13.   Employment Taxes

What's New for 2013

Social security and Medicare tax for 2013. The employee tax rate for social security is 6.2%. Previously, the employee tax rate for social security was 4.2%. The employer tax rate for social security remains unchanged at 6.2%. The social security wage base limit is $113,700.The Medicare tax rate is 1.45% each for the employee and employer, unchanged from 2012. There is no wage base limit for Medicare tax.

Additional Medicare Tax. In addition to withholding Medicare tax at 1.45%, you must withhold a 0.9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Additional Medicare Tax is only imposed on the employee. There is no employer share of Additional Medicare Tax. All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 threshold.For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E), Employer's Tax Guide. For more information on Additional Medicare Tax, visit IRS.gov and enter “Additional Medicare Tax” in the search box.

Leave-based donation programs to aid victims of Hurricane Sandy. Under these programs, employees may donate their vacation, sick, or personal leave in exchange for employer cash payments made before January 1, 2014, to qualified tax-exempt organizations providing relief for the victims of Hurricane Sandy. The donated leave will not be included in the income or wages of the employee. The employer may deduct the cash payments as business expenses or charitable contributions. For more information, see Notice 2012-69, 2012-51 I.R.B. 712, available at www.irs.gov/irb/2012-51_IRB/ar09.html.

Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans extended. The work opportunity tax credit is now available for eligible unemployed veterans who begin work before January 1, 2014. Previously, the credit was available for unemployed veterans who began work on or after November 22, 2011, and before January 1, 2013. Qualified tax-exempt organizations that hire eligible unemployed veterans can claim the work opportunity tax credit against their payroll tax liability using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. For more information, visit IRS.gov and enter “work opportunity credit” in the search box.

What's New for 2014

Social security and Medicare tax for 2014. The employee and employer tax rates for social security and the maximum amount of wages subject to social security tax for 2014 will be discussed in Publication 51 (Circular A), Agricultural Employer's Tax Guide (For use in 2014).The Medicare tax rate for 2014 will also be discussed in Publication 51 (Circular A) (For use in 2014). There is no limit on the amount of wages subject to Medicare tax.

Reminders

Additional employment tax information for farmers. See Publication 51 (Circular A) for more detailed guidance on employment taxes. For the latest information about employment tax developments impacting farmers, go to www.irs.gov/pub51.

Correcting a previously filed Form 943. If you discover an error on a previously filed Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, make the correction using Form 943-X, Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund. Form 943-X is filed separately from Form 943. For more information on correcting Form 943, see the Instructions for Form 943-X.

Federal tax deposits must be made by electronic funds transfer. You must use electronic funds transfer to make all federal tax deposits. Generally, electronic funds transfers are made using the Electronic Federal Tax Payment System (EFTPS). If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. EFTPS is a free service provided by the Department of Treasury. Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee.For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). To get more information about EFTPS or to enroll in EFTPS, visit www.eftps.gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started.

Important Dates for 2014

You should take the action indicated by the dates listed. See By February 15 and On February 16 for Form W-4, Employee's Withholding Allowance Certificate, information. Due dates for deposits of withheld federal income taxes, social security taxes, and Medicare taxes are not listed here. For these dates, see Publication 509, Tax Calendars (For use in 2014).

Note. If any date shown below for filing a return, furnishing a form, or depositing taxes falls on a Saturday, Sunday, or legal holiday, the due date is the next business day. A statewide legal holiday delays a filing or furnishing due date only if the IRS office where you are required to file a return or furnish a form is located in that state. For any due date, you will meet the “file” or “furnish” date requirement if the envelope containing the tax return or form is properly addressed, contains sufficient postage, and is postmarked by the U.S. Postal Service by the due date, or sent by an IRS-designated delivery service by the due date. See Private delivery services in Publication 51 (Circular A).Federal tax deposits can only be made by electronic funds transfer and are governed by legal holidays in the District of Columbia. Statewide holidays no longer apply. For a list of legal holidays that delay the due date of a federal tax deposit, see section 7 of Publication 51 (Circular A).

