Sunday, March 9, 2008

Salaries & Wages

Income tax is withheld from the pay of most employers. Your pay includes your regular pay, bonuses, commissions, and vacation allowances. If your income is low enough, you will not have to pay federal income tax; you will be exempt from withholding. There have been questions raised upon whether or not/how farm workers, household workers and military workers are taxed:

Military Workers- Military retirement pay is treated in the same manner as regular pay for income tax purposes, even though it is treated as a pension or annuity for other tax purposes.

Household Workers: A household worker is someone/employee who performs household work in a private home,local college club, a fraternity, or sorority chapter. One can ask to have tax withheld from their employer, if not then you may want to pay estimated tax payments (ES payments) , provided you made enough income.

Farm workers: Generally,income tax is withheld from your cash wages for work on a farm, unless your employer both:

* Pays you cash wages of less than $150 during the year, and

* Less than $2500 in expenditures for agricultural labor

You can ask your employer to withhold income tax from non cash wages and other wages not subject to withholding. There again, if you make enough income and your employer refuses to take out income tax, you may want to make those estimated tax payments (that I have been speaking) of so that you will not owe so much when you file your tax returns. The Internal Revenue Service will issue Estimated Tax penalties if you fail to pay them !

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