Publication 80 - (Circular Ss),federal Tax Guide For Employers In The U.s. Virgin Islands, Guam, American Samoa, And The Commonwealth Of The Northern Mariana Islands Page 7
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245. Taxable Tips
6. Social Security and Medicare
Taxes for Farmworkers
Tips that your employee receives are generally subject to
social security and Medicare withholding. Your employee
The tests described below apply only to services that are
must report cash tips to you by the 10th of the month after
defined as agricultural labor (farmwork). Farmworkers are
the month that the tips are received. The report should
your employees if they:
include tips that you paid to the employee from charge
•
receipts. Also include tips that the employee received
Raise or harvest agricultural or horticultural products
directly from customers and other employees, and indi-
on your farm,
rectly (for example, tip splitting). The report should not
•
Work in connection with the operation, management,
include tips that the employee paid out to other employees.
conservation, improvement, or maintenance of your
No report is required for months when tips are less than
farm and its tools and equipment,
$20. Your employees report tips on Form 4070,
•
Handle, process, or package any agricultural or hor-
Employee’s Report of Tips to Employer, or on a similar
ticultural commodity if you produced over half of the
statement. They may also use Form 4070A, Employee’s
commodity (for an unincorporated group of up to 20
Daily Record of Tips, to keep a record of their tips. Both
operators, all of the commodity), or
forms are printed in Publication 1244, Employee’s Daily
•
Do work for you related to cotton ginning, turpentine,
Record of Tips and Report to Employer, available from the
or gum resin products.
IRS.
A “share farmer” working for you is not your employee.
The statement must be signed by the employee and
However, the share farmer may be subject to self-employ-
must show the following.
ment tax. In general, share farming is an arrangement in
which certain commodity products are shared between the
•
The employee’s name, address, and SSN.
farmer and the owner (or tenant) of the land. For details,
•
see Regulations section 31.3121(b)(16)-1.
The employer’s name and address.
•
The month or period that the report covers.
The $150 Test or the $2,500 Test
•
The total tips.
All cash wages that you pay for farmwork are subject to
You must collect the employee social security and Medi-
social security and Medicare taxes if either of the two tests
below is met.
care taxes on the employee’s tips. You can also collect
these taxes from the employee’s wages or from other
•
You pay cash wages to the employee of $150 or
funds that he or she makes available. Stop collecting the
more in a year (count all cash wages paid on a time,
employee social security tax when his or her total wages
piecework, or other basis) for farmwork. The $150
and tips for 2005 reach $90,000. Collect the employee
test applies separately to each farmworker that you
Medicare tax for the whole year on all wages and tips.
employ. If you employ a family of workers, each
You are responsible for the employer social security tax
member is treated separately. Do not count wages
paid by other employers.
on wages and tips until the wages (including tips) reach the
•
wage base limit. You are responsible for the employer
The total that you pay for farmwork (cash and non-
Medicare tax for the whole year on all wages and tips. File
cash) to all of your employees is $2,500 or more
Form 941-SS to report withholding and employer taxes on
during the year.
tips.
If, by the 10th of the month after the month you received
Exceptions. The $150 and $2,500 tests do not apply
an employee’s report on tips, you do not have enough
wages that you pay to a farmworker who receives less than
employee funds available to deduct the employee tax, you
$150 in annual cash wages and the wages are not subject
no longer have to collect it. Show these tips and any
to social security and Medicare taxes, or income tax with-
holding, even if you pay $2,500 or more in that year to all of
uncollected social security and Medicare taxes in boxes 1,
your farmworkers if the farmworker:
5, 7, and 12 on Forms W-2VI, W-2GU, W-2AS, or W-2CM
and on lines 5b, 5c, and 7c of Form 941-SS.
•
Is employed in agriculture as a hand-harvest laborer,
•
Note. You are permitted to establish a system for elec-
Is paid piece rates in an operation that is usually
tronic tip reporting by employees. See Regulations section
paid on a piece-rate basis in the region of employ-
31.6053-1(d).
ment,
•
The table in section 12 shows how tips are treated for
Commutes daily from his or her home to the farm,
FUTA tax purposes.
and
Page 7
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