Statutory employees have been declared employees under federal tax laws, but are independent contractors under common law. These workers are usually working salespeople or have commission-based jobs.

What is statutory employee on W2?

A statutory employee is an independent contractor who is considered an employee for tax withholding purposes if they meet certain conditions. This typically means they will receive a W-2 but are otherwise not considered full employees.

Can statutory employees claim expenses?

Statutory employees are entitled to deduct their business expenses on Schedule C, and must pay income taxes on their net income since their employers are not required to withhold income taxes from their pay.

How do I report a statutory employee W-2?

Statutory employees. If you received a Form W-2 and the “Statutory employee” box in box 13 of that form was checked, report your income and expenses related to that income on Schedule C or C-EZ. Enter your statutory employee income from box 1 of Form W-2 on line 1 of Schedule C or C-EZ and check the box on that line.

How does statutory employee affect taxes?

As a statutory employee, your employer is paying their share of FICA taxes, and your overall tax bill will be lower as a result. Since you are still considered an independent contractor for income tax purposes, you can also write off unreimbursed employee business expenses.

Is it better to be a statutory employee?

Advantages of being a statutory employee Statutory employees can reap both the benefits of being an employee as well as the advantages of being an independent contractor. Statutory employees are only responsible for the employee portion of Social Security and Medicare taxes.

What can you write off as a statutory employee?

A statutory employee is able to deduct their business expenses against their income on Schedule C, just like independent contractors. But just like employed individuals, statutory employees only have to pay half of their Medicare and Social Security taxes since their employer is paying the other half.

What can I deduct as a statutory employee?

What can a statutory employee deduct?

What do you put on W-2 for a statutory employee?

To fill out Form W-2 for a statutory employee, you must mark the small box under “statutory employee” in Box 13. Statutory employee earnings are considered “other compensation.” Record the amount you paid the worker in Box 1. Also enter the statutory employee’s wages that are subject to Social Security and Medicare taxes in Boxes 3 and 5.

Do you have to withhold income from a statutory employee?

The statutory employee does not have a substantial investment in the equipment and property they use to perform the services (exception: transportation facilities). Again, you are not required to withhold income tax from a statutory employee’s wages. Independent contractors receive Form 1099-MISC. Employees receive Form W-2.

What kind of taxes do you pay to a statutory employee?

Statutory employee earnings are considered “other compensation.” Record the amount you paid the worker in Box 1. Also enter the statutory employee’s wages that are subject to Social Security and Medicare taxes in Boxes 3 and 5. And, enter how much you withheld for these taxes.

How to report statutory employee income on taxes?

If you are not a statutory employee but are a regular employee with employee business expenses, select the federal taxes tab, then select “deductions & credits.” Click on “I’ll choose what I work on” then select “employment expenses.” The interview will ask about employee business expenses (job-related expenses) in this section.