Before you start running payroll through FarmRaise—or even if you’re already using it—it’s important to know whether your workers qualify as agricultural workers under IRS rules. Why? Because agricultural workers are subject to special tax rules, and understanding these rules helps ensure your payroll is set up correctly from the start.
Let’s break it down simply.
What Makes Someone an Agricultural Worker?
The IRS defines agricultural labor as work done on a farm in connection with:
Cultivating soil or raising/harvesting crops
Raising livestock, including poultry, bees, and fish
Operating or maintaining farm equipment used for these activities
Packing, processing, or delivering agricultural goods if done on the farm as part of normal farm operations
If your worker does any of the above on your farm or ranch, they likely count as an agricultural worker for payroll purposes.
When Are Agricultural Wages Taxable?
To determine if you need to withhold and pay payroll taxes, the IRS uses two simple tests:
1. The $150 Cash Wage Test
If you pay a farm worker $150 or more in cash wages in a calendar year, then:
You must withhold Social Security and Medicare (FICA) taxes
You also owe federal unemployment tax (FUTA) if the second test applies (see below)
2. The $2,500 Farm Payroll Test
If you pay $2,500 or more in total farm wages during any quarter of the current or previous calendar year, then:
FUTA applies to all employees who meet the $150 cash wage test
In plain terms:
➡️ FICA applies once a single worker makes $150 or more in cash wages.
➡️ FUTA applies if your whole farm paid out $2,500+ in any quarter AND the worker earned $150+.
Common Scenarios for FarmRaise Payroll Users
Seasonal Harvest Workers: If they work just a few weeks and earn under $150, their wages might not be taxable—but keep good records!
Family Members: Some relatives may be exempt from certain taxes—ask us or your accountant for specifics.
Contract vs. Employee: Only employees (not contractors) go through payroll. Make sure you’re classifying workers correctly.
What Should I Do Next?
Review each worker’s role – Are they performing farm tasks listed above?
Estimate their yearly wages – Will they hit $150 in cash wages?
Look at your full farm payroll – Will you pass the $2,500 quarterly total?
If the answer to both wage thresholds is “yes,” then payroll taxes apply, and FarmRaise Payroll can help you handle them correctly.
Need Help?
You're not alone! The FarmRaise team is here to support you. If you’re unsure about a worker’s status, reach out to our support team or ask your accountant. Better to check now than get surprised later by IRS penalties.
Farm payroll can be tricky, but FarmRaise is here to make it simple.
Let us take care of the tax rules—so you can get back to your fields, flock, or fence line.