Fiscal year taxpayers. The due dates listed below apply whether you use a calendar or a fiscal year.

By January 31. 

  • File Form 943 with the IRS. If you deposited all Form 943 taxes when due, you have 10 additional days to file.

  • Furnish each employee with a completed Form W-2, Wage and Tax Statement.

  • Furnish each recipient to whom you paid $600 or more in nonemployee compensation with a completed Form 1099 (for example, Form 1099-MISC).

  • File Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, with the IRS. If you deposited all the FUTA tax when due, you have 10 additional days to file.

  • File Form 945, Annual Return of Withheld Federal Income Tax, with the IRS to report any nonpayroll income tax withheld during 2013. If you deposited all Form 945 taxes when due, you have 10 additional days to file.

By February 15. Ask for a new Form W-4 or Formulario W-4(SP), Certificado de Exención de Retenciones del Empleado, from each employee who claimed exemption from federal income tax withholding last year.

On February 16. Any Form W-4 claiming exemption from withholding for the previous year has now expired. Begin withholding for any employee who previously claimed exemption from withholding but has not given you a new Form W-4 for the current year. If the employee does not give you a new Form W-4, withhold taxes based on the last valid Form W-4 you have for the employee that does not claim exemption from withholding or, if one does not exist, as if he or she is single with zero withholding allowances. If the employee furnishes a new Form W-4 claiming exemption from withholding after February 15, you may apply the exemption to future wages, but do not refund taxes withheld while the exempt status was not in place.

By February 28.  File paper Forms 1099 and 1096. File Copy A of all paper Forms 1099 with Form 1096, Annual Summary and Transmittal of U.S. Information Returns, with the IRS. For electronically filed returns, see By March 31 below. File paper Forms W-2 and W-3. File Copy A of all paper Forms W-2 with Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration (SSA). For electronically filed returns, see By March 31 below.

By March 31.  File electronic Forms W-2 and 1099. File electronic Forms W-2 with the SSA and Forms 1099 with the IRS. For more information on reporting Form W-2 information to the SSA electronically, visit the SSA's Employer W-2 Filing Instructions & Information webpage at www.socialsecurity.gov/employer. For information on filing information returns electronically with the IRS, see Publication 1220, Specifications for Filing Forms 1097, 1098, 1099, 3921, 3922, 5498, 8935, and W-2G Electronically.

By April 30, July 31, October 31, and January 31.  Deposit FUTA taxes. Deposit FUTA tax due if it is more than $500.

Before December 1. Remind employees to submit a new Form W-4 if their withholding allowances have changed or will change for the next year.

Introduction

You are generally required to withhold federal income tax from the wages of your employees. You may also be subject to social security and Medicare taxes under the Federal Insurance Contributions Act (FICA) and federal unemployment tax under the Federal Unemployment Tax Act (FUTA). You must also withhold Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. This chapter includes information about these taxes.

You must also pay self-employment tax on your net earnings from farming. See chapter 12 for information on self-employment tax.

Topics - This chapter discusses:

  • Farm employment,

  • Family employees,

  • Crew leaders,

  • Social security and Medicare taxes,

  • Additional Medicare Tax withholding,

  • Federal income tax withholding,

  • Reporting and paying social security, Medicare, and withheld federal income taxes, and

  • FUTA tax.

Useful Items - You may want to see:

Publication

  • 15 (Circular E), Employer's Tax Guide

  • 15-A Employer's Supplemental Tax Guide

  • 15-B Employer's Tax Guide to Fringe Benefits

  • 51 (Circular A), Agricultural Employer's Tax Guide

  • 926 Household Employer's Tax Guide

Form (and Instructions)

  • W-2 Wage and Tax Statement

  • W-4 Employee's Withholding Allowance Certificate

  • W-9 Request for Taxpayer Identification Number and Certification

  • 940 Employer's Annual Federal Unemployment (FUTA) Tax Return

  • 943 Employer's Annual Federal Tax Return for Agricultural Employees

  • 943-X Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund

See chapter 16 for information about getting publications and forms.

