Income Tax Withholding If the cash wages you pay farm workers are subject to socialsecurity and Medicare taxes, they are also subject to income taxwithholding. Withhold income tax on noncash payments only if you andthe employee agree to do so. The amount to withhold is figured ongross wages without taking out social security and Medicare taxes,union dues, insurance, etc. You can use one of several methods todetermine the amount to withhold. The methods are described inCircular A. Generally, the amount of income tax you withhold is based on theemployee's marital status and withholding allowances claimed on theemployee's Form W-4. In general, an employee can claimwithholding allowances on Form W-4 equal to the number ofexemptions the employee will be entitled to claim on his or her taxreturn. An employee may also be able to claim a special withholdingallowance and allowances for estimated deductions and credits. Do not withhold income tax from the wages of an employee who, byfiling Form W-4, certifies that he or she had no income taxliability last year and anticipates no liability for the current year. Circular A contains tables showing the correct amount of income taxyou should withhold. It also contains additional information aboutincome tax withholding. See chapter 21for information about gettingCircular A and Form W-4. Form W-4 for 2000.Farmers who have employees should make the 2000 Form W-4available to their employees and encourage them to check their incometax withholding for 2000. Those employees who owed a large amount oftax or received a large refund for 1999 may want to file a new FormW-4. Nonemployee compensation.Generally, you are not required to withhold tax on payments forservices to individuals who are not your employees. However, you maybe required to report these payments on Form 1099-MISC,Miscellaneous Income, and to withhold under the backupwithholding rules. See Information Returns in chapter 2forinformation.