What characterizes a statutory employee?

A statutory employee is characterized by being designated by law for specific tax-withholding requirements. This means that certain types of workers, though they may be technically classified as independent contractors, are considered employees under tax law for the purposes of withholding Social Security and Medicare taxes. This classification can include workers such as certain drivers, life insurance agents, and certain salespeople who work for a commission. The legal designation allows employers to withhold taxes for these individuals even if they do not follow the traditional employee-employer relationship.

In this context, the correct answer highlights the unique nature of statutory employees within the broader concept of employment classifications and tax implications. This classification is significant because it affects how taxes are administered, impacting both the employer's responsibilities and the worker's financial obligations. Understanding this helps clarify the regulatory framework that governs various employment scenarios.