Employee or Independent Contractor .. continued

Who is a Statutory Employee?

If workers are independent contractors under the common law rules, such workers may nevertheless be treated as employees by statute (statutory employees) for certain employment tax purposes if they fall within one of the following four categories.

1) A driver who distributes beverages (other than milk) or meat, fruit, vegetable or bakery products; or who picks up and delivers dry cleaning or laundry, if the driver is your agent or is paid on commission.
2) A full-time life insurance sales agent whose prinicipal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company.
3) An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done.
4) A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors or operators of hotels, restaurants or other similiar establishments.  The goods sold must be merchandise for resale or supplies for use in the buyers' business operation.  The work performed for you must be the salespersons' prinicipal business activity.  Refer to the Salesperson section located in Publication 15-A, Employers' Supplemental Tax Guide for more information.

Who is a Statutory Nonemployee?

There are two categories of statutory nonemployees: direct sellers and licensed real estate agents.  They are treated as self-employed for all Federal tax purposes, including income and unemployment taxes, if:

1) Substantially all payments for their services as direct sellers or real estate agents are directly related to sales or other output, rather than to the number of hours worked and
2) Their services are performed under a written contract providing that they will not be treated as employees for Federal tax purposes.

Refer to information on Direct Sellers located in Publication 15-A, Employers' Supplemental Tax Guid for additional information.

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