be fully insured you must have either (a) 40 

 quarters of coverage (exceptions for workers 

 born before 1929) or (b) one quarter of coverage 

 for each year the worker is over 21 (not 

 counting the year of death), with a minimum of 

 6 quarters. To be currenly insured, if you are 

 aged less than 24 years, you must have six 

 quarters of coverage in the preceding three 

 years. If you are between 24 and 31, you must 

 have one quarter of coverage for each half year 

 over age 21 (example: if aged 26, 26-21=5 years, 

 requires 10 quarters coverage). If you are 31 or 

 older, you must have 20 quarters in the 

 preceding 10 years. 



Example: John Grower had been farming 

 since 1988. Although he had gross profits in 

 some years and losses in others he and his tax 

 preparer had followed a tax planning strategy 

 that enabled John to report net farm losses for 

 every year. John was killed in a tractor accident 

 in July 1996, leaving a wife and two young 

 children. He was 32 years old. John never 

 elected the optional farm method of reporting 

 self-employment income, consequently he had 

 no quarters of social security coverage on the 

 day he died. His wife and children do not appear 

 to be eligible for survivor's benefits. However, if 

 the 1996 return will show a net farm income of 

 at least $2,560, then four quarters of SE 

 coverage are available under option (a). By 

 amending John's returns fi-om 1993 to 1995 

 (years whose statute of limitations for 

 amendment has not expired) and using option 

 (b), $1600 of net farm income can be reported 

 each year, giving two quarters of coverage for 

 each of those years for a total of 10 quarters of 

 coverage. This is just the amount needed to 

 provide for full coverage (fi-om age 22 to age 31, 

 using full coverage method (b) ). Note: if the 

 accident had left John permanently disabled, 

 he would receive no disability benefits from 

 social security since he cannot obtain the 20 

 quarters of coverage needed to be fully insured. 



Employment Taxes for Farm Labor 



Almost every farmer who employs a worker 

 for more than a few months a year (except for 

 harvest workers paid by piecework) will be 

 subject to FICA taxes and to federal-income-tax 

 withholding. A farmer who in any quarter 

 employs the equivalent of about four full-time 

 workers must also pay FUTA. 



If total payroll in a year exceeds $2,500, all 

 wages, except those paid at piecework rates for 

 harvest, are subject to FICA taxes. The 

 employer must withhold 7.65% from employees 

 wages and also contribute 7.65% employer 

 share. (There are exceptions for an employee 

 paid over $62,700). 



An employer must also withhold income tax 

 unless wages are exempt fi-om FICA. The 

 withholding amount should be calculated fi-om 

 information given by each employee on form W- 

 4 or, failing that information, at the highest 

 (emergency) rate. 



If employment taxes are less than $500 in a 

 year, the entire amount may be paid with the 

 employment tax return (Form 943). If 

 employment taxes are more than $500 and less 

 than $50,000 in the lookback period (the 

 calendar year two years prior to the current 

 year) payment is monthly. If more than 

 $50,000, deposits must be made twice a week. 



Footnotes 



[Health Act], Health Care Portability and 

 Accountability Act (H.R. 3103, enacted as 

 Public Law 104-191 on August 21, 1996); [IRC], 

 Internal Revenue Code; [Rights 2], Taxpayer 

 Bill of Rights 2 (H.R. 2337, enacted as PubUc 

 Law 104-168 on July 30, 1996); [SBA], Small 

 Business Job Protection Act, also known as the 

 Minimum Wage Increase Act (H.R. 3448, 

 enacted as Pubhc Law 104-188 on August 20, 

 1996); [T.C. Memo], Tax Court Memorandum.' 



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FfUit Notes, Volume 61 (Number 4), FaO, 1996 



17 



