Statutory employee

This article is part of a series on
Taxation in the United States
Federal taxation Alternative minimum tax Capital gains tax Corporate tax Estate tax Excise tax Gift tax Generation-skipping transfer tax Income tax Payroll tax Internal Revenue Service (IRS) Internal Revenue Code (IRC) IRS tax forms Revenue by state History Constitutional authority Taxpayer standing Court Protest Evasion Resistance
State and local taxation State income tax Property tax Sales tax Use tax Land value tax State tax levels
Federal tax reform Automated payment transaction tax 9–9–9 Competitive Tax Plan Efficient Taxation of Income FairTax Flat tax Hall–Rabushka flat tax Kemp Commission Taxpayer Choice Act USA Tax Value added tax Border-adjustment tax
v t e

A statutory employee is an independent contractor under American common law who is treated as an employee, by statute, for purposes of tax withholdings.^[1] For a standard independent contractor, an employer cannot withhold taxes. Statutory employees are also permitted to deduct work-related expenses on IRS Schedule C instead of Schedule A in the United States tax system. As a result, they are allowed a greater tax deduction for business expenses than standard employees, as Schedule C expenses are not subject to the 2% adjusted gross income threshold as seen with Schedule A.^[2]

Criteria

For an individual to be considered a statutory employee, all of the following conditions must apply:^[2]

Some examples of persons who may be considered statutory employees are as follows:^[2]

Advantages over standard employee

Statutory employees occupy an intermediate position between employees and independent contractors from the perspective of the employer. Statutory employees are less expensive to hire than regular employees because the employer does not have to pay unemployment taxes. However, such employees are more expensive to hire than independent contractors because Social Security and Medicare taxes must be paid on wages in the form of FICA tax.^[2] Statutory employees pay FICA tax through their employer, and so do not pay self-employment tax; despite this, they must report expenses, income and wage.^[3]

Similar to independent contractors, statutory employees may deduct business expense from W-2 earnings.^[3]

See also

References

Further reading

• Publication 17 Your Federal Income Tax
• Form 1040 series of forms and instructions
• Social Security's booklet "Medicare Premiums: Rules for Higher-Income Beneficiaries" and the calculation of the Social Security MAGI.

0.00 (0 votes) Original source: https://en.wikipedia.org/wiki/Statutory employee. Read more