Agricultural employers may have responsibilities to
fulfill under the three major Federal employment tax
laws: the Federal Insurance Contributions Act (FICA,
commonly known as Social Security), Federal
Unemployment Tax Act (FUTA), and Federal income
tax codes. These Federal tax laws may require an
agricultural employer to:
nWithhold money from employees wages, match
the amount withheld, and forward the total to the
U.S. Treasury (FICA).
nPay a specified amount based on wages paid to
employees (FUTA).
nWithhold money from employees wages and
forward it to the U.S. Treasury (Federal income tax
code).
Definitions
The applicability of these employment tax laws to
specific situations is based on refinements to the
general definitions of terms in the Internal Revenue
Code. For purposes of this report, definitions will be
limited to employees, employer of farmworkers, crew
leaders, and wages.
Employees. For tax purposes, there are several types
of business relationships between a person obtaining
labor services and the person providing them. These
are independent contractors, common-law employees,
statutory employees, statutory nonemployees, and
family employees. Independent contractors and
common-law and family employees have particular
relevance for agricultural employment. Generally, a
person is an independent contractor if the person
paying for the services has the right to control or direct
only the result of the work and not the means and
methods of accomplishing the results (22). A
common-law employee is anyone who performs
services for someone if the person paying for the
services can control what will be done and how it will
be done, even if the employee is given freedom of
action (22). Family employees are children, parents,
and spouses.
An employer must generally withhold income taxes,
withhold and pay Social Security and Medicare taxes,
pay unemployment taxes on wages paid, and file
employment tax returns for each employee, but not
generally withhold them on wages paid to an
independent contractor. Therefore, it is important to
distinguish between independent contractors and
employees. The Internal Revenue Service determines
a workers status according to the degree of control
and independence. The facts that provide the evidence
of the degree of control and independence have been
divided into three categories: behavioral, financial, and
the type of relationship of the parties (see app. B).
Employer of farmworkers. If a farm employer has
employees performing several tasks, it is also
important to distinguish between those that are
farmworkers and others. According to the Internal
Revenue Service, in general, a person is an employer
of farmworkers if the employees:
nRaise or harvest agricultural or horticultural
products on a farm.
nWork in connection with the operation,
management, conservation, improvement, or
maintenance of the employers farm and its tools
and equipment.
nHandle, process, or package any agricultural or
horticultural commodity if the employer produced
over half of the commodity (for a group of more
than 20 operators, all of the commodity).
nDo work related to cotton ginning, turpentine, or
gum resin products.
nDo housework in the employers private home if it
is on a farm operated for profit (22).16
Farmwork does not include reselling activities that do
not involve any substantial activity of raising
agricultural or horticultural commodities. This would
include employment in retail stores or greenhouses
used primarily for display or storage.
The term farm includes stock, dairy, poultry, fruit, fur-
bearing animal, and truck farms. It also includes
plantations, ranches, nurseries, ranges, greenhouses, or
other structures used primarily for the raising of
16For more detailed information see appendix C, Circular A,
Agricultural Employers Tax Guide, or contact the local office of
the Internal Revenue Service.
42 Federal Laws and Regulations Affecting Agricultural Employers Economic Research Service/USDA
Requirements for Agricultural Employers Under the Major Federal
Employment Tax Laws
