What can be done if an employer will not withhold income taxes, social security, and Medicare from my pay?

Generally, in situations such as this, the employer is not considering you to be an employee. Rather, you are being treated as an independent contractor (self-employed person). If you cannot resolve this matter with your employer, and if you feel that an employer-employee relationship exists, you should submit a Form SS-8 (PDF), Determination of Employee Work Status for Purposes of Federal Employment Taxes and Income Tax Withholding. The factors used to determine if an employer-employee relationship exists are covered in Chapter 2 of Publication 15-A (PDF), Employer's Supplemental Tax Guide.

If your status as an employee is not at issue, it may be that you are in a category of employment whose earnings are not defined as wages under U.S. federal tax and social security law. Find out from your employer the reason that social security and Medicare taxes and income taxes are not being withheld from your pay. If you have further questions, contact the IRS at 800-829-1040 or visit an IRS walk-in office for assistance.

I am self-employed. How do I report my income and how do I pay Medicare and social security taxes?

You are a sole proprietor if you are the sole owner of a business that is not a corporation. Report your income and expenses from your sole proprietorship on Form 1040, Schedule C (PDF), Profit or Loss from Business (Sole Proprietorship), or on Form 1040, Schedule C-EZ (PDF), Net Profit from Business.

If the total of your net profit from all businesses is $400 or more, you must pay into the Social Security and Medicare systems by filing Form 1040, Schedule SE (PDF), Self-Employment Tax. Self-Employment tax consists of the Old-Age, Survivors, and Disability Insurance (social security) and the Hospital Insurance (Medicare) taxes. For more information on this, refer to Publication 533, Self-Employment Tax.

The Federal tax system is based on a pay-as-you-go plan. Tax is generally withheld from your wages or salary before you get it. However, tax is generally not withheld from self-employment income. Thus, you may be required to make estimated tax payments. Publication 505, Tax Withholding and Estimated Tax, provides information on making estimated tax payments.

I received a Form 1099-MISC with an amount in box 7, (nonemployee compensation). What forms and schedules should be used to report income earned as an independent contractor?

Independent contractors report their income on Form 1040, Schedule C (PDF), Profit or Loss from Business (Sole Proprietorship), or you may qualify to use Form 1040, Schedule C-EZ (PDF), Net Profit from Business (Sole Proprietorship). You should also be aware of Form 1040, Schedule SE (PDF), Self-Employment Tax, which must be filed if net earnings from self-employment are $400 or more. This form is used to figure your social security and Medicare tax which is based on your net self-employment income. You may also need to file Form 2210, Underpayment of Estimated Tax by Individuals, Estates & Trusts, if you do not make estimated tax payments.

Can an employer take out taxes if a Form W-4 was never filed?

Yes, the employer is required to withhold income taxes. Publication 15, Circular E, Employer's Tax Guide, states that if an employee does not give you a completed Form W-4 (PDF), Employee's Withholding Allowance Certificate, withhold tax as if he or she is single, with no withholding allowances.

The employer is also required to withhold social security and Medicare taxes.

If an employee claims more than 10 exemptions on their Form W-4, does the employer have to report this to the IRS?

Yes, if you receive a Form W-4 (PDF), Employee's Withholding Allowance Certificate, on which the employee claims more than 10 withholding allowances, you must send a copy of that Form W-4 to the IRS service center with your next Form 941, Employer's Quarterly Federal Tax Return employment tax return.

Also, if an employee claims exemption from withholding and his or her wages would normally be expected to exceed $200 or more a week, you must also send a copy of that Form W-4 to the service center with your next employment tax return.

If you want to submit the Form W-4 earlier, you can send a copy of the Form W-4 to the IRS with a cover letter, including your name, address, employer identification number, and the number of forms included. The service center will send you further instructions if it determines that you should not honor the Form W-4. Follow the W-4 unless you hear back from the IRS.

