What Does 943 Agricultural Employee Mean?

Understanding the classification of an “agricultural employee” is important for employers regarding federal tax obligations. The Internal Revenue Service (IRS) has specific guidelines that determine who falls under this category, impacting how employers manage and report payroll taxes. Proper classification ensures compliance with tax laws and helps avoid potential penalties.

Defining Agricultural Employee

An individual is an agricultural employee if they perform specific agricultural labor. This includes services performed on a farm such as cultivating the soil, raising or harvesting agricultural or horticultural commodities, or the care of livestock, poultry, bees, fur-bearing animals, and wildlife. The term “farm” includes stock, dairy, poultry, fruit, fur-bearing animal, and truck farms, plantations, ranches, nurseries, ranges, greenhouses, and orchards primarily used for raising agricultural or horticultural commodities. Services connected to farm operation, management, conservation, or maintenance, including tools and equipment, are also agricultural labor if performed primarily on a farm.

For Social Security and Medicare taxes, an agricultural employee’s cash wages are subject to tax if certain conditions are met. One condition is if an employer pays an individual $150 or more in cash wages for farm work in a calendar year. Alternatively, if total cash and non-cash wages paid to all farmworkers by an employer in a calendar year amount to $2,500 or more, all cash wages paid to those employees are subject to Social Security and Medicare taxes. Even if an individual employee doesn’t reach the $150 threshold, their cash wages are taxable if the employer’s total agricultural payroll meets the $2,500 threshold.

Distinguishing between cash and non-cash wages is important for agricultural employment tax purposes. For Social Security and Medicare taxes, only cash wages are generally considered, unlike non-agricultural employment where non-cash wages may also be taxable. However, for the $2,500 aggregate wage test, both cash and non-cash wages paid to all farmworkers count towards the threshold. Federal income tax withholding is also required for agricultural employees whose wages are subject to Social Security and Medicare taxes.

Form 943 Purpose and Content

IRS Form 943, “Employer’s Annual Federal Tax Return for Agricultural Employees,” is the primary document for agricultural employers to report and pay federal employment taxes. It reports wages paid to agricultural workers and calculates associated federal taxes. It is for employers who pay farmworker wages subject to federal income tax withholding or Social Security and Medicare taxes.

The form requires employers to report several key pieces of information. This includes federal income tax withheld from agricultural employee wages. Employers must also report employee and employer shares of Social Security and Medicare taxes on agricultural wages. Additionally, the form allows for adjustments related to prior periods, such as corrections for fractions of cents, sick pay, tips, and group-term life insurance.

Employers can obtain Form 943 from the IRS website or by ordering a paper copy. When completing the form, employers enter their business name, address, and Employer Identification Number (EIN). Detailed payroll records are used to complete the form’s lines, such as total cash wages subject to Social Security and Medicare taxes, and total federal income tax withheld. For example, Line 2 requires total cash wages subject to Social Security Tax, and Line 3 calculates the Social Security Tax due by multiplying that total by 12.4%.

Employer Responsibilities for Agricultural Employee Taxes

Once agricultural employees are identified, employers must fulfill specific procedural obligations for tax compliance related to Form 943. Form 943 must be filed annually by January 31st of the year following the tax year. However, if an employer has made timely deposits of all taxes due, an extension to file until February 10th is granted. Once filed, employers must continue to file Form 943 every year, even if no taxes are due, until a final return indicates the business has ceased operations or no longer employs agricultural workers.

Depositing federal employment taxes for agricultural employees typically involves electronic funds transfer (EFT), often through the Electronic Federal Tax Payment System (EFTPS). Employers determine their deposit schedule (monthly or semi-weekly) based on their total tax liability from a look-back period, which is the second calendar year preceding the current year. Monthly depositors generally deposit taxes by the 15th day of the following month for wages paid during a calendar month. Semi-weekly depositors have specific deadlines: by Wednesday for payments made on Wednesday, Thursday, and Friday, and by Friday for payments made on Saturday, Sunday, Monday, and Tuesday.

If an employer’s total tax liability for the calendar year is less than $2,500, they can generally pay the full amount owed when filing Form 943, rather than making periodic deposits. However, if a tax liability of $100,000 or more accumulates on any day, the employer must deposit the tax by the next business day, irrespective of their regular deposit schedule. This also makes them a semi-weekly depositor for at least the remainder of the current year and the subsequent calendar year. Employers must also maintain detailed records for agricultural employees for at least four years after the tax becomes due or is paid, whichever is later. These records should include employee names, addresses, Social Security numbers, wages paid, dates of employment, and all taxes withheld.