Making sense of how employees should be taxed is no small task. You might even say it takes a feat of superhuman strength.
While I love payroll, I’ll be the first one to admit that taxation isn’t the most approachable subject out there—so let’s have some fun. Using the larger-than-life heroes that make up “the Avengers,” we’ll dissect some of the more complex tax situations you’ll face in real life as a payroll professional, from military tax exemptions to independent contractor status.
Military Tax Exemptions
After volunteering for the top-secret Super Soldier program, scrawny Steven Rogers transformed into Captain America. As a soldier, “Cap” has a few distinct tax advantages. Enlisted service members serving in a combat zone for any part of a month are exempt from federal income taxes.
In addition to tax-free combat pay, Cap would be entitled to uniform deductions. Generally, these are not deductible, but when regulations prohibit you from wearing uniforms off-duty, exceptions exist. Cap would also be entitled to moving expenses when forced to relocate for permanent duty.
Captain America gets one final benefit for his service. If he is on duty outside of the U.S. beyond the due date of his personal tax return, he’d be granted an automatic 2-month extension. In most years, this extension would give him until June 15 to file.
Billionaire Tony Stark wears a suit of armor and takes on the identity of Iron Man. When he’s not saving the world, he owns and operates Stark Industries. While it’s unlikely that Stark is the single owner of that company, if he was, he would be considered a sole proprietor. In that case, he’d report business profit or loss on his own tax return (Form 1040).
If Stark Industries was like any other type of business, Stark would share the tax burden with other shareholders or partners. In this scenario, he qualifies as an executive employee and would be considered exempt from overtime, assuming he’s making at least $455 per week. It should also be noted that any employee who owns at least 20 percent of an enterprise in which they are employed (regardless of salary level) is an exempt executive.
Additionally, Stark would likely be entitled to something called a “golden parachute.” This simply means he is guaranteed considerable benefits in the event of a takeover. Executives receive stock options, cash bonuses, and generous severance if they are terminated as a result. In Stark’s case, he might think of it more as an iron parachute.
The Incredible Hulk
After a laboratory experiment gone horribly wrong, scientist Bruce Banner became the Hulk. From a tax perspective, we can derive two very important things. First, Bruce Banner is a scientist, implying that he possesses advanced knowledge in a field of science. This means that regardless of hours worked, under the Fair Labor Standards Act (FLSA), the Hulk is an exempt professional employee and therefore not eligible for overtime regardless of how many hours it takes to save the world.
Secondly, because Bruce Banner was exposed to gamma radiation while on the job, he would be eligible for worker’s compensation. Worker’s compensation, when not paid for by the employer, is considered non-taxable.
Independent Contractor Status
After being bitten by a radioactive spider, Peter Parker gained superhuman abilities. He uses these powers to fight crime—and as a side hustle, to take photographs for the Daily Bugle. While the newspaper has control over the output of his work, it cannot control the means and methods to complete work. This makes Parker an independent contractor.
Unfortunately, as an independent contractor, “Spidey” wouldn’t be covered under the FLSA. If he were working as a true, full-time employee, he would have limitations on the type of work he could do as a teenager, and the hours he could work.
At the end the year, Peter would be given a Form 1099-MISC by the Daily Bugle to report his income. This assumes that Peter has been paid over $600 in the calendar year for his services. Like the Form W-2, 1099s are due to be filed no later than January 31. When Peter files his 1099, any tax amounts owed would be paid at that time.
Sorry comic book fans, we weren’t able to cover the entire team. While I don’t personally know how the IRS might handle income taxes for ancient gods like Thor, or what Wakanda’s tax structure looks like, the above should serve as a more than adequate primer in superhero taxation.
Are you an HR or payroll pro looking to save the day at your own company? Download our free Definitive Guide to Payroll and learn even more about how to manage federal, state, and local tax compliance.
Jim Kohl is the Senior Manager of Managed Services at Namely, the HR, payroll, and benefits platform built for today's employees. Connect with Jim and the Namely team on Twitter, Facebook, and LinkedIn.
Get the latest news from Namely about HR, payroll, and benefits.
We send out emails once a week with the latest from the Namely Blog, HR News, and other industry happenings. Expect to see that in your inbox soon!