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Payroll Taxes Basics

This tipsheet includes instructive charts that will help you identify when payroll tax obligations kick in for workers on your farm.

How much can I pay workers before I need to pay attention to payroll tax, etc.?

It can seem like a maze to navigate all the various payroll tax requirements when hiring farm employees. Payroll taxes include state and federal income tax withholdings, state and federal unemployment taxes, and federal social security and Medicare tax withholdings and contributions. How do you know when to pay what?

Both state and federal laws provide farm labor exemptions for certain payroll tax requirements if specified thresholds are met. However, such exemptions only apply for wages earned for agricultural labor. Diversified farms assigning non-agricultural labor tasks—such as packing other farmers’ produce, hosting on-farm events and agritourism, selling at farmers’ markets, and such—will need to pay attention as lower thresholds generally apply for these non-agricultural activities. Use the following charts to help you identify whether and when payroll tax obligations kick in for your farm workers.

Agricultural Labor versus Non-Agricultural Labor

Whether work is “agricultural labor” under the law is not always intuitive. That’s because it’s based on legal definitions, which don’t always reflect practical life. The following provides some guidelines as to what types of tasks are likely to be considered agricultural labor and non-agricultural labor for purposes of determining when certain payroll tax thresholds kick in. Note that a farm might have some workers performing tasks that are considered agricultural labor while other workers are performing tasks that are considered nonagricultural labor. What’s more, a single worker could be performing some agricultural labor tasks and some nonagricultural labor tasks! This is when it can get tricky. In general, assigning non-agricultural labor tasks triggers requirements for paying payroll taxes quicker.

What types of tasks are considered agricultural labor and non-agricultural labor?

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When must you begin withholding income taxes?

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When must you begin paying unemployment taxes?

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When must you begin withholding and paying federal social security and Medicare taxes?

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For more detailed information on payroll tax obligations, including how and when to file and remit the required tax documents and payments to the state and federal agencies, check out Farm Commons’ state specific checklists:

Minnesota Checklist of Selected Legal Obligations When Hiring a Farm Employee

Wisconsin Checklist of Selected Legal Obligations When Hiring a Farm Employee

DISCLAIMER: This guide does not provide legal advice or establish an attorney-client relationship between the reader and author. Consult an attorney for advice specific to your situation and the state in which you operate.