Farm payroll looks like any other payroll until it is time to file. Agricultural wages have their own federal return and tests, and California adds its own overtime and piece-rate rules. Here are the basics for California agricultural employers.
Form 943, not Form 941
Most employers report federal payroll taxes quarterly on Form 941. Employers who pay wages to farmworkers report those wages on Form 943, the Employer’s Annual Federal Tax Return for Agricultural Employees (IRS Instructions for Form 943).
If you employ both farm and nonfarm workers, the two groups are reported separately: nonfarm wages go on Form 941 (or Form 944), not Form 943. A farm with field crews and an office manager may file both.
Form 943 is filed once a year, generally by January 31 of the following year, with extra time to February 10 for employers who deposited all taxes on time and in full. When a due date falls on a weekend or holiday, the next business day applies. An annual return does not mean annual payments: payroll taxes are still deposited during the year on the schedule that applies to your business (IRS Publication 15).
Publication 51, the old Agricultural Employer’s Tax Guide, has been discontinued; that guidance now lives in Publication 15.
When farmworker wages are subject to Social Security and Medicare
Two federal tests decide when farmwork wages are subject to Social Security and Medicare taxes (IRS Instructions for Form 943):
- The $150 test. You pay an employee cash wages of $150 or more in a year for farmwork.
- The $2,500 test. The total cash and noncash wages you pay to all farmworkers during the year is $2,500 or more.
If either test is met, the wages are generally subject to Social Security and Medicare. Special rules apply to certain hand-harvest laborers paid less than $150 in annual cash wages. When farmworker wages are subject to these taxes, federal income tax withholding generally applies as well (IRS Publication 15).
Federal unemployment tax (FUTA) has a separate test. An agricultural employer files Form 940 if it paid $20,000 or more in cash wages to farmworkers in any calendar quarter, or employed 10 or more farmworkers during some part of a day in 20 or more different weeks, in the current or prior year (IRS Instructions for Form 940).
H-2A workers follow different rules
H-2A workers, admitted for temporary agricultural work, are treated differently for federal payroll taxes (IRS guidance on foreign agricultural workers; Instructions for Forms 940 and 943):
- No Social Security or Medicare. Compensation paid to H-2A workers is exempt from these taxes (see also IRC §3121(b)(1)).
- No FUTA. Wages paid to H-2A workers are not subject to federal unemployment tax.
- Form W-2 reporting. Compensation of $600 or more is reported in box 1 of Form W-2. Nothing is reported in box 3 or box 5.
- Income tax withholding is voluntary. Employers are not required to withhold federal income tax, but may when both the worker and employer agree. Amounts withheld go on Form 943, line 8, and Form W-2, box 2.
- Backup withholding without a TIN. If an H-2A worker does not provide a Social Security number or ITIN and annual payments reach $600, the IRS calls for backup withholding at 24%, reported on Form 1099-MISC and Form 945.
The IRS also notes that H-2A wages may be subject to state and local income taxes, so California treatment is worth confirming with the Employment Development Department (EDD). The program’s separate wage, housing, and recordkeeping requirements are administered by the U.S. Department of Labor and are best handled alongside the agent or attorney managing your petitions.
California agricultural overtime
California phased in daily and weekly overtime for agricultural workers under AB 1066 (2016). According to the California Labor Commissioner’s agricultural overtime guidance, the phase-in finished on January 1, 2022 for employers with 26 or more employees and on January 1, 2025 for employers with 25 or fewer.
Under the final schedule, agricultural workers earn overtime after 8 hours in a workday or 40 hours in a workweek, and double time after 12 hours in a workday. Seventh-day rules under IWC Wage Order 14 also continue to apply. Farms that set up payroll under older thresholds may want to confirm their settings match the current schedule.
Piece-rate pay and wage statements
California Labor Code §226.2 sets specific rules for workers paid by the piece. In general terms:
- Rest and recovery periods are paid separately from piece-rate earnings, at a rate no lower than the higher of an average hourly rate for the workweek or the applicable minimum wage.
- Other nonproductive time, meaning time under the employer’s control that is not directly related to the piece-rate work, is paid separately at no less than the applicable minimum wage.
- Itemized wage statements show the total hours, rate, and gross wages for rest and recovery periods, and the same details for other nonproductive time (with an exception for employers who also pay at least minimum wage for every hour worked).
The Department of Industrial Relations publishes guidance and a sample piece-rate pay stub. Because one error can repeat across a crew, setup is worth reviewing before the season.
Keep payroll tied to the books
A few habits keep filings and books consistent:
- Separate farm and nonfarm wages from the start, so each employee’s pay lands on the right federal return.
- Code labor to the crop, block, or enterprise it supports, so you can see what each part of the operation costs.
- Track hours, piece counts, and rest periods together, so wage statements can be built from the same data.
- Keep crew leader records. If a crew leader supplies farmworkers, Publication 15 calls for a record of the crew leader’s name, permanent mailing address, and EIN.
- Reconcile at year end. Form 943, any Form 941 filings, Forms W-2 and W-3, and the payroll accounts in your general ledger should tell the same story.
When payroll and the books agree, notices are easier to answer, and labor costs become something you can plan around rather than discover.
How TreeStar can help
TreeStar works with agricultural employers on payroll setup, processing, and federal and California filings, with every pay run recorded in the books. If you would like a second look at how your farm and nonfarm wages, H-2A reporting, or piece-rate pay are set up, we are glad to review it with you.
This article is general information, not advice for your situation. Rules change; confirm current law before acting.
