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Woman: Welcome to Payroll Reporting for Election Workers.

This program explains a government entity´s withholding and reporting responsibilities when paying election workers.

Let´s start with defining who are election workers.

Election workers are defined as individuals who are generally employed by state or local governments to perform services at election booths in connection with national, state, or local elections.

An election worker performs services during an election season.

The election must be a national, state, or local election.

So, we´re not talking about someone who presides over the election for a class president in high school.

Sometimes, a worker is erroneously considered to be an election worker.

For example, when a board of elections employee attends election worker meetings or the election itself through the normal course of their duties, it is not considered work as an election worker.

Those services are part of the regular duties of a board of elections employee.

Here is another example of when work is not that of an election worker.

Let´s say the school janitor has to work an extra shift to clean the school gymnasium after the election.

Again, the janitor is performing a duty of their janitorial position, and it is not considered election work.

Let´s make sure we understand the nature of the working relationship with an election worker.

Election workers are deemed to be employees.

As the employer, you have the right to direct and control these workers.

They are employees.

They are not independent contractors.

If your organization pays workers for election work, be aware that there are special rules for treating their pay relating to taxing, withholding, and reporting.

We will get into the details on withholding payroll taxes and reporting an election worker´s pay, but first remember this important point -- The compensation an election worker gets for election work is taxable income to the worker, and reported on their Form 1040 regardless of whether they receive a Form W-2.

You´ll see that sometimes you won´t need to issue a Form W-2, and often times, there won´t be any taxes withheld.

But it is still taxable income to the worker, and reportable by them personally.

Now let´s get to the withholding responsibilities.

Since you have a wage payment to an employee, you must consider the payroll taxes.

For federal purposes, as a government entity, that means you should be thinking about income tax withholding, Social Security and Medicare taxes that both the employee and employer owe.

Let´s talk about the income tax withholding first.

You aren´t required to withhold income tax from an election worker´s wages by federal statute.

Don´t misunderstand this to mean it isn´t taxable to the worker.

All it means is that you aren´t required to withhold income tax, but if you issue the Form W-2 -- and we will cover that -- an election worker´s wages belong in box 1.

Leave box 2 blank if you didn´t withhold income tax.

What about Social Security and Medicare taxes?

Generally speaking, unless there is a specific exclusion from Social Security, payments to election workers are subject to FICA tax.

To explain FICA as it relates to government entities and election workers, we must touch on Section 218 Agreements.

If you are a government entity, you´ve probably realized that Section 218 coverage can vary from state to state, and in some states, it can vary from entity to entity.

If you have Section 218 coverage, the provisions of your agreement may speak to election worker Social Security exemption amounts.

The agreement may mirror the SSA exemption amounts reported annually by the SSA, or state its own amounts of exemption threshold.

If a 218 Agreement is not in place, the mandatory Social Security rules apply.

If you have any questions, check out "Publication 963, Federal-State Reference Guide" from our website for an in-depth review of both Section 218 Agreements and the mandatory Social Security coverage rules.

At the end of this program, we´ll show you how to find this publication on our website.

So, what is the SSA exemption amount, and how do I apply it to an election worker´s compensation?

The mandatory Social Security rules set the election worker FICA exemption amount for 2016 at $1,700.

This amount is adjusted annually, and is announced by the Social Security Administration on October 15th of each year.

Your Section 218 threshold may be less than the exemption amount.

So, again, it´s important for you to know your Section 218 coverage, if any.

To know if your state has a Section 218 Agreement, visit the Social Security Administration website at SSA.gov, and enter "election workers" in their search bar.

If an employee´s compensation is under the applicable limit, it will be exempt from Social Security and Medicare wages of election work from FICA taxes.

It is important to note that once you meet or exceed the exemption amount, all the compensation to that individual is subject to Social Security and Medicare taxes, not just the amount over the exemption limit.

Finally, let´s answer the question, "When do I need to report the election worker compensation on a Form W-2?" There are two guidelines to follow when determining the proper payroll reporting of wages to an election worker.

They are the information reporting requirements of IRC Section 6041-A and 6051-A.

Code Section 6041-A states that reporting is generally not required to employees whom you pay less than $600 annually.

The exception to "generally" is when 6051-A comes into force due to income tax and/or FICA withholding being taken.

Code Section 6051-A requires the information reporting of compensation, which is subject to either FICA or income tax withholding.

Therefore, if an election worker´s compensation is subject to withholding of FICA tax, reporting is required on Form W-2, regardless of the amount of compensation.

Recall, we mentioned earlier the employer does not have to withhold income tax, even though it is taxable to the employee on their personal returns.

Let´s look at some examples to show how all these rules work together.

In example one, if an election worker receives $200 in compensation and it is not covered by a Section 218 Agreement, no FICA tax withholding applies, as it is under the Social Security mandatory limit of $1,700.

Therefore, a Form W-2 is not required to be issued, as the compensation is under the $600 filing requirement limit.

On the other hand, in example two, if an election worker receives $200 in compensation and there is FICA tax withheld due to a Section 218 Agreement which set the withholding limit at $100, a Form W-2 must be given to the election worker.

On the Form W-2, you will report the compensation of $200 in boxes 1, 3, and 5 and the FICA taxes withheld in boxes 4 and 6.

In example three, an election worker earned $1,300 and is not covered by a Section 218 Agreement, so neither income tax nor any FICA tax was withheld or matched by her employer.

Since the worker exceeded the reportable amount of $600, a Form W-2 is required to be issued, but the only information required to be entered on the Form W-2 is the compensation earned, in box 1.

In our next example, another election worker earned the same amount, $1,300, then later worked for a special ballot count and earned another $400, for a total of $1,700 in election worker wages.

The entire $1,700 is subject to FICA taxes since the wages are equal to or greater than the exemption amount for 2016.

Therefore, in addition to filing the Form W-2 and reporting wages in boxes 1, 3, and 5, the payment is subject to FICA withholding, which needs to be reported in boxes 4 and 6.

Think these last two examples through.

If you know the worker is going to meet or exceed the exemption amount, you should withhold and match the FICA taxes from the first dollar paid.

How would an employer report the earnings of an election worker who is also an ongoing employee?

Example five helps us understand this.

The entity´s 218 Agreement is written to exempt election workers up to the federal threshold amount of the mandatory exemption.

The government entity pays a worker $100 in 2016 for election worker services and also employs the person in another capacity where the employee earns another $1,000.

Under the entity´s 218 Agreement, the $1,000 payment is subject to income tax and FICA withholding, but the $100 payment is not.

All payments to the worker must be reported as wages in box 1 on Form W-2 because the entity made payments in 2016 to the employee equal to $600 or more.

However, note that a separate Form W-2 may be used for the two positions the employee is being paid for.

In this case, the Form W-2 for the election work is not going to have any federal income tax withheld unless the employee requests it.

Only box 1 will contain a value, and it will be $100.

The other W-2 -- for regular earnings -- will be filled out as usual, including box 1 compensation, box 3 and box 5 for the FICA wages, and all the withholding for income tax, Social Security, and Medicare taxes in boxes 2, 4, and 6.

We estimated a 15% income tax rate for this example, but the rate would vary depending on the worker´s Form W-4 details.

For more information on tax treatment and reporting of election workers, read these resources on our webpage, "Election Workers: Reporting and Withholding." From IRS.gov, simply search "election workers." Thank you for taking the time to learn about payroll reporting of election workers.