Statutory employees occupy a sort of middle ground between independent
contractors and regular employees. They can be defined as workers in certain
occupations who would not be considered employees under the usual rules, but who
have been declared employees under the federal tax laws so that their employers
must withhold FICA
taxes on their income.
If you are a classified as a "statutory employee," you will also
report your income on Schedule C or C-EZ, although your employer should give you
a W-2 Form that reports this income and shows that payroll taxes were withheld
Because FICA taxes have already been paid by your employer on this income,
you don't have to file a Schedule SE and pay Self-Employment
Contributions Act (SECA) tax on it. Just be sure to check the box on Line 1
on your Schedule C or C-EZ, so that the IRS doesn't go looking for a Schedule SE
that's not there.
If you have both statutory employee income and other income from your own
business, do not combine these two types of income on a single Schedule C. You
must file two Schedule Cs, and only the income from your non-statutory-employee
business will flow through to your Schedule SE.
Occupations that may be considered statutory employees are:
Statutory employees are entitled to deduct their business
expenses on Schedule C, and must pay income taxes on their net income since
their employers are not required to withhold income taxes from their pay.
- Full-time life insurance salespersons who work primarily for one
- Agent-drivers and commission drivers who deliver specified products
- individuals who (1) operate their own trucks or the trucks of the persons
for whom they perform services, (2) serve customers designated by their
principals and customers they solicit on their own initiative, (3) make
wholesale or retail sales, and (4) are paid commissions on their sales or
earn the difference between what they charge their customers and what they
pay their principals for the products or services they sell. Such drivers
are "statutory employees" if they distribute beverages (other than
milk), meat, vegetables, fruit, or bakery products or if they pick up and
deliver laundry or dry cleaning.
- Traveling or city salespersons (other than agent-drivers or
commission drivers) who work full time on the principal's behalf and remit
orders from customers who are retailers, wholesalers, contractors, or
operators of hotels, restaurants, or other businesses whose primary function
is the furnishing of food or lodging. The orders must be for items that
their customers will resell or will use as supplies in their business
- Homeworkers who work on a contract or piecework basis, in their own
homes or in the homes of others. For example, persons hired to type up
correspondence and to do other word processing jobs on their home computers
would be homeworkers.