Payroll on the Prairie: A Beginner’s Guide for New Farm Employers

Running a farm or ranch isn’t just about planting, harvesting, or managing livestock. If you’re growing your agricultural business and thinking of hiring help, one of the most critical parts of your journey is understanding and managing farm payroll. Paying workers in an accurate, timely, and compliant manner is essential for your farm operation to thrive and remain above board with tax agencies like the IRS and your state department of labor.

This beginner's guide will walk you through everything you need to know about setting up and running payroll for your farm or ranch, including why it matters, the legal requirements, and how FarmRaise can help simplify the process through our partnership with Salsa payroll software.

Why Farm and Ranch Payroll Matters

Hiring help can boost your agricultural production, relieve pressure from your family farm, and allow your operation to grow. But it also means you now become an agricultural employer, with responsibilities that go beyond just cutting a paycheck.

As a farm business or small-scale operation, you're expected to:

• Withhold and remit federal income tax and social security taxes
• Submit accurate tax forms and tax returns to the IRS and your state
• Maintain detailed record keeping for audits and payroll compliance
• Understand your obligations to migrant or seasonal employees

Skipping these steps can lead to fines, penalties, and even audits. This is why agricultural employers are encouraged to use modern payroll software tailored to the needs of the farm work environment.

Key Steps to Setting Up Farm Payroll

Here are the major steps you’ll need to follow as a beginning farmer or rancher:

1. Get an Employer Identification Number (EIN)

Before you can pay anyone, you need to apply for an Employer Identification Number through the IRS. This number identifies your farm as an employer for tax purposes.

2. Classify Your Business Structure

Are you a sole proprietorship, limited liability company, or corporation? Your structure affects how you report and pay taxes. Many beginning farmers and ranchers start with sole proprietorships but may transition to an LLC as their farm business grows.

3. Register with State Agencies

Each state department has its own requirements for registering as an employer. This may include unemployment insurance and state income tax registration.

4. Gather Employee Documentation

Collect Form W-4 (Employee’s Withholding Certificate) and verify work eligibility with Form I-9. If you hire migrant or seasonal workers, extra steps may apply.

5. Choose Payroll Software

Manually calculating taxes and filing payroll documents is risky for new farmers. Tools like QuickBooks may not be tailored for farm payroll. That’s where FarmRaise steps in with a smarter option for agricultural businesses.

Meet FarmRaise Payroll (Powered by Salsa)

FarmRaise offers integrated payroll software through our partner Salsa that makes payroll simple and stress-free. Here's what you get:

• Federal and State Tax Filing: We handle both IRS and state department filings.
• Support for Seasonal Employees: Whether you're hiring during harvest or planting season, we’ve got you covered.
• Up to 10 Employees Included: Start with up to 10 workers, and expand as needed.
• Compliance and Documentation: Never miss a tax deadline or file the wrong tax forms again.

This is especially helpful for small farms, beginning farmers and ranchers, and family farm operations that are scaling.

Common Payroll Terms You Need to Know

• Form W-2: Used to report wages and tax withholdings for full-time employees.
• Form 943: The IRS form for reporting agricultural employee wages.
• FICA: The combined Social Security and Medicare tax.
• FUTA: Federal Unemployment Tax Act – separate from state unemployment.
• 1099: For independent contractors, not regular employees.

Using FarmRaise Payroll ensures you're not missing any of these vital reports.

Farm Payroll vs. Regular Payroll

Agricultural employers face some unique rules compared to other small businesses. For example:

• Wages for farm work are reported on Form 943 and Form 940
• Minimum wage laws may differ for migrant or seasonal labor
• Overtime rules vary based on the type of agricultural production and the worker
• You may qualify for special exemptions as a family farm or small-scale operation

Tools to Support Your Farm Management

Payroll is just one piece of the puzzle. As your farm business expands, you may also need:

• Bookkeeping tools to track expenses and revenues
• A business plan to apply for a farm loan or pitch to investors
• Support from the Farm Service Agency (FSA) to access USDA programs
• Tools to track farm equipment depreciation
• A tax guide built specifically for agricultural businesses
• Information on managing natural resources and improving soil health

FarmRaise combines many of these features into a comprehensive dashboard.

Handling Challenges: Risk Management for Employers

Running payroll means managing risks too. These may include:

• Fines for incorrect tax returns or late tax forms
• Misclassified employees
• Mistakes in record keeping
• Non-compliance with labor laws or IRS regulations

Using payroll software reduces these risks by automating calculations, tracking payments, and ensuring compliance.

Frequently Asked Questions

• Can I pay my kids to help on the farm?
  • Yes, but IRS guidelines apply. If you're a sole proprietorship or LLC owned by both parents, kids under 18 are exempt from some taxes.
• Do I need workers' comp insurance?
  • Requirements vary by state and size of your farm operation. Check with your state department.
• How does payroll work for part-time or seasonal employees?
  • FarmRaise Payroll supports seasonal or migrant workers, and we handle the changing payroll needs during your busy seasons.
• What if I have more than 10 employees?
  • No problem! FarmRaise can add more employees to your account for a small additional fee.

The Role of USDA, FSA, and FarmRaise in Supporting Employers

The USDA and Farm Service Agency (FSA) offer vital support to new farmers, including:

• Farm loan assistance
• Business training for agribusiness development
• Guidance for beginning farmers and ranchers
• Technical help in areas like soil health, natural resources use, and stewardship

FarmRaise ties into many of these support systems by helping you stay organized and compliant.

Why You Shouldn't Run Payroll Alone

Hiring employees is a big step for any farm business. It means your agricultural production is growing, and so is your need for streamlined farm management.

Using a tailored payroll software like FarmRaise Payroll, in partnership with Salsa, is the best way to manage:

• Taxes and filings with the IRS and your state department
• Payroll for seasonal, migrant, and full-time agricultural employees
• Important documents for your tax guide, bookkeeping, and business plan

With FarmRaise Payroll, you can:

• File federal and state taxes with ease
• Support up to 10 employees (and more if needed)
• Stay compliant with IRS, USDA, and FSA standards
• Focus on growing your crops, livestock, and business

Whether you're located in New York, Nebraska, or anywhere in between, we’ve got your back.

Don't leave payroll up to chance. Let FarmRaise Payroll handle it, so you can get back to doing what you love — farming, ranching, and stewarding your land.

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Ready to get started with FarmRaise Tracks to get your finances on track? Use code IT3H12B for 20% off, or click here to get started. This does not apply to Payroll.