Statutory Employees

For federal employment tax purposes, a “statutory employee” is defined as an individual that performs services for remuneration for any person:

As an agent-driver or commission-driver engaged in distributing meat products, vegetable products, fruit products, bakery products, beverages (other than milk), or laundry or dry-cleaning services, for his principal;

As a full-time life insurance salesman;

As a home worker performing work, according to specifications furnished by the person for whom the services are performed, on materials or goods furnished by such person which are required to be returned to such person or a person designated by him; or

As a traveling or city salesman, other than as an agent-driver or commission-driver, engaged upon a full-time basis in the solicitation on behalf of, and the transmission to, his principal (except for side-line sales activities on behalf of some other person) of orders from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments for merchandise for resale or supplies for use in their business operations; if the contract of service contemplates that substantially all of such services are to be performed personally by such individual; except that an individual shall not be included in the term "employee" under the provisions of this paragraph if such individual has a substantial investment in facilities used in connection with the performance of such services (other than in facilities for transportation), or if the services are in the nature of a single transaction, not part of a continuing relationship with the person for whom the services are performed.

“Statutory employees” are independent contractors who are deemed “employees” for Federal employment tax purposes because of special Federal statutory rules.

For PA PIT purposes, individuals shall report all taxable remuneration they receive as a statutory employee as compensation unless their activities constitute a business, profession, or other activity engaged in as a commercial enterprise. See Chapter 5 of the PA Personal Income Tax Guide - Net Income (Loss) from the Operation of a Business, Profession, or Farm . Those expenses that are not reported in a specific part of the PA-40 Schedule UE, Allowable Employee Business Expenses should be itemized and claimed in Part C, Miscellaneous Expenses.

However, if such expenses are extensive, a PA-40 Schedule C, Profit or (Loss) From Business or Profession may be used in lieu of the PA-40 Schedule UE, Allowable Employee Business Expenses, provided that the PA wages shown on the W-2 are included on Line 1a, Gross Compensation, and the expenses from Schedule C are included on Line 1b, Unreimbursed Business Expenses.