What is the difference between:

Employee
When you are an employee, your employer must withhold and pay  Social Security and Medicare taxes , and pay unemployment tax on your wages. The employer must pay out of their own bank account half of the Social Security and Medicare tax your income generated. The employer pays half or 7.65% of your income in these taxes and they also subtract the other half, 7.65% of your income, from your earnings to send to the IRS on your behalf.

The employer usually also withholds Income Tax from your pay in the amount appropriate to what your W4 indicates should be withheld.  Not all employers are required to withhold income tax, and some may not take out enough, or may take too much.

In January, your employer will send you and the IRS a Form W-2 Wage and Tax Statement, where you can
see what they reported your total earned income and the amount they withheld for taxes is.

Filing an income tax return reconciles  what the employee is required to pay in Federal and State Income Tax for the year, for all income for that tax year, after all allowable tax credits and adjustments  have been applied to the tax return, and after all federal and state income tax paid for that tax year has been entered.--whether it was sent in by employer/payer or by the taxpayer themselves through Estimated quarterly payments.  

If the employee owes, it is a good idea to review their situation and see if completing a new W-4 is necessary to avoid owing again in the future. 

Occasionally a taxpayer is upset they owe because the employer did not take out enough Income tax on their return. The taxpayer thinks they can report the employer or sue them or have them pay the balance due on their tax return. The taxpayer is ultimately responsible for ALL income tax-- regardless of whether the employer withheld the correct amount or not. Getting a new W4 turned in and asking the HR person to correct withholdings is pretty much all they really can do. I try to diffuse the situation and explain it like this: You are responsible for all the income tax your earnings generates. One benefit of being an employee is the employer will withhold taxes for you and send it to the IRS throughout the year on your behalf, but you are ultimately responsible for that tax. Let's get you a new W4 so you can turn in right away to your company so they can fix it for this new year--so this won't happen again.  And let's talk about some options on how you can pay this current balance due.

Statutory Employee (not common)
This is a unique type of self-employed person that is actually issued a W-2. On this W2 you will see the box on Line 13 that is checked Statutory Employee.
This income, when entered, will automatically carry over to a Schedule C and expenses can be entered to offset this income.  What is great about this is the "Employer(payer)" pays half (1/2) of the Social Security and Medicare Taxes (the contractor pays 7.65%) .

--------Below from Taxslayer Blog--
The conditions which must be met to be considered a statutory employee are rather narrow. In fact, there are just four categories of workers who qualify as statutory employees under the current tax code:

1. A driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning if the driver is your agent or is paid on commission.
2. A full-time life insurance sales agent whose principal business activity is selling life insurance, annuity contracts, or both, primarily for one life insurance company.
3. An individual who works at home on materials and goods that you supply and that must be returned to you or to a person you name if you also furnish specifications for the work to be done.
4. A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors, operators of hotels, restaurants, or other similar establishments. The goods sold must be merchandise for resale or supplies for use in the buyer’s business operation. The work performed for you must be the salesperson’s principal business activity.

As you can see, these categories will apply to only a small minority of workers in the United States. 
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Their employers usually cover half of Medicare and Social Security taxes, but statutory employees don’t usually get health insurance, vacation time, 401k plans, and other benefits reserved for common law employees.  

Statutory Employee-article from Taxslayer Blog

Independent Contractor
A contractor is a self-employed person--working for themselves and gets paid with cash/check, credit cards and may or may not receive a 1099-NEC or 1099-K for their tax return. Regardless of whether they get a tax form, they are required to report ALL income and ALL expenses incurred in earning that income on their tax return.

A self-employed person is responsible for ALL taxes-- Social Security & Medicare (which is 15.3% of the profit) and any income tax that this profit generates.

Many are shocked how large their tax bill is after their first year of being self employed. Planning ahead is key, like putting money aside and sending in payments quarterly in what are called Estimated Tax Payments--this helps to reduce the tax bill at the end of the year. **We are a pay-as-you go society and if you owe $1,000 or more you might be fined by the IRS on top of having to pay the balance due--no one wants to pay more than they need to. And the IRS has started charging this penalty--they had let a lot slide during COVID but I have heard from a few people I have warned that the IRS has charged them on their 2023 tax return and they had wished they had headed my warning.

Word of caution-- only claim expenses that are incurred in making this money. Some people, in an attempt to reduce their tax bill will make up numbers or exaggerate their expenses. I get it--a large tax bill stinks, but remember a few thinigs:

• Everyone needs to pay their fair share.
• The more expenses you enter the less income... this total income gets reported to Social Security, those taxes you pay get reported to Social Security under your account (SS Number). When a worker becomes disabled or has reached retirement age, the amount they receive is based on a couple things:
• 1. Have they earned enough credits to draw on the funds?
• 2. How much in benefits they will receive is based on the income (profit) reported. 

I have had several people come to me asking why they dont have enough credits or why their payments are so small when they earned so much money as a contractor... yes you earned a lot of money, but you also reported so much in expenses that you showed no, or very little profit, so you paid no, or very little taxes. 

If you truly have the expenses, then by all means you must report it. And if you show very little or no profit--it might be a good idea to consider doing something else--but I understand needing money now.. which is why Uber/door dash, etc.  are good options--but long term, is the ultimate cost in gas, wear and tear on vehicle, etc worth it in the long run, only the worker can decide that and each person's scenario is different.

Another reason why the IRS requires all expenses to be reported is certain things  like Additional Child Tax Credit (ACTC),  Earned Income Tax Credit ( EITC),  the taxable portion of Social Security, and the amount of premium tax credit allowed for Marketplace is all based on total income. Some people fraudulently manipulate their expenses and/or income with self employed in order to get more ACTC and EITC than they are entitled to or reduce Marketplace repayment.  This is fraud. 

