(a) General

Wages consist of all remuneration whether in cash of other forms paid to an employee for services performed. The word "wages" covers all types of employee remuneration, including salaries; vacation allowances, bonuses, commissions, and earned severance pay. It is immaterial whether payments are based on the hour, day, week, month, year, piecework, or percentage plan. Wages paid in any form other than money are measured by the fair market value of the goods, lodging, meals, or other consideration given in payment of services.

If an employee receives sick pay for a sick leave or a family leave absence, the sick pay is subject to withholding as though it were a regular wage payment made for the payroll period. If sick pay is paid by a third party payer, the sick pay is also treated as a regular wage payment.

Amounts paid specifically for traveling or other ordinary and necessary expenses incurred or reasonably expected to be incurred in your business are not wages subject to these taxes. Traveling and other reimbursed expenses must be identified by making a separate payment or by specifically indicating the separate amounts if both wages and expense allowances are combined in a single payment.

Supplemental Unemployment Compensation Benefits are treated as wages if paid to an employee because of his involuntary separation from employment whether or not temporary under a plan to which the employer is a party. The separation must be due directly to a reduction in force, discontinuance of a plant or operation or similar condition.

The above examples of "wages" are by way of example and not by limitation. Any amount which is subject to federal withholding is subject to State withholding.

(b) Withholding Requirements for Farmworkers

Withholding taxes apply to all cash payments you paid during the year if either of the two tests below are met:

  1. You pay cash wages to an employee of $150 or more in a year including cash wages paid on a time, piecework, or other basis. The $150 test applies to each employee and each member of a family is treated separately.
  2. You pay $2,500 or more during the year to all your employees for agricultural labor.

Exception: Wages you pay to a farmworker who receives less than $150 in annual cash wages is not subject to withholding, even if you pay $2,500 or more in that year to all your farmworkers, if the farmworker:

  1. Is employed in agriculture as a hand harvest laborer,
  2. Is paid piece rates in an operation that is usually paid on a piece-rate basis in the region of employment,
  3. Commutes daily from his or her farm to the farm, and
  4. Had been employed in agriculture less than 13 weeks in the preceding year.

Compensation of Residents and Non-Residents