Farm Employment

In general, you are an employer of farmworkers if your employees do any of the following types of work.

  • Raising or harvesting agricultural or horticultural products on a farm, including raising and feeding of livestock.

  • Operating, managing, conserving, improving, or maintaining your farm and its tools and equipment.

  • Services performed in salvaging timber, or clearing land of brush and other debris, left by a hurricane (also known as hurricane labor).

  • Handling, processing, or packaging any agricultural or horticultural commodity if you produced more than half of the commodity (for a group of up to 20 unincorporated operators, all of the commodity).

  • Work related to cotton ginning, turpentine, gum resin products, or the operation and maintenance of irrigation facilities.

For more information, see Publication 51 (Circular A).

Generally, a worker who performs services for you is your employee if you have the right to control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed. You are responsible for withholding and paying employment taxes for your employees. You are also required to file employment tax returns. These requirements do not apply to amounts that you pay to independent contractors. See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee.

If you employ a family of workers, each worker subject to your control (not just the head of the family) is an employee.

Special rules apply to crew leaders. See Crew Leaders , later.

Employer identification number (EIN).   If you have employees, you must have an EIN. If you do not have an EIN, you may apply for one online. Go to IRS.gov and click on the Apply for an EIN Online link under Tools. You may also apply for an EIN by calling 1-800-829-4933 or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). The hours of operation for both numbers are Monday–Friday form 7:00 a.m.–7:00 p.m. local time (Alaska and Hawaii follow Pacific time). You can also fax or mail Form SS-4, Application for Employer Identification Number, to the IRS.

Employee's social security number (SSN).   An employee who does not have an SSN should submit Form SS-5, Application for a Social Security Card, to the Social Security Administration (SSA). Form SS-5 is available from any SSA office or by calling 1-800-772-1213 (operates 24 hours per day). It is also available from the SSA's website at www.socialsecurity.gov.

  The employee must furnish evidence of age, identity, and U.S. citizenship or lawful immigration status permitting employment with the Form SS-5. An employee who is age 18 or older must appear in person with this evidence at an SSA office.

Form I-9.    You must verify that each new employee is legally eligible to work in the United States. This includes completing the Form I-9, Employment Eligibility Verification. Form I-9 is available from the U.S. Citizenship and Immigration Services (USCIS) offices or by calling the Bureau of Citizenship and Immigration Services Forms Request Line at 1-800-870-3676. Form I-9 is also available from the USCIS website at www.uscis.gov. You can also contact the USCIS at 1-800-375-5283 for more information.

New hire reporting.   You are required to report any new employee to a designated state new hire registry. Many states accept a copy of Form W-4 with employer information added. Visit the Office of Child Support Enforcement website at www.acf.hhs.gov/programs/cse/newhire for more information.

Family Employees

Generally, the wages you pay to family members who are your employees are subject to employment taxes. However, certain exemptions may apply to wages paid to your child, spouse, or parent.

Exemptions for your child.   Payments for the services of your child under age 18 who works for you in your trade or business (including a farm) are not subject to social security and Medicare taxes. However, see Nonexempt services of a child or spouse , later. Payments for the services of your child under age 21 employed by you in other than a trade or business, such as payments for household services in your home, are also not subject to social security or Medicare taxes. Payments for the services of your child under age 21 employed by you, whether or not in your trade or business, are not subject to FUTA tax. Although not subject to social security, Medicare, or FUTA tax, the child's wages still may be subject to federal income tax withholding.

Exemptions for your spouse.   Payments for the services of your spouse who works for you in your trade or business are subject to federal income tax withholding and social security and Medicare taxes, but not FUTA tax.

  Payments for the services of your spouse employed by you in other than a trade or business, such as payments for household services in your home, are not subject to social security, Medicare, or FUTA taxes.

Nonexempt services of a child or spouse.   Payments for the services of your child or spouse are subject to federal income tax withholding as well as social security, Medicare, and FUTA taxes if he or she works for any of the following entities.
  • A corporation, even if it is controlled by you.

