Tax Tips of the Week: Some income isn’t subject to payroll taxes

You’ve probably heard that the IRS has undertaken a new initiative to make sure workers are properly classified as either independent contractors or employees. At issue is the collection of payroll taxes, including FICA taxes (social security and Medicare), which are generally required to be withheld from wages by law.

But did you know some services are specifically excluded from the mandatory FICA rule?

For example: You work in the election booth for your state or local government. Depending on the agreement your state signed with the Social Security Administration, payments you receive (up to $1,500 for 2011) may qualify for an exclusion from FICA taxes.

Another example: Temporary work you’re hired to do during emergencies, such as fires, earthquakes or floods, can be excluded. The exclusion applies only when you’re a temporary worker. Police officers and firefighters, including volunteer firefighters, do not qualify, even when the work performed is intermittent.

Other exclusions from FICA taxes: Services you provide as a notary public, bankruptcy estate manager, and non-professional personal representative or executor of an estate. If you’re a student or a medical resident working for the college or university where you attend classes, you may also qualify. Just remember all the income you earn from these services is subject to income tax.

If you think an exclusion from FICA taxes applies to services you performed in current or prior years, please contact our office for details.

© MC 2013

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