Details on whether certain payments to Employees are wages for Social Security and Medicare tax purposes are found earlier where each payment is discussed separately. In general, all Employee compensation is subject to Social Security and Medicare taxes unless specifically exempted under the Internal Revenue Code.
Following is a list of several exempt payments.
- sickness or injury payments made under a state workers’ compensation law;
- sick or disability benefits paid to or on behalf of an Employee more than 6 calendar months after the last month the Employee worked for the employer;
- payments made under a deferred compensation plan, except elective deferrals to the plan;
- payments made under a §125 flexible benefits plan other than elective deferrals to a deferred compensation plan;
- non-cash payments to an Employee for work done outside the employer’s trade or business or for domestic service in the employer’s home;
- cash payments to an Employee for domestic service totaling less than $1,400 for 2004 (indexed for inflation);
- cash payments to an Employee for work done outside the employer’s trade or business totaling less than $100 for the year;
- non-cash payments to agricultural workers;
- cash payments to agricultural workers if the amount paid to the Employee totals less than $150 for the year and the employers total cash payments to all agricultural workers for the year total less than $2,500;
- cash payments totaling less than $100 for the year made to a homeworker who can be classified as a statutory Employee (see Section 1.3-1);
- qualified moving expense reimbursements;
- cash tips totaling less than $20 in a month and non-cash tips;
- death or disability retirement benefits paid under an employer plan;
- wages paid to an Employee’s beneficiary after the year of the Employee’s death;
- payments made by a tax-exempt organization to an Employee totaling less than $100 for the year;
- reimbursement for or provision of excluded educational or dependent care assistance;
- the value of excludable meals and lodging provided by the employer; and
- the value of excludable Employee length-of-service and safety achievement awards, fellowships and scholarships, and nontaxable benefits under IRC §132.
Employment Exempt From Social Security and Medicare Taxes
In addition to the wage payments listed above certain types of employment are also exempt from Social Security and Medicare taxes.
Here is a list of some of them.
- work done by temporary foreign agricultural workers;
- work performed by a child under age 18 for his or her parents (age 21 if the work is outside the course of the employer’s trade or business or is domestic service);
- work on a foreign ship or aircraft outside the U.S. by non-U.S. citizens for a non-U.S. employer;
- work done by students who are enrolled and regularly attending classes at the school for which they are working and who are not “career Employees” of the school (unless the school is a public educational institution that has opted for FICA coverage of student Employees);
- work done for a foreign government or an international organization;
- work done by student nurses;
- work performed by Resident Aliens or Nonresident Aliens under an F, J, M, or Q visa . work performed by small fishing boat crews (normally less than 10 individuals) that receive a share of the catch (or the proceeds from the catch) and less than $100 cash compensation per trip for each crew member; and
- domestic service performed by an individual under age 18 if it is not his or her principal occupation.