  • A partnership, even if you are a partner. This does not apply to wages paid to your child if each partner is a parent of the child.

  • An estate or trust, even if it is the estate of a deceased parent.

In these situations, the child or spouse is considered to work for the corporation, partnership, or estate, not you.

Exemptions for your parent.   Payments for the services of your parent employed by you in your trade or business are subject to federal income tax withholding and social security and Medicare taxes. Social security and Medicare taxes do not apply to wages paid to your parent for services not in your trade or business, but they do apply to payments for household services in your home if both the following conditions are satisfied.
  • You have a child living in your home who is under age 18 or has a physical or mental condition that requires care by an adult for at least 4 continuous weeks in a calendar quarter.

  • You are a widow or widower; or divorced and not remarried; or have a spouse in the home who, because of a physical or mental condition, cannot care for your child for at least 4 continuous weeks in the quarter.

  Wages you pay to your parent are not subject to FUTA tax, regardless of the type of services provided.

Qualified joint venture.   If spouses elect to be treated as a qualified joint venture instead of a partnership, either spouse may report and pay the employment taxes due on the wages paid to employees using the EIN of that spouse's sole proprietorship. For more information about qualified joint ventures, see chapter 12.

Crew Leaders

If farmworkers are provided by a crew leader, the crew leader may be the employer of the workers.

Social security and Medicare taxes.   For social security and Medicare tax purposes, the crew leader is the employer of the workers if both of the following requirements are met.
  • The crew leader pays (either on his or her own behalf or on behalf of the farmer) the workers for their farm labor.

  • The crew leader has not entered into a written agreement with the farmer under which the crew leader is designated as an employee of the farmer.

Federal income tax withholding.   If the crew leader is the employer for social security and Medicare tax purposes, the crew leader is the employer for federal income tax withholding purposes.

Federal unemployment (FUTA) tax.   For FUTA tax purposes, the crew leader is the employer of the workers if, in addition to the earlier requirements, either of the following requirements are met.
  • The crew leader is registered under the Migrant and Seasonal Agricultural Worker Protection Act.

  • Substantially all crew members operate or maintain mechanized equipment provided by the crew leader as part of the service to the farmer.

  The farmer is the employer of workers furnished by a crew leader in all other situations. In addition, the farmer is the employer of workers furnished by a registered crew leader if the workers are the employees of the farmer under the common-law test. For example, some farmers employ individuals to recruit farmworkers exclusively for them. Although these individuals may be required to register under the Migrant and Seasonal Agricultural Worker Protection Act, the workers are employed directly by the farmer. The farmer is the employer in these cases. For information about common-law employees, see section 1 of Publication 15-A. For information about crew leaders, see the Department of Labor website at www.dol.gov/whd/regs/compliance/whdfs49.htm.

Social Security and Medicare Taxes

All cash wages you pay to an employee during the year for farmwork are subject to social security and Medicare taxes if you meet either of the following tests.

  • You pay the employee $150 or more in cash wages (count all wages paid on a time, piecework, or other basis) during the year for farmwork (the $150 test). The $150 test applies separately to each farmworker that you employ. If you employ a family of workers, each member is treated separately. Do not count wages paid by other employers.

  • You pay cash and noncash wages of $2,500 or more during the year to all your employees for farmwork (the $2,500 test).

If the $2,500 test for the group is not met, the $150 test for an employee still applies.

Exceptions.   Annual cash wages of less than $150 you pay to a seasonal farmworker are not subject to social security and Medicare taxes, even if you pay $2,500 or more to all your farmworkers. However, these wages count toward the $2,500 test for determining whether other farmworkers' wages are subject to social security and Medicare taxes.

  A seasonal farmworker is a worker who:
  • Works as a hand-harvest laborer,

  • Is paid piece rates in an operation usually paid on this basis in the region of employment,

  • Commutes daily from his or her permanent home to the farm, and

  • Worked in agriculture less than 13 weeks in the preceding calendar year.

