Tax Treatment of Statutory Employees

Statutory employees are workers classified by the IRS who are treated similarly to independent contractors for tax purposes. They receive a W-2 form but are responsible for paying their own Social Security and Medicare taxes, as their employers don’t withhold these. Common examples include drivers and salespeople. While their wages are subject to withholding for income tax, statutory employees can deduct certain business expenses directly on their tax returns, lowering their taxable income. This tax treatment recognizes their unique work arrangement while providing some benefits of traditional employment.