What's the Difference Between a W-2 Employee and a Statutory Employee?

Most workers who receive a W-2 are regular employees, but there's a special category called a statutory employee that blends features of employment and self-employment. Statutory employees receive a W-2 with box 13 checked, indicating their special status — common examples include certain traveling salespeople, home workers, and full-time life insurance agents. Like regular employees, statutory employees have Social Security and Medicare taxes withheld by their employer. Unlike regular employees, statutory employees report their W-2 income on Schedule C rather than as wages, which means they can deduct business expenses directly related to their work without needing to itemize. This gives statutory employees a significant tax advantage over regular employees, who face strict limits on employee business expense deductions under current tax law.