Roger McEowen, Professor of Agricultural Law and Taxation at Washburn University, spoke with us recently about laws surrounding H-2A workers and their effects on the agriculture industry. Here is what he shared.
“You know, trends, it’s been up significantly for quite some time, but really ramped up in the past year or two,” McEowen commented.
“So it’s indispensable for a lot of farms and ranches because of the chronic labor shortages. And what I was writing about is that H-2A workers, what you have to be aware of as a farming operation, is that they are subject to an entirely different federal payroll tax system than our domestic AG employees. And that distinction really matters,” said McEowen.
“That’s a huge distinction. So, I go into a whole bunch of detail as to what they are. They are employees, but they’re not typical employees. And that’s a misconception. A lot of farms and ranches think that H-2A workers somehow fall outside the normal payroll reporting system. They do not,” McEowen emphasized.
“And that’s a first concern because you don’t want to mess up your payroll reporting because IRS will jump all over that. So that’s what I was writing about. The withholding, the payroll system, the state payroll systems differ, can differ dramatically from the federal,” McEowen added.
McEowen said, “Some states will follow the federal treatment. Others require state income tax withholding, even though federal withholding is not mandatory on your H-2A workers. Some of the state unemployment insurance rules are not always identical to the federal unemployment tax exemption.”
“So it really requires farms and ranches that are hiring H-2A workers as their laborers to get really good tax advice. You need to have a good CPA or tax advisor in general that helps you through that, or you can get yourself into a big mess. But the chronic worker shortage has really put pressure on farms and ranches to hire H-2A workers,” McEowen said.
Audio Reporting by Elizabeth Sanders for Southeast AgNet.