Payments for Statutory Employees are:

Payments for statutory employees are characterized primarily by their unique tax treatment. Statutory employees are workers who, while technically classified as independent contractors, enjoy certain benefits similar to employees. This classification allows employers to treat their tax withholdings in a specific manner.

For statutory employees, there is no requirement for federal income tax withholding. This means that the employers do not withhold federal income taxes from their payments. Nonetheless, payments made to statutory employees are subject to Social Security and Medicare taxes, just like regular employee wages. This makes the payroll responsibilities of employers distinct in the case of statutory employees compared to traditional independent contractors, who are typically responsible for their own tax payments without any employer withholding.

The recognition of statutory employees in this way establishes a clear distinction from other classifications of workers, which is crucial when handling payroll, as it affects the withholding processes and tax liabilities. In summary, the correct characterization of payments for statutory employees is that they are not subject to federal income tax withholding but are subject to Social Security and Medicare taxes.