We are about to hire employees and need to know how much tax to take out and where to send this money?

You will need to secure a completed Form W-4 (PDF), Employee's Withholding Allowance Certificate, from each employee. You will need Publication 15, Circular E, Employer's Tax Guide, and Publication 15-A (PDF), Employer's Supplemental Tax Guide, to determine the amount of withholding and for directions on depositing the withholding amounts and other employment taxes. Publication 15T, New Withholding Tables contains the revised withholding tables. The change is a result of the Jobs and Growth Tax Relief Reconciliation Act of 2003. This publication is a supplement to Publication 15.

Generally, employers will quarterly file Form 941 (PDF), Employer's Quarterly Federal Tax Return, and annually file Form 940 (PDF), Employer's Annual Federal Unemployment Tax Return (FUTA), and Form W-2 (PDF), Wage and Tax Statement, with Form W-3 (PDF), Transmittal of Income and Tax Statements.

If a new employee has reached the limit for social security wage base with a previous employer in the same year, does the new employer need to withhold FICA taxes on wages paid for both the company and employee?

Yes, the social security wages base limit is applied to each separate employer. The individual employee is subject to social security taxes up to the maximum amount from each employer. As a result of an employee working for two or more employers in the same year, social security tax in excess of the maximum wage base may be withheld from his or her pay. An employee can claim the excess of social security tax withheld from pay resulting from working for two or more employers as a credit against the employee's income tax when filing Form 1040 (PDF), U.S. Individual Income Tax Return. However, there is no provision for an employer to get a credit for the employer portion of social security tax paid in this situation. There is no wage limit on the Hospital Insurance tax.

We hired a nanny to look after our baby while we work. How do we pay her social security taxes and properly report her income?

A nanny is considered a household employee. A household employer only has to pay social security and Medicare tax only for the employee(s) that receive $1,400 or more in cash wages for the year 2004. If the amount paid is less than $1,400, no social security or Medicare tax is owed. If social security and Medicare tax must be paid, you will need to file Form 1040, Schedule H, Household Employment Taxes. You must withhold the employee's portion of the social security and Medicare unless the employer chooses to pay both the employee's share and the employer's share.

The taxes are 15.3% of cash wages. Your share is 7.65% and the employee's share is 7.65%. You may also be responsible for paying federal unemployment taxes. For directions on household employees, refer to Publication 926, Household Employer's Tax Guide.

Under my visa as a temporary nonresident alien, I'm not subject to social security and Medicare withholding. My employer withheld the taxes from my pay. What should I do to get a refund of my social security and Medicare?

If social security tax and Medicare were withheld in error from pay received which was not subject to the taxes, you must first contact the employer who withheld the taxes for reimbursement. If you are unable to get a refund from the employer, file a claim for refund with the Internal Revenue Service on Form 843 (PDF), Claim for Refund and Request for Abatement.

You must attach the following to your claim:

In addition to the documentation listed above foreign student visa holders should also attach the following:

File the claim, with attachments, with the IRS where the employer's returns were filed. If you do not know where the employer's returns were filed, send your claim to the Internal Revenue Service Center, Philadelphia, PA 19255.

For more information, refer to Publication 519, U.S. Tax Guide for Aliens .

Are nonresident alien students, with F-1 or J-1 visas and employed by a U.S. company during the summer, required to have federal income taxes withheld from their paychecks?

The following discussion generally applies only to nonresident aliens. Wages and other compensation paid to a nonresident alien for services performed as an employee are usually subject to graduated withholding at the same rates as resident aliens and U.S. citizens. Therefore, your compensation, unless it is specifically excluded from the term "wages" by law, or is exempt from tax by treaty, is subject to graduated withholding. Nonresident aliens must follow modified instructions when completing Form W-4. Please refer to Publication 519, U.S. Tax Guide for Aliens, for directions on completing Form W-4 (PDF), Employee's Withholding Allowance Certificate.