  See Family Employees , earlier, for certain exemptions from social security and Medicare taxes that apply to your child, spouse, and parent.

Religious exemption.   An exemption from social security and Medicare taxes is available to members of a recognized religious group or division opposed to public insurance. This exemption is available only if both the employee and the employer are members of the group or division.

  For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers.

Cash wages.   Only cash wages paid to farmworkers are subject to social security and Medicare taxes. Cash wages include checks, money orders, and any kind of money or cash.

  Only cash wages subject to social security and Medicare taxes are credited to your employees for social security benefit purposes. Payments not subject to these taxes, such as commodity wages, do not contribute to your employees' social security coverage. For information about social security benefits, contact the SSA at 1-800-772-1213 or online at www.socialsecurity.gov.

Noncash wages.    Noncash wages include food, lodging, clothing, transportation passes, and other goods and services. Noncash wages paid to farmworkers, including commodity wages, are not subject to social security and Medicare taxes. However, they are subject to these taxes if the substance of the transaction is a cash payment. For information on lodging provided as a condition of employment, see Publication 15-B.

  Report the value of noncash wages in box 1 of Form W-2 together with cash wages. Do not show noncash wages in box 3 or in box 5, (unless the substance of the transaction is a cash payment).

Tax rates and social security wage limit.   For 2013, the employer and the employee will pay the following taxes.
  • The employer and employee each pay 6.2% of cash wages for social security tax (old-age, survivors, and disability insurance).

  • The employer and employee each pay 1.45% of cash wages for Medicare tax (hospital insurance).

  • The employee pays 0.9% of cash wages in excess of $200,000 for Additional Medicare Tax.

Wage limit.   The limit on wages subject to the social security tax for 2013 is $113,700. There is no limit on wages subject to the Medicare tax. All covered wages are subject to the Medicare tax. Additionally, all wages in excess of $200,000 are subject to Additional Medicare Tax withholding.

Paying employee's share.   If you would rather pay the employee's share of social security and Medicare taxes without deducting it from his or her wages, you may do so. It is additional income to the employee. You must include it in box 1 of the employee's Form W-2, but do not count it as social security and Medicare wages (boxes 3 and 5 on Form W-2) or as wages for federal unemployment (FUTA) tax purposes.

Example.

Jane operates a small family fruit farm. She employs day laborers in the picking season to enable her to timely get her crop to market. She does not deduct the employees' share of social security and Medicare taxes from their pay; instead, she pays it on their behalf. When her accountant, Susan, prepares the employees' Forms W-2, she adds each employee's share of social security and Medicare taxes paid by Jane to the employee's wage income (box 1 of Form W-2), but does not include it in box 3 (social security wages) or box 5 (Medicare wages and tips).

For 2013, Jane paid Mary $1,000 during the year. Susan enters $1,076.50 in box 1 of Mary's Form W-2 ($1,000 wages plus $76.50 social security and Medicare taxes paid for Mary). She enters $1,000 in boxes 3 and 5 of Mary's Form W-2.

Additional Medicare Tax.   In addition to withholding Medicare tax at 1.45%, you must withhold a 0.9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Additional Medicare Tax is only imposed on the employee. There is no employer share of Additional Medicare Tax. All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 threshold.

  For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E). For more information on Additional Medicare Tax, visit IRS.gov and enter “Additional Medicare Tax” in the search box.

Federal Income Tax Withholding

If the cash wages you pay to farmworkers are subject to social security and Medicare taxes, they are also subject to federal income tax withholding. Although noncash wages are subject to federal income tax, withhold income tax only if you and the employee agree to do so. The amount to withhold is figured on gross wages without taking out social security and Medicare taxes, union dues, insurance, etc.

Form W-4.   Generally, the amount of federal income tax you withhold is based on the employee's marital status and withholding allowances claimed on the employee's Form W-4. In general, an employee can claim withholding allowances on Form W-4 equal to the number of exemptions the employee will be entitled to claim on his or her tax return. An employee may also be able to claim a special withholding allowance and allowances for estimated deductions and credits.

