Farmers, H-2A, and Employee Taxes: What You Need to Know
Paying taxes – it’s one of the guaranteed aspects of life as an American.
Our in-house consultants are asked about employee taxes related to the H-2A program all of the time. To help clear things up, we’re going over some of the tax obligations and challenges our clients typically face when first hiring seasonal H-2A employees for their farms or agribusinesses.
If you have immediate questions about the H-2A program or sourcing a quality workforce, please don’t hesitate to reach out to the team at USA FARM LABOR. Our agents are standing by ready to help with all of your H-2A needs.
Now, let’s dig into taxes and H-2A employees.
Benefits of Understanding H-2A Employee Tax Regulations
As a farmer or farm labor contractor, you’re also a business owner and that comes with a ton of responsibility. Understanding taxes and your business’s tax obligations is a critical aspect of running a successful business. You need to have a working knowledge of both business taxes and employee taxes. Here are a couple of the benefits of understanding H-2A employee taxes.
Trustworthiness
Having a thorough knowledge of your employees’ tax obligations makes you a trusted employer while ensuring fair treatment of your dedicated employees. Whether you employ domestic workers, H-2A workers, or a combination of both, you need to understand the tax obligations of your employees. Furthermore, failing to withhold the proper tax amounts or not reporting wages to the Internal Revenue Service (IRS) can cause issues for your employees and lead to dissension.
Business Finances
Understanding all aspects of your tax obligations is simply good business management. Managing your finances involves planning for taxes and knowing your tax obligations – for both your business entity and your employees. A working knowledge of taxes will also help you plan for the future and effectively grow your business year after year.
Steps to Get Your H-2A Employees Set Up to Pay Taxes
Now, it’s time to get your H-2A employees ready to work in America, but how will you get these employees established with taxes?
Here are the steps you will need to take to get your employees established as taxpayers:
1. Get a Social Security Number (SSN)
Let’s take a step back in the process to when your H-2A employees first arrive in America. You will need to get your H-2A employees a Social Security Number (SSN) by taking them to the nearest Social Security Administration (SSA) office. If your employees arrive a day or two before the start date on your work contract (the start date you chose on the ETA-790), then you’ll have a couple of days to get them settled in America. We recommend setting your H-2A employees up with an SSN right away.
2. Open a Bank Account
Once your employees are set up with an SSN, it’s time to get them over to the bank to open a bank account. Although a bank account isn’t a requirement to pay taxes, it’s smart to have your H-2A employees set up with a bank account so you can pay them with direct deposit, they have a way to accept tax returns, and they can quickly pay any bills or outstanding tax balances.
3. File Tax Forms for Payroll
Once your H-2A employees have an SSN and a bank account, it’s time to get them on your business’s payroll. Have your employees fill out a W-4 Employee’s Withholding Certificate and they will be ready to start working and paying Federal Income Taxes.
Tax Obligations for H-2A Employees
H-2A employees are essential to the agriculture industry in America, but for tax purposes, these individuals are considered non-resident aliens. This citizenship status means there are a few different tax rules for your H-2A employees than your domestic hires.
Social Security, Medicare, and Unemployment Taxes
H-2A employees are not required to pay Social Security or Medicare taxes, so employers won’t have to worry about this. This tax exemption also means that employers do not need to pay half of these taxes for H-2A employees or unemployment insurance taxes as they would for domestic workers.
Federal Income Tax
H-2A employees are required to pay Federal Income Tax, but withholding Federal Taxes from your H-2A employees is not mandatory. H-2A employees can opt in or out of withholding their taxes while they are filling out their form W-4 and you must not pressure them either way. Although withholding Federal Tax from your H-2A employees is optional, it’s highly recommended that they choose to have these taxes withheld. If you don’t withhold Federal Taxes, your H-2A employees might owe the government when they go to file their tax return.
Likewise, if you plan on bringing the same H-2A employees back every season, it’s highly recommended to withhold Federal Tax and have them fill out a W-4.
State Income Tax
Not all states have a state income tax. You’ll need to check with your specific state regarding state taxes. While some states such as Florida, South Carolina, and Texas don’t have any state income tax, other states such as Illinois and Indiana do. Check with your state and your accountant and proceed appropriately.
Contact USA FARM LABOR for Help with H-2A Program Requirements
Don’t trust your H-2A program needs to just anyone. With more than 20 years of program experience, USA FARM LABOR is your trusted source for all things H-2A. From filing the necessary paperwork to helping you source a reliable, skilled seasonal H-2A workforce, we have the experience and connections needed to help our clients successfully navigate this program and grow their businesses at the same time.
Our consultations are always 100% FREE and there’s never any obligation to sign up.
If you’ve been struggling to source reliable employees for your farm or agribusiness, then you can’t afford to miss this chance.
Give us a call at 828-246-0659 or fill out the contact form below to get started.
When you succeed, we succeed, and that’s the USA FARM LABOR difference.