Social Security and Medicare Taxes All cash wages you pay to an employee during the year for farm workare subject to social security and Medicare taxes if you meet eitherof the following tests. You pay the employee $150 or more in cash wagesduring the year for farm work (the $150 test). You pay cash and noncash wages of $2,500 or more during theyear to all your employees for farm work (the $2,500 test). If the $2,500 test for the group is not met, the $150 test for anindividual still applies. Exceptions.The following wages are not subject to social security and Medicaretaxes, even if you pay $2,500 or more to all your farm workers. Thesewages, however, do count toward the $2,500 test for determining socialsecurity and Medicare coverage of other farm workers. Annual cash wages of less than $150 paid to a seasonal farmworker. A seasonal farm worker is one who: Works as a hand-harvest laborer, Is paid piece rates in an operation usually paid on thisbasis in the region of employment, Commutes daily from his or her permanent home to the farm,and Worked in agriculture less than 13 weeks in the precedingcalendar year. Annual cash wages of less than $1,100 paid to your householdemployee. See Circular A for more information on these exceptions. SeeFamily Employees, later, for special rules on socialsecurity and Medicare tax withholding that apply to your spouse andchildren. Religious exemption.An exemption from social security and Medicare taxes is availableto members of a recognized sect opposed to insurance. This exemptionis available only if both the employee and the employer are members ofsuch a sect. For more information, see Publication 517,Social Security andOther Information for Members of the Clergy and Religious Workers. Cash wages.Cash wages paid to farm workers are subject to social security tax,Medicare tax, and income tax withholding. Cash wages include checks,money orders, and any kind of money or cash. Only cash wages subject to social security and Medicare taxes arecredited to your employees for social security benefit purposes.Payments not subject to these taxes, such as commodity wages, do notcontribute to your employees' social security coverage. Forinformation about social security benefits, contact the SocialSecurity Administration. Internet users can go to www.ssa.govfor more information. Noncash wages.Noncash wages include food, lodging,clothing, transportation passes, and other goods. Noncash wages,including commodity wages, are not subject to socialsecurity and Medicare taxes and income tax withholding. However, theyare subject to these taxes if the substance of thetransaction is a cash payment. The value of noncash wages isreported on Form W-2 in box1, Wages, tips, other compensation, together with cashwages. Do not show noncash wages in box 3, Social security wages,or in box 5, Medicare wages and tips. Tax rates and social security wage limit.For 2000, the employer and the employee will continue to pay: 6.2% each for social security tax (old-age, survivors, anddisability insurance), and 1.45% each for Medicare tax (hospital insurance). Wage limit.The maximum amount of 2000 wages subject to the social security taxwill be published in Circular A. There is no limit on wages subject tothe Medicare tax. All covered wages are subject to the tax. Paying employee's share.If you would rather pay the employee's share of social security andMedicare taxes without deducting it from his or her wages, you may doso. If you do not deduct the taxes, you must still pay them. Theemployee's share of social security or Medicare tax that you pay isadditional income to the employee. You must include it on theemployee's Form W-2 in box 1, but do not count it as socialsecurity and Medicare wages (boxes 3 and 5 on Form W-2) or aswages for federal unemployment (FUTA) tax purposes. Publication 51,Circular A.Circular A contains additional information about social securityand Medicare taxes. See chapter 21for information about getting formsand publications from the IRS.