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Statutory employee

Depending on the type of work performed, the IRS allows employers to treat certain independent contractors as employees when filing Social Security and Medicare taxes. Statutory employees also receive a tax deduction for business expenses. In order to be classified as statutory, and employee who works on your behalf must:

  • Personally perform the services spelled out in their contract
  • Not have a substantial investment in the equipment used in their services or the property on which they are performed (not including transportation costs)
  • Perform services on a continuing basis for the same payer

To classify as a statutory employee, an employee must check Box 13 on the Wages and Salaries section of their W-2 form. This will allow their employer to treat them as a regular employee for tax purposes. Employees who may qualify as statutory include:

  • A full-time traveling or city salesperson working on a company’s behalf who turns in orders from wholesalers, merchandisers, retailers, or similar service providers
  • A full-time life life insurance sales agent, working primarily for a single life insurance company, whose role primarily involves selling life insurance or annuity contracts
  • A driver employed as agents or paid on commission who distribute foods, beverages (not including milk), or laundry
  • A contractor working at home on materials or goods supplied by the employer that will be returned to the employer on completion and sold as part of the buyer’s business operation

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