Irs Publication 595 - Tax Highlights For Commercial Fishermen

on a fishing boat are considered to be self-em-

Figure 1. Estimated Tax for Fishermen

ployed for purposes of employment and self-em-

ployment taxes. A fisherman is considered

Start Here:

self-employed if he meets all of the following

conditions.

Do you expect to owe

$1,000 or more after

1) He receives a share of the catch or a

subtracting your

share of the proceeds from the sale of the

withholding and credits?

catch.

Yes

2) His share depends on the amount of the

catch.

Was at least 66

⁄

Yes

3) He receives his share from a boat (or from

of all your gross

Follow the general

each boat in the case of a fishing opera-

income in 2000 or

estimated tax rules.

tion involving more than one boat) with an

2001 from fishing?

operating crew normally made up of fewer

than 10 individuals. This requirement is

considered to be met if the average num-

Do you expect

ber of crew members on trips the boat

your income tax

Will you file

made during the last 4 calendar quarters

Estimated tax

withholding and

your income

was less than 10.

payment (your

credits to be at

tax return and

required annual

4) He does not get any money for his work

least 66

⁄

% of

least 100% of

pay the tax in

payment) due

(other than his share of the catch or of the

the tax shown

full by

January 15.

proceeds from the sale of the catch), un-

on your 2001

on your 2000

March 1?

less the pay meets all of the following con-

return?

ditions.

Yes

a) He does not get more than $100 per

trip.

You do not have to

b) He is paid only if there is a minimum

pay estimated tax.

catch.

c) He is paid solely for additional duties

(such as for services performed as

mate, engineer, or cook) for which ad-

ditional cash payments are traditional

Employment Tax Forms

When Do Fishermen

in the fishing industry.

You are generally required to withhold federal

Pay Estimated Tax and

income tax, social security tax, and Medicare tax

Example 1. You hire a captain, a mate, an

from your employee’s wages. You also must pay

File Tax Returns?

engineer, a cook, and five other crew members

the employer’s share of social security and

to work on your fishing boat. The proceeds from

Medicare taxes. In addition, you may be re-

the sale of the catch offset boat operating ex-

When you must pay estimated tax and file

quired to pay federal unemployment tax under

penses such as bait, ice, and fuel. You divide

your tax return depends on what percentage of

the Federal Unemployment Tax Act (FUTA). If

60% of the balance among the captain, the

your gross income comes from fishing. Gross

you have employees, you will need to file forms

mate, and the crew members. You divide the

income is discussed later.

to report these employment taxes. For more

other 40% between yourself and the captain.

information, see Publication 15, which explains

The mate, the engineer, and the cook also each

General Rule For Making

your payroll tax responsibilities as an employer.

receive an extra $100 for each trip that brings

Estimated Tax Payments

back a certain minimum catch. The crew mem-

To help you determine whether the people

bers do not receive any additional pay between

working for you are your employees, see Publi-

You must make estimated tax payments for

voyages, but they must do certain work, such as

cation 15 – A. It has information to help you de-

2001 if you expect to owe at least $1,000 in tax,

repairing nets, splicing cable, and transporting

termine whether an individual is an independent

after subtracting your withholding and credits,

the catch.

contractor or an employee.

and you expect your withholding and credits to

For purposes of employment and self-em-

be less than the smaller of the following.

If you incorrectly classify an employee

ployment taxes, each crew member (including

as an independent contractor, you can

the captain, mate, engineer, and cook) is con-

1) 90% of the tax to be shown on your 2001

be held liable for employment taxes for

CAUTION

sidered self-employed. You must file Form

tax return.

that worker, plus a penalty.

1099 – MISC to report amounts you pay to them.

2) 100% of the tax shown on your 2000 tax

An independent contractor is someone

return. Your 2000 tax return must cover all

Example 2. The facts are the same as in

who is self-employed. You do not generally have

12 months for this rule to apply.

Example 1 except that all the crew members but

to withhold or pay any taxes on payments to an

the captain receive an extra $100 for each trip

If at least two-thirds of your gross income for

independent contractor.

that brings back a certain minimum catch.

2000 or 2001 is from fishing, substitute 66

Individuals you employ to work on a boat that

for 90% in (1) above.

For purposes of employment and self-em-

normally has an operating crew of fewer than 10

If you receive at least two-thirds of your total

ployment taxes, the captain, the mate, the engi-

individuals may be considered self-employed.

gross income from fishing in the current or prior

neer, and the cook are self-employed

For more information, see Which fishermen are

year, special estimated tax and return due dates

individuals. The other five crew members who

considered self-employed? under Form

apply to you. See the discussion under Due

receive this extra payment in addition to the

1099 – MISC, earlier.

Dates for Qualified Fishermen, later.

proceeds from the sale of the catch are employ-

ees. They are employees because the $100

Table 1. See Table 1 for information on the

payment is not paid solely for additional duties

employment tax treatment of fishing activities

for which additional cash pay is traditional in the

fishing industry.

and certain fishermen.

Page 5

Irs Publication 595 - Tax Highlights For Commercial Fishermen - 2001 Page 5

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