Many people are confused about statutory employment and in order to understand that they often ask a question like what is a statutory employee? People get confused about many facts regarding statutory employment, like what are the criteria that anybody has to meet if they have to become a statutory employee.
Or what are the benefits of being a statutory employee? One of the most basic questions regarding this matter is what are the differences between any statutory employee and a regular employee. Here in his article, we are about to discuss statutory employment and give you all the information you need to know if you want to understand the entire concept.
Statutory Employee : Defination
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At the very beginning, we would like to give you the answer to the question of what is a statutory employee and then later give you other information about this topic, so let’s start. A statutory employee is an independent contractor who is considered an employee for the purposes of tax withholding.
An employee is considered a worker as long as both the employer and the employee pay their portion of Medicare and Social Security taxes and meet the following requirements: The employee is entitled to file claims on behalf of the employer for expenses incurred on the job.
For example, a driver is a statutory employee, as well as a full-time insurance sales agent A statutory employee, receives a W-2 form from their employer to file their yearly tax returns
The Understanding Of Statutory Employment Salary?
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Category statutory employee is the Internal Revenue Service’s (IRS) common law classification of workers subject to statutory withholding. While most independent contractors are not subject to statutory withholding, an employer can withhold taxes for an employee who meets the following:
- The employee carries out almost all of the services specified or implied in the employment contract.
- The employee does not have a significant equity stake in the company equipment/property utilized to carry out the services.
- The employee carries out the services continuously for the same employer.
If you fall into this employee class, you can also deduct work expenses on Schedule C when you file your annual tax returns. This is because Schedule C expenses do not have the same 2% AGI threshold as Schedule A expenses. Statutory employees are not entitled to the same benefits as full-time employees.
For example, an employee who is a statutory employee may not qualify the retirement benefits, coverage for health insurance, or vacation pay. Employees who receive these benefits are considering the regular employees.
Statutory Employees vs Independent Contractor
Since you want to know what is a statutory employee, we figured out that you might also want to know about the differences between the statutory employees also independent contractors. Statutory employees are typically employed by a single company, which distinguishes them from independent contractors, who provide their services to both businesses and individuals.
These individuals are typically self-employed, meaning they are solely responsible for paying their own income tax to the federal government, as well as any FICA taxes owed by the state or local government.
Examples of individuals who fall into the category of independent contractors include dental practitioners, plumbing technicians, electricians, other craftspeople, and construction contractors.
Additionally, freelance workers in certain industries, including journalists and hairdressers, may also be considered independent contractors. This is the most basic difference between statutory employees and independent contractors.
What Is A Statutory Employee On W-2
Statutory employees receive their W-2 forms at the same time as all other employees, which is at the end of January each year, that is the answer to the question asks what is a statutory employee on w-2.
These forms are necessary for individuals filing their tax returns. However, unlike other employees, statutory employees’ W-2 forms have Box 13 crossed out.
Categories Of A Statutory Employee:
We already gave you the answer to what is a statutory employee, and now we are about to discuss the category of a statutory employee. If you’re not sure if you’re a statutory employee or an independent contractor, you can find out more info from the IRS.
Check out Publication 15- A Employer’s Supplemental Tax Guide, which outlines how employees compare to independent contractors when it comes to withholding taxes. The IRS says that the following people fall into the category of a statutory employee:
- Drivers who transport food and beverages (excluding milk), dry cleaning, or laundry.
- Life insurance and annuity salespeople who sell life insurance and annuity contracts full-time on behalf of the same insurance company.
- Remote salespeople will going to work from home using supplies borrowed from their employers.
- Travel salespeople working part-time for a single company and fulfill orders with retailers ,distributors, contractors, or any other establishments.
The Benefit of Being A Statutory Employee
There are some benefits to being a statutory employee. If you receive a W-2, some of your taxes are already covered by your employer (such as FICA taxes).
This means that you don’t have to pay self-employment taxes like you would as an independent contractor. However, they still have to pay income taxes. They can also deduct the costs associated with your employment.
Conclusion
This article starts with a question that asks what is a statutory employee and we tried our best to give you an answer that covers all the related information regarding this topic. Hope you find this article informative and interesting. To wrap it up all we can say is that there are some particular parks in statutory employment that make it interesting.
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