of the regulations. Nevertheless, he may voluntarily file such returns as a means of informing the Internal Revenue Service that the commissions were not retained but were paid over to his employer.