Statutory Employee

A statutory employee is a worker classified as an independent contractor under common law but treated as an employee for payroll tax purposes under specific IRS statutory categories — including certain delivery drivers, home workers (those who work from home on materials supplied by the employer under specifications they provide), full-time life insurance sales agents working primarily for one company, and traveling or city salespeople working full-time for one company. For statutory employees, the employer withholds Social Security and Medicare taxes (but not income tax), and the employee reports their earnings on Schedule C as a self-employed individual rather than as an employee. It is a narrow, specific classification that creates a distinct tax treatment profile different from both regular employees and independent contractors.