What is a statutory employee?

Table of Contents

3. Why does my W2 box 13 say statutory employee?

4. How do I know if I’m a statutory employee?

5. What is the difference between a statutory employee and a non employee?

6. What type of lawyer does an employer need to discuss statutory employees?

What is a statutory employee?

Workers who are independent contractors under common law rules may still be regarded as employees by statute. Thus, they are statutory employees for particular employment tax purposes. This happens if they fit into one of the four categories listed below and meet the three circumstances outlined under Medicare and Social Security taxes:

A truck driver who delivers food products to a store, or a driver who picks up dry cleaning; if the driver is your agent or receives commission.

A full-time life insurance sales representative whose main line of work is selling annuity contracts, life insurance, or both, mostly for one life insurance firm.

A person who completes work at home using supplies or items you provide, which must be returned to you or a designated recipient if you also provide the requirements for the task.

A full-time sales representative who travels or works in a city, taking orders from contractors, wholesalers, merchants, operators of restaurants, hotels, or other similar businesses and submitting them to you. Products for resale or supplies for the buyer’s business usage are required to be included in the sale. The primary business activity of the salesman must be the work they do for you.

For more details, see the section on salespeople in Publication 15-A, Employer’s Supplemental Tax Guide.

Medicare and Social Security taxes

If all three of the following criteria are met, withhold Social Security and Medicare taxes from statutory employees’ pay:

The service agreement either explicitly states or suggests that they will provide almost all of the services themselves.
With the exception of an investment in transportation facilities, they have not made a sizable investment in the tools and assets needed to provide the services.
For the same payer, the services are continuously provided.

Why does my W2 box 13 say statutory employee?

A W2 tax form box 13 will say “statutory employee” if the worker falls under certain categories as defined by the IRS, such as full-time life insurance sales agents, certain full-time homeworkers, or certain drivers like taxi drivers.

Some key things to know about statutory employees:

They are treated as self-employed for the Federal income tax purposes. This means they can deduct the business expenses on Schedule C and must pay the self-employment taxes.
Social Security and Medicare taxes are withheld from their pay and are also matched by the employer. This is why they receive a W2 even though they are treated as being self-employed for the income taxes.
Statutory employees can’t contribute to a 401k plan or they can not get other employee benefits. They also aren’t protected by the employment laws related to discrimination, minimum wage, overtime pay, etc.

So in summary, the “statutory employee” designation is for a special category of worker who is not an independent contractor but also isn’t a common law employee. A statutory employee get some employee-like tax treatment but are considered as self-employed for most other purposes. The W2 box 13 checkbox indicates that they fall into this special IRS classification.

How do I know if I’m a statutory employee?

Here are a few key signs that can help a worker determine if they are a statutory employee:

The job involves delivery work, full-time life insurance sales, or homeworker services like assembling products at home. These types of jobs often fall under the statutory employee status.
The worker receives a consistent pay and doesn’t have much control over their schedule or the workload. Statutory employees typically work regular hours that are determined by the employer.
No formal employment agreement or any contract is signed detailing the terms of work. Statutory employees usually don’t have a formal job offer or a contract.
The employer pays the Social Security and also Medicare taxes. Unlike the independent contractors, statutory employees have these taxes withheld from their paychecks by the employer.
The worker uses the employer’s tools and equipment. For example, a delivery driver may use a company vehicle and also wear uniform. This level of control indicates a statutory employee status.

What is the difference between a statutory employee and a non employee?

The main differences between a statutory employee and a non-employee are:

Statutory Employees:

Meet the IRS definition of a statutory employee – this includes certain drivers, full-time life insurance sales agents, homeworkers, and also traveling/outside salespeople.
Are subject to the social security and also Medicare taxes like regular employees.
Do not have any income tax withheld from their paycheck. They pay self-employment taxes on their earnings instead of when filing their personal tax return.

Non-Employees (Independent Contractors):

Do not meet the criteria to be classified as a statutory employee.
Are self-employed and are seen as running their own independent business.
Pay the self-employment tax on their earnings since no tax is withheld.
Do not receive the employee benefits like health insurance and retirement plans from the payer.
Have more control over their hours and how the work is performed compared to the employees.

In summary – statutory employees are treated partly as independent contractors and partly as regular employees when it comes to paying the taxes. Non-employees have alot more independence in how they do the work and are fully responsible for their own taxes. Properly classifying the workers is very important for legal and also tax purposes.

What type of lawyer does an employer need to discuss statutory employees?

For consultation regarding statutory employees, an employer typically needs the expertise of an employment law or labor lawyer for employers. This type of lawyer specializes in employment law and is well-versed in the various classifications of employees, including statutory employees, and the legal implications of these classifications. Their expertise is crucial in areas such as:

Understanding Legal Definitions: Providing clarity on the legal definition and criteria for a statutory employee.
Compliance with Employment Laws: Ensuring that the employer’s practices comply with federal and state employment laws, including tax obligations, benefits, and workers’ compensation.
Drafting Employment Agreements: Assisting in drafting and reviewing contracts or agreements to ensure they accurately reflect the statutory employee’s status and comply with legal requirements.
Advising on Employer Obligations: Guiding employers on their legal obligations towards statutory employees, which may differ from those towards regular employees.
Handling Disputes: Advising and representing the employer in any disputes or legal issues that arise concerning the status or treatment of statutory employees.

In summary, an employment lawyer provides critical legal guidance to ensure that employers correctly classify and manage statutory employees in compliance with applicable laws and regulations.

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What is a statutory employee?

A statutory employee is a salesperson, either traveling full-time or based in a city, who represents you and submits orders from wholesalers, retailers, contractors, or operators of establishments such as hotels and restaurants. The merchandise sold should be for resale, or the supplies should be for use in the buyer's business operation. For you, the principal business activity performed must be the salesperson's work.

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132

Statutory Employee Meaning

What is a statutory employee?

Medicare and Social Security taxes

Why does my W2 box 13 say statutory employee?

How do I know if I’m a statutory employee?

What is the difference between a statutory employee and a non employee?

What type of lawyer does an employer need to discuss statutory employees?

How to Calculate FTE

Weingarten Rights

Can you get fired for using sick time

Insubordination in the workplace: 7 ways to manage

Diversity, Equity, and Inclusion

Human Resources (HR): Meaning and Responsibilities

10 Alternatives to Employee of the Month Awards

Learning To Learn

Gen Z Years, Age Range, Meaning, & Characteristics

Quid Pro Quo Sexual Harassment and Law

What is Sabbatical Leave? It’s the best kept secret in HR

At-Will Doctrine

7-Day Work Week

What Happens When Employers Make False Promises

What to do if your employer doesn’t pay you?

What to Do At a Job Fair to Impress Employers and Get the Interview

Emotional Duress: How to Avoid

California Termination Laws

Late Paycheck Penalty

How To Calm Down Before An Interview

How to Include a Referral in Your Cover Letter?

Best Job Options For Someone With A Criminal Record

What are Weingarten Rights?

What Is Job Rotation: Advantages And Disadvantages

What is the meaning of Pay Rate?

How can part-time or temporary work help you explore career choices?

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What Happens When You Get Audited EDD

What is FMLA Intermittent Leave of Absence?

What is a statutory employee?

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