Just because a return is accepted when sent in does not mean the IRS won't audit the return in a year, or two, or three. Have back up for all income and expenses reported just in case. The taxpayer is fully responsible for what is on that tax return--regardless of who they had prepare them.

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Being an employee or contractor can have different pros and cons, including:

• Flexibility
  Contractors can set their own hours and start and stop work when a task is complete--they have more control since they are their r own boss., while employees may have a set schedule.
• Benefits
  Employees often receive benefits like health insurance, paid vacation, and sick days from their employer, while contractors are responsible for funding their own benefits.
• Financial control
  
• Contractors might earn more money, but contractors are also responsible for all costs associated with their work, including profit or loss, and may need to pay self-employment taxes. Independent contractors must fund 100% of their Medicare and Social Security taxes, health insurance, and retirement. Contractors may also be responsible for buying the tools and equipment needed for their profession.  Employees, on the other hand, have a set income based on their salary or hourly rate. Usually tools needed are provided by the employer, but if an employee has to buy tools/uniforms they cannot deduct this as an expense on their taxes at this time. (Law might change in 2025 when Tax Cut expires)
• Responsibility
  Contractors are often more independent and answer only to themselves and their clients, but they also have more responsibility. Employees, on the other hand, may feel more dependent on their company.
• Legal protections
  Full-time employees have legal protections that contractors may not, which could make it more difficult for contractors to resolve disputes with clients or companies.
• Development
  Employees may be limited to the industry and position they hold, while contractors may have access to a variety of in-demand skills. Some employers provide training, continuing education and help make connections, etc. Contractors have to do this on their own.

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How to tell if you are an employee or a contractor   The IRS says: “The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.”   
To determine your employment status, consider the working relationship as a whole. Ask yourself who controls what and to what degree:   

• Who decides how and when the work is done?   
• Who determines what tools or equipment (computer, phone, materials, etc.) are used to do the work?   
• Are you reimbursed for work-related expenses?   

In other words, if your employer has a lot of rules about how, when, and where work is done, you’re likely an employee. On the other hand, you’re probably a contractor if you are performing a service and calling most of the shots. See examples of self-employed jobs and job titles.   
What if I was misclassified as an independent contractor?   If you think you should be classified as an employee rather than an independent contractor based on the criteria above, discuss the details of your work contract/arrangement with your employer, and communicate the issue and any other concerns you may have.   
The IRS can help you correctly classify your worker status if you need help doing so. You or your employer should file a Form SS-8, and the IRS will make the final determination.    
If it turns out your employer incorrectly classified you as an independent contractor, they could be responsible for paying employment taxes on your behalf. In that case, you can use Form 8919, Uncollected Social Security and Medicare Tax on Wages, to calculate and report your share of Social Security and Medicare taxes.   

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Information on the difference between Employee and contractor-Taxslayer Blog

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What is a Household Employee?  
According to the IRS, nannies, caregivers and most household workers are “employees”. A household employee is not an “independent contractor”, because the family (not the worker) determines things like work hours, work place, responsibilities, etc.

There are 2 criteria basically-- the type of work must be Household Work--see list below and whether they can be classified as an employee or independent contractor.

You have a household employee if you hired someone to do household work and that worker is your employee. The worker is your employee if you can control not only what work is done, but how it is done. If the worker is your employee, it doesn't matter whether the work is full time or part time or that you hired the worker through an agency or from a list provided by an agency or association. It also doesn't matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job.
Example. You pay Peyton Shore to babysit your child and do light housework 4 days a week in your home. Peyton follows your specific instructions about household and childcare duties. You provide the household equipment and supplies that Peyton needs to do the work. Peyton is your household employee.
Household work.Household work is work done in or around your home. Some examples of workers who do household work are:

• Babysitters,
  Butlers,
  Caretakers,
  Cooks,
  Domestic workers,
  Drivers,
  Health aides,
  Housecleaning workers,
  Housekeepers,
  Maids,
  Nannies,
  Private nurses, and
  Yard workers.

Household work doesn't include services performed by these workers unless the services are performed in or around your private home. A separate and distinct dwelling unit maintained by you in an apartment house, hotel, or other similar establishment is considered a private home.

Examples of Not a Household Worker: Services not of a household nature, such as services performed as a private secretary, tutor, or librarian, even though performed in your home, aren't considered household work.
Workers who aren't your employees. If only the worker can control how the work is done, the worker isn't your employee but is self-employed. A self-employed worker usually provides their own tools and offers services to the general public in an independent business.

• A worker who performs childcare services for you in their home (not yours) generally isn't your employee.
• If an agency provides the worker and controls what work is done and how it is done, the worker isn't your employee.

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Example. You made an agreement with a worker to care for your lawn. The worker runs a lawn care business and offers their services to the general public. The worker hires their own helpers, provides their own tools and supplies, and instructs the helpers how to do their jobs. Neither the worker nor their helpers are your employees.
More information.  More information about who is an employee is in section 1 of Pub. 15-A.
A Household employee is entitled to minimum wage and overtime regardless of whether they are paid hourly or salary. If they are paid a salary, it is best to document the hours worked (and the pay rate) included in the salary amount.

The employer is responsible for withholding the employee’s portion of the FICA payroll taxes, which is 7.65% of the gross wages. In addition, the employer also pays 7.65% for FICA taxes for social security and Medicare and they have to pay Unemployment Tax on the wages as well.
The employer must issue a W-2 to the employee in January to report all income and tax withheld.

To learn more visit irs.gov/publications/p926www.irs.gov/publications/p926