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Statutory nonemployee

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A statutory nonemployee is an independent contractor or self-employed worker whose service may appear to be that of a type of employee called a statutory employee, but whose type of work has been specifically exempted from from such status. This is important for the employer to understand as the classification of such an employee governs whether or not the employer is required to withhold certain taxes and provide certain benefits to the worker.

There are generally 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 employment taxes, if:

  • 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
  • Their services are performed under a written contract providing that they will not be treated as employees for Federal tax purposes.

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