The Internal Revenue Service says to determine whether your salespersons are employees under
However, even if a salesperson is not an employee under the usual common-law rules for income tax withholding, his or her pay may still be subject to social security, Medicare, and unemployment taxes (also known as FUTA) as a statutory employee, IRS continues.
To determine whether a salesperson is an employee for social security, Medicare and FUTA tax purposes the salesperson must meet all eight elements of the statutory employee test. As seen below, no mortgage originator can meet Nos. three and four.
The IRS says a salesperson is a statutory employee for social security, Medicare, and FUTA tax purposes if he or she:
1. Works full time for one person or company except, possibly, for sideline sales activities on behalf of some other person,
2. Sells on behalf of, and turns his or her orders over to, the person or company for which he or she works,
3. Sells to wholesalers, retailers, contractors, or operators of hotels, restaurants, or similar establishments,
4. Sells merchandise for resale, or supplies for use in the customer's business,
5. Agrees to do substantially all of this work personally,
6. Has no substantial investment in the facilities used to do the work, other than in facilities for transportation,
7. Maintains a continuing relationship with the person or company for which he or she works, and
8. Is notan employee under common-law rules.
Because mortgage loan originators cannot satisfy Nos. three and four at all, he or she cannot be a statutory employee.
