Tax law carved out a unique category of worker—the statutory employee.

The term “statutory employee” can mislead you into thinking the worker is an employee. Nope—this worker is not a traditional employee.

The tax code–defined statutory employee is, for the most part, an independent contractor. The term employee in the tax code refers to the common-law employee.

Technically, what happens here is that the tax code–defined worker you would ordinarily classify as an independent contractor for tax purposes under the IRS right-of-control test becomes an employee, but only for certain tax purposes.

Yes, it’s strange. But as you know, there is much strangeness in tax law. To help avoid thinking of these workers as regular workers, we will sometimes refer to them as hybrid self-employed.

Who Are These People?

The hybrid self-employed known in the tax code as statutory employees are1

corporate officers;

home workers;

drivers who distribute food products, beverages, or laundry;

full-time life insurance salespeople; and

traveling or city salespeople (think business to business salespeople).

Now What?

You, as the employer, must treat statutory employees as employees for Federal Insurance Contributions Act (FICA) tax purposes. Therefore, you

pay half of their Social Security and Medicare taxes, and

withhold the other half from their paychecks.

You must also pay federal unemployment taxes for some types of statutory employees, as we detail later in this article.

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