  Do not withhold federal income tax from the wages of an employee who, by filing Form W-4, certifies that he or she had no federal income tax liability last year and anticipates no liability for the current year.

  You should give each new employee a Form W-4 as soon as you hire the employee. For Spanish-speaking employees, you may use Formulario W-4(SP) which is the Spanish translation of Form W-4. Have the employee complete and return the form to you before the first payday. If the employee does not return the completed form, you must withhold federal income tax as if the employee is single and claims no withholding allowances.

New Form W-4 for 2014.   You should make the 2014 Form W-4 available to your employees and encourage them to check their income tax withholding for 2014. Those employees who owed a large amount of tax or received a large refund for 2013 may want to submit a new Form W-4. You cannot accept substitute Forms W-4 developed by employees.

How to figure withholding.   You can use one of several methods to determine the amount to withhold. The methods are described in Publication 51 (Circular A), which contains tables showing the correct amount of federal income tax you should withhold. Publication 51 (Circular A) also contains additional information about federal income tax withholding.

Nonemployee compensation.   Generally, you do not have to withhold federal income tax on payments for services to individuals who are not your employees. However, you may be required to report these payments on Form 1099-MISC, Miscellaneous Income, and to withhold under the backup withholding rules. For more information, see the Instructions for Form 1099-MISC.

Required Notice to Employees About Earned Income Credit (EIC)

You must provide notification about EIC to each employee who worked for you at any time during the year and from whom you did not withhold any federal income tax. However, you do not have to notify employees who claim exemption from federal income tax withholding on Form W-4. You meet the notification requirement by giving each employee any of the following.

  • Form W-2, which contains EIC notification on the back of Copy B.

  • A substitute Form W-2 with the exact EIC wording shown on the back of copy B of Form W-2.

  • Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit (EIC).

  • Your own written statement with the exact wording of Notice 797.

For more information, see Publication 51 (Circular A).

Reporting and Paying Social Security, Medicare, and Withheld Federal Income Taxes

You must withhold federal income, social security, and Medicare taxes required to be withheld from the salaries and wages of your employees. You are liable for the payment of these taxes to the federal government whether or not you collect them from your employees. If, for example, you withhold less than the correct tax from an employee's wages, you are still liable for the full amount. You must also pay the employer's share of social security and Medicare taxes. There is no employer share of Additional Medicare Tax.

Form 943.   Report withheld federal income tax, social security tax, and Medicare tax on Form 943. Your 2013 Form 943 is due by January 31, 2014 (or February 10, 2014, if you made deposits on time in full payment of the taxes due for the year).

Deposits.   Generally, you must deposit both the employer and employee shares of social security and Medicare taxes and federal income tax withheld during the year. However, you may make payments with Form 943 instead of depositing them if you accumulate less than a $2,500 tax liability (“Total taxes after adjustments” line on Form 943) during the year and you pay in full with a timely filed return.

  For more information on deposit rules, see Publication 51 (Circular A).

Electronic deposit requirement.   You must use electronic funds transfer to make all federal tax deposits. Generally, electronic funds transfers are made using EFTPS. If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. EFTPS is a free service provided by the Department of Treasury. Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee.

  For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). To get more information about EFTPS or to enroll in EFTPS, visit www.eftps.gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Additional information about EFTPS is also available in Publication 966.

Form W-2.   By January 31, you must furnish each employee a Form W-2 showing total wages for the previous year and total federal income tax, social security tax, and Medicare tax withheld. However, if an employee stops working for you and requests the form earlier, you must give it to the employee within 30 days of the later of the following dates.
  • The date the employee requests the form.

  • The date you make your final payment of wages to the employee.

Compensation paid to H-2A visa holders.   Report compensation of $600 or more paid to foreign agricultural workers who entered the country on H-2A visas in box 1 of Form W-2. Compensation paid to H-2A workers for agricultural labor performed in connection with this visa is not subject to social security and Medicare taxes, and therefore should not be reported as wages subject to social security tax (line 2), Medicare tax (line 4), or Additional Medicare Tax (line 6) on Form 943, and should not be reported as social security wages (box 3) or Medicare wages (box 5) on Form W-2.

