STATUTORY EMPLOYEE & STATUTORY NONEMPLOYEE: Lessons in Payroll with Charles Read

GetPayroll President Charles Read shares his years of knowledge of the payroll landscape to the masses. today's Payroll Lesson: The difference between Statutory Employees Versus Statutory Nonemployees.

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TRANSCRIPT:
Most business owners know the difference between an employee and an independent contractor. The two types of workers. Turns out it’s a bit more complicated. Some workers can fall under 2 other categories: Statutory Employees and Statutory Nonemployees.

Statutory employees are independent contractors who do not necessarily meet the common law test as an employee but have been deemed employees for Federal law purposes by the Federal statute employees for employment tax purposes.

There are four groups of Statutory Employees: Agent or Commission-Drivers, Full-time Life Insurance Salespersons, Traveling Salespersons, and home workers. For the Worker to qualify they must meet the following conditions:
Services are performed by themselves, personally. The Worker cannot make any large investment in equipment or accommodations for the actual work. And have an ongoing relationship with the employer

Statutory Nonemployees are workers that would clearly be employees under the common law test are treated as independent contractors because Congress chose them to be such. They are looked at by the IRS as independent contractors for income tax withholding, FICA, and FUTA taxes, as long as clear circumstances are met.

There are two types of these Statutory Nonemployees: Direct Sellers, and Qualified Real Estate Agents.
The two above non-employees must meet the following requirements before they are exempt from payroll tax withholding requirements.
Compensation is dependent on the employee’s sales or production. Rather than how long they work. As well as, have a contract in writing agreeing they will not be treated as an employee for federal employment tax.

If you’re interested in learning more about payroll, check out our website at www.getpayroll.com or check my new book: The Payroll Book: A Guide for Small Businesses and Startups. Available wherever fine books are sold.