Q:

What qualifies a person as a statutory employee?

A:

Quick Answer

A worker is considered a statutory employee if he is in business for himself but is treated like an employee for tax purposes. Common examples of statutory employees include corporate officers, agent drivers or commission drivers, full-time life-insurance salespeople, homeworkers, and traveling or city salespeople who solicit orders. Most statutory employees are paid on commission.

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Full Answer

A statutory employee is an independent contractor under common-law rules that the IRS requires to be treated like a regular employee for tax purposes. They are referred to as statutory employees because their tax treatment is required by statute.

Highly specific requirements determine if an employee qualifies as a statutory employee. For example, a driver can be considered a statutory employee only if he is paid on commission and distributes beverages (other than milk) or meat, vegetables, fruit, bakery products, or picks-up or delivers dry-cleaning.

A life-insurance salesperson must work full time for one company. Homeworkers must work on materials supplied by their employers and return them to the employers according to specifications. Traveling salespeople must work primarily for one company, and the salesperson must sell to wholesalers, distributors, retailers, contractors, restaurants or other similar enterprises. The goods sold must be retailed or used in the buyer's operation.

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