  An employer is not required to withhold federal income tax from compensation it pays to an H-2A worker for agricultural labor performed in connection with this visa unless the worker asks for withholding and the employer agrees. In this case, the worker must give the employer a completed Form W-4. Federal income tax withheld should be reported on Form 943, line 8, and in box 2 of Form W-2.

  These reporting rules apply when the H-2A worker provides his or her taxpayer identification number (TIN) to the employer. For the rules relating to backup withholding and reporting when the H-2A worker does not provide a TIN, see the Instructions for Form 1099-MISC and the Instructions for Form 945.

Trust fund recovery penalty.   If you are responsible for withholding, accounting for, depositing, or paying federal withholding taxes and willfully fail to do so, you can be held liable for a penalty equal to the withheld tax not paid. A responsible person can be an officer of a corporation, a partner, a sole proprietor, or an employee of any form of business. A trustee or agent with authority over the funds of the business can also be held responsible for the penalty.

  Willfully means voluntarily, consciously, and intentionally. Paying other expenses of the business instead of the taxes due is acting willfully.

Consequences of treating an employee as an independent contractor.   If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker. See Publication 15-A for more information.

Federal Unemployment (FUTA) Tax

You must pay FUTA tax if you meet either of the following tests.

  • You paid cash wages of $20,000 or more to farmworkers in any calendar quarter during the current or preceding calendar year.

  • You employed 10 or more farmworkers for some part of at least 1 day during any 20 or more different calendar weeks during the current or preceding calendar year.

These rules do not apply to exempt services of your spouse, your parents, or your children under age 21. See Family Employees , earlier.

Alien farmworkers.   Wages paid to aliens admitted on a temporary basis to the United States to perform farmwork (also known as “H-2A visa workers”) are exempt from FUTA tax. However, include your employment of these workers and the wages you paid them to determine whether you meet either of the above tests.

Commodity wages.   Payments in kind for farm labor are not cash wages. Do not count them to figure whether you are subject to FUTA tax or to figure how much tax you owe.

Tax rate and credit.   The gross FUTA tax rate is 6.0% of the first $7,000 cash wages you pay to each employee during the year. However, you are given a credit of up to 5.4% of the first $7,000 cash wages you pay to each employee for the state unemployment tax you pay. If your state tax rate (experience rate) is less than 5.4%, you may still be allowed the full 5.4% credit.

  If you do not pay the state tax, you cannot take the credit. If you are exempt from state unemployment tax for any reason, the full 6.0% rate applies. See the Instructions for Form 940 for additional information.

More information.   For more information on FUTA tax, see Publication 51 (Circular A).

Reporting and Paying FUTA Tax

The FUTA tax is imposed on you as the employer. It must not be collected or deducted from the wages of your employees.

Form 940.   Report FUTA tax on Form 940. The 2013 Form 940 is due January 31, 2014 (or February 10, 2014, if you timely deposited the full amount of your 2013 FUTA tax).

Deposits.   If at the end of any calendar quarter you owe, but have not yet deposited, more than $500 in FUTA tax for the year, you must make a deposit by the end of the following month. If the undeposited tax is $500 or less at the end of a quarter, you do not have to deposit it. You can add it to the tax for the next quarter. If the total undeposited tax is more than $500 at the end of the next quarter, a deposit will be required. If the total undeposited tax at the end of the 4th quarter is $500 or less, you can either make a deposit or pay it with your return by the January 31, 2014, due date.

Electronic deposit requirement.   You must use electronic funds transfer to make all federal tax deposits. Generally, electronic funds transfers are made using EFTPS. If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. EFTPS is a free service provided by the Department of Treasury. Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee.

  For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). To get more information about EFTPS or to enroll in EFTPS, visit www.eftps.gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Additional information about EFTPS is also available in Publication 966.


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