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Who Is a Statutory Employee?

October 12th

employee taxesTo make things even more confusing for business owners, filing taxes is even more complicated than the general “independent contractor” versus “employee” designation. There are even differentiations within the class of those who are considered employees. There is a distinct difference between normal employees and statutory employees, and in order to file your taxes correctly and avoid IRS penalties, it is vital that you understand this difference.

Statutory Employees and Regular Ones

Generally speaking, a statutory employee is not considered a traditional employee but may still be considered an employee by statute for the purposes of Social Security, Medicare, and Federal Unemployment Tax purposes if certain conditions are met. The following conditions define a statutory employee:

  •  A worker who delivers food, beverages, laundry, or dry cleaning for another individual;
  •  Life insurance salesman that works full-time primarily for a single company;
  •  individual who works in a home using guidelines of the person for whom the work is done, using materials furnished by and returned to the employer;
  •  A traveling or city salesperson that works full-time for one firm.

If you have one or more of these individuals as your employee, they are considered statutory employees and must be classified as such in order to avoid tax debt. To learn more about statutory employees, be sure to read the IRS’ publication called the Employer’s Tax Guide.  The exact monetary provision that must be made regarding statutory employees is different depending on the nature of your business and the state in which a business operates. For more pointed information regarding the tax regulations surrounding statutory employees, visit the IRS’ website at www.IRS.gov, or consider a meeting with local tax lawyers or attorneys.

 

 
 
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