When we say an employee business tax deduction we mean it to refer to an employee business expense, such as payroll. We will point out the difference between how to treat an employee tax expense versus a 1099 contractor expense, along with AMT under tax reform. For starters, one major difference between being an employee and being self-employed is how you deduct the expenses you incur related to your work. A self-employed individual is able to deduct expenses on his or her business schedule. However, an employee is generally limited to deducting them as itemized deductions.