What Is Box 13 on a W-2? Statutory Employee, Retirement, Sick Pay

Box 13 on a W-2 is a set of three checkboxes — Statutory Employee, Retirement Plan, and Third-Party Sick Pay — that flag special tax situations rather than reporting a dollar amount. A check in any of these boxes changes something concrete on your return: which form you report wages on, whether you can deduct a Traditional IRA contribution, or how disability payments are taxed. More than one can be checked, and only the boxes that apply to you will be marked.¹

Statutory Employee

A statutory employee is a worker who would ordinarily be an independent contractor under common-law rules but is treated as an employee by statute for Social Security and Medicare tax purposes. Only four categories qualify: certain delivery drivers (beverages other than milk, meat, vegetables, fruit, bakery products, or laundry and dry cleaning) working as the employer’s agent or on commission; full-time life insurance agents selling primarily for one company; home workers who work on employer-supplied materials to employer specifications; and full-time traveling or city salespersons turning in orders from wholesalers, retailers, contractors, or similar businesses.²

Even within those categories, the box should only be checked when three additional conditions apply: the contract requires you to perform substantially all the services personally, you have no major investment in the equipment used, and the services are performed on a continuing basis for the same payer.²

How It Changes Your Return

When this box is checked, your employer withheld Social Security and Medicare taxes from your pay, but did not withhold federal income tax.² You cover income tax yourself, either through estimated payments during the year or at filing.

Instead of putting your Box 1 wages on the wages line of Form 1040, you report them on Schedule C. Enter the wages on line 1 and check the box on that line identifying the income as statutory employee wages.³ Because payroll taxes were already withheld, you do not owe self-employment tax on that income — a savings of roughly 15.3 percent compared with a true independent contractor.

The other advantage is deductions. You subtract ordinary and necessary business expenses (mileage, travel, supplies, and similar work costs) directly against the income on Schedule C. Regular employees lost the ability to deduct unreimbursed business expenses on federal returns when those miscellaneous itemized deductions were eliminated; statutory employees avoid that limit because deductions flow through Schedule C, not Schedule A.

If you also have separate self-employment income from a side business, file two Schedules C. Statutory employee wages and self-employment earnings cannot be combined on one form.³

Retirement Plan

The Retirement Plan box is checked when you were an “active participant” in a qualifying employer-sponsored retirement plan at any point during the year. Qualifying plans include 401(k)s, traditional pensions, profit-sharing plans, 403(b) annuity contracts, SIMPLE IRAs, and SEP plans. Government plans also count, with one exception: a standalone 457(b) plan does not. Non-qualified deferred compensation plans on their own also leave the box unchecked.⁴

Active participation is defined by plan type. In a defined contribution plan such as a 401(k), you are an active participant if any contributions or forfeitures were credited to your account during the year. In a defined benefit plan, you are an active participant for any year you were eligible to participate, whether or not you have vested.⁴ That catches people who chose not to contribute to their 401(k): if the employer made a matching or profit-sharing contribution on your behalf, you are still an active participant.

What the Checkmark Does to Your IRA Deduction

You can always contribute to a Traditional IRA. Whether you can deduct that contribution depends on your income when Box 13 is checked. The 2026 contribution limit is $7,500 (up from $7,000 in 2025), plus a $1,100 catch-up if you are 50 or older.⁵ For 2026, the Traditional IRA deduction phases out across these modified adjusted gross income ranges when you are covered by a workplace plan:⁶

Single filers: $81,000 to $91,000. Full deduction below $81,000; no deduction above $91,000.
Married filing jointly, if you are the one covered: $129,000 to $149,000.
Married filing separately: $0 to $10,000, which eliminates the deduction for most people in this status.

Your spouse’s checkbox matters too. If your own W-2 has the Retirement Plan box unchecked but your spouse’s is checked, your Traditional IRA deduction phases out between $242,000 and $252,000 of combined MAGI for 2026.⁵ If neither spouse is covered, there is no income limit on the deduction.

Roth IRAs sit outside this rule. The Retirement Plan checkbox does not affect Roth eligibility, which depends only on income.⁶ The 2026 Roth phase-outs are $153,000 to $168,000 for single filers and $242,000 to $252,000 for married filing jointly.⁵

Third-Party Sick Pay

This box is checked when some of the income on your W-2 came from a third party (typically an insurance company) rather than your employer. It usually reflects disability or sick leave payments made through an insurance policy.¹

Whether the sick pay is taxable depends on who paid the premiums. If your employer paid them, or you paid them through pre-tax payroll deductions, the benefits are taxable. If you paid the premiums entirely with after-tax dollars, the benefits are generally not taxable.⁷ That distinction can turn on an enrollment choice you made months before you filed a claim.

The taxable portion of third-party sick pay is included in Box 1 (Wages), Box 3 (Social Security wages), and Box 5 (Medicare wages). Any nontaxable portion (from premiums you paid with after-tax dollars) appears in Box 12 under Code J and is informational only, not included in the Box 1, 3, or 5 wage figures.⁷

If a Box 13 Checkmark Looks Wrong

Errors in Box 13 change your tax. A Retirement Plan check that shouldn’t be there could make you think your IRA deduction is capped when it isn’t. A missing Statutory Employee check could send your wages to the wrong line and cost you business deductions. Start with your employer’s payroll or HR department and ask for a corrected W-2 (Form W-2c).⁸

If your employer won’t fix the error or doesn’t respond by the end of February, call the IRS at 800-829-1040 or visit a Taxpayer Assistance Center to file a W-2 complaint. The IRS will send your employer a letter requesting a corrected form within ten days. If a corrected W-2 still doesn’t arrive in time to file, the IRS will send you Form 4852 as a substitute; you estimate wages and withholding from your final pay stub.⁹

If you file using Form 4852 and later receive a corrected W-2 with different figures, or if you filed from an incorrect W-2 that later gets corrected and your liability changes, file an amended return on Form 1040-X.⁹

1
Internal Revenue Service. General Instructions for Forms W-2 and W-3 (2026) – Specific Instructions for Form W-2
2
Internal Revenue Service. Statutory Employees
3
Internal Revenue Service. 2025 Instructions for Schedule C (Form 1040)
4
Internal Revenue Service. Common Errors on Form W-2 Codes for Retirement Plans
5
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
6
Internal Revenue Service. Retirement Topics – IRA Contribution Limits
7
Internal Revenue Service. Reporting Sick Pay Paid by Third Parties Notice 2015-6
8
Internal Revenue Service. Form W-2c (Rev. January 2026) – Corrected Wage and Tax Statement
9
Internal Revenue Service. W-2 – Additional, Incorrect, Lost, Non-Receipt, Omitted