What Is a Statutory Employee?
A statutory employee is an independent contractor who is treated as an employee for tax withholding purposes. Unlike regular W-2 wages, statutory employee income is reported on Schedule C instead of Form 1040, Line 1 (Wages).
If a taxpayer receives a Form W-2 with the Statutory Employee box (Box 13) checked, follow these steps to correctly enter it in the software.
Steps to Enter Statutory Employee Income in the Software
Access Form W-2
From the left-side menu, search for "W-2" and select Form W-2, Wage and Tax Statement.
Alternatively, navigate to Income and select Form W-2.
Enter W-2 Information
Input all the details from Form W-2 as usual.
Scroll down to Box 13 and check the box for Statutory Employee.
(Checking this box ensures that these wages are not included as regular wages on Form 1040).
Continue to Schedule C
Click Continue after entering the W-2 details.
A message will appear stating that statutory employee income (Box 1 on W-2) must be reported on Schedule C.
Click "Create a Schedule C" when prompted.
Enter Income on Schedule C
From the Schedule C menu, select Income.
Locate the field "Income Reported to You on Form W-2 as a Statutory Employee" and enter the Box 1 amount from Form W-2.
Important Notes on Statutory Employee Income
✔️ Do Not Combine With Self-Employment Income
Statutory employee wages should be reported on a separate Schedule C and not combined with self-employment income.
✔️ Do Not Include in Schedule SE
Social Security and Medicare taxes should already be withheld and reported on Form W-2, so statutory income should not be carried over to Schedule SE (Self-Employment Tax).
By following these steps, taxpayers can correctly report statutory employee income while ensuring compliance with IRS filing requirements.