What is a statutory employee?

[AndreaC1]

A statutory employee is someone that is considered to be an independent contractor under IRS common law rules. They are treated as an employee for employment tax purposes. 

• Treated as an employee for Social Security/Medicare tax purposes
• Treated as an independent contractor for income tax purposes. 

Please see more details here on IRS's website Statutory Employees for who falls in this category. 

Per IRS Schedule C Instructions: "Statutory employees. If you received a Form W-2 and the "Statutory employee" box in box 13 of that form was checked, report your income and expenses related to that income on Schedule C or C-EZ. Enter your statutory employee income from box 1 of Form W-2 on line 1 of Schedule C or C-EZ and check the box on that line. Social security and Medicare tax should have been withheld from your earnings; as a result, you do not owe self-employment tax on these earnings. Statutory employees include full-time life insurance agents, certain agent or commission drivers and traveling salespersons, and certain homeworkers"

Other Helpful Topics:

• Statutory Nonemployees
• Exempt Organizations: Who Is a Statutory Employee?
• Exempt Organizations: Who Is a Statutory Non-Employee?

[goalie3079]

My spouse is a speech pathologist in private practice. She is compensated as an independent contractor (1099 income) from one source and as a sole proprietor (W2 income) from another.  The PPP rules appear to be pushing the 1099 and W2 into the same Sch C.  However the W2 income does NOT have the Statutory Employee checkbox checked so the Sch C cant match the PPP Worksheets.  So in past years the W2 was not 'combined' on the Schedule C.

1 - is a speech pathologist in private practice considered a "Statutory Employee"?

2 - if so, is a corrected W2 required?

3 - if a corrected W2 is required does that change anything from an employer/sole proprietor arrangement...as in does it cost the employer anything to do so or change the compensation platform in any way?  We are already having Fed tax, social security tax, medical tax and state taxes withheld on that W2.

[Critter]

@goalie3079 

Why  did you tack on a PPP question to this thread ?  

The PPP is for businesses  that have employees ... so your wife's Sch C business doesn't qualify for that loan since she doesn't have employees ... she is NOT employed by her business statutory or otherwise .

What she may be eligible  for is UNEMPLOYMENT benefits ... the SE are also allowed to collect it ... check with your state's site. 

[goalie3079]

I do not believe your answer is correct.  An independent contractor / sole proprietor is one of the businesses who the PPP was designed for.