This issue can get complicated in a hurry. We’ll keep it simple while pointing out the key thresholds.
If the farm assigns non-agricultural labor, federal income tax withholding, federal unemployment insurance (FUTA) tax, and social security/Medicare tax (FICA) apply right away.
If the farm assigns only agricultural labor, the situation gets more complex.
Let’s begin with federal income tax and FICA: A farm must begin withholding social security and Medicare taxes and remit the withheld portion to the IRS when either of the following happens: when the farm pays one person $150 or more in wages per year OR has a total annual payroll of $2,500 or more. A farm must also begin paying its contribution of social security and Medicare taxes when this same threshold is met. The employee’s tax is deducted from wages. The employer’s tax is paid by the employer and may not be deducted from wages.
Unemployment insurance adds another layer of complexity. States also assess unemployment insurance tax, and the state and federal governments have sometimes-complicated rules for when it’s owed. Get a straightforward answer for when farms need to pay into their state and federal unemployment insurance programs in our Selected Essentials in Farm Employment Law resource for each state (10pgs).
Wondering when labor is agricultural and non-agricultural? So were we! We provide you with a strong analysis that helps you make decisions regarding your obligations in our Farmers’ Guide to Hiring Obligations (20pgs).
Looking for more support and practical resources as you create a workforce wage strategy that works for your farm? Take our Advanced Employment Law Course, an online, comprehensive experience that helps farmers understand and apply farm employment law to their specific situations.
New to farm employment law, not yet a member, or looking for an overview of issues? Try our Farm Employment Law Basics(1 pg), an hand list of ten things every farm business owner should know about farm employment law. This resource is available to all, and will direct you to more detailed resources on the issues relevant to your farm.