If the cash wages you pay farm workers are subject to social
security and Medicare taxes, they are also subject to income tax
withholding. Although noncash wages are subject to 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 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 income tax from the wages of an employee who, by
filing Form W-4, certifies that he or she had no income tax
liability last year and anticipates no liability for the current year.
How to figure withholding.
You can use one of several methods to determine the amount to
withhold. The methods are described in Circular A, which contains
tables showing the correct amount of income tax you should withhold.
Circular A also contains additional information about income tax
withholding.
New Form W-4 for 2001.
You should make the 2001 Form W-4 available to your
employees and encourage them to check their income tax withholding for
2001. Those employees who owed a large amount of tax or received a
large refund for 2000 may want to file a new Form W-4.
Nonemployee compensation.
Generally, you are not required to withhold 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. See Information Returns in chapter 2
for
information.
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