Withholding - Types of Employees

Generally, employees are any individuals who perform services for you when you have the right to control what they will do and how they will do it. This is true even when you choose not to exercise your control over the employee and allow the employee freedom of action. It’s also true regardless of how payments are measured or paid or whether the employee works full-time or part-time.

If an employer/employee relationship exists, it doesn’t matter what you call the relationship. Generally, people who perform services for you are employees unless they’re in business for themselves and offer the same service to others.

Corporate officers

A corporate officer who works for the corporation is an employee.

Statutory employees

If an employee qualifies as a statutory employee under federal law, you’re not required to withhold Idaho income tax. See IRS Publication 15-A, Employer’s Supplemental Tax Guide, or Publication 1779, Independent Contractor or Employee. for more information.

Family members

If a family member – even your spouse or child – gets paid for providing services, you must withhold Idaho income tax just as you would for a non-family member.

Domestic employees

If you hire an employee to work in your home:

  • The employee’s wages are subject to Idaho income tax.
  • You must have an Idaho withholding account and report the wages.
  • You’re not required to withhold Idaho income tax from the employee’s wages.
  • You must issue W-2 forms to your employees and file Form 967 and your employees’ W-2 forms by the due date.

Farm and ranch help

Withhold Idaho income tax from the employee’s check if all of the following apply:

  • You hire an employee to help you in your agricultural business.
  • You’re required to withhold for federal purposes.
  • The employee earns $1,000 or more during the calendar year.

You can file your Idaho withholding Form 910 either quarterly or annually depending on your situation:

  • File Form 910 quarterly if you file employment reports with the Idaho Department of Labor.
  • File Form 910 annually if you don’t have to file employment reports with the Idaho Department of Labor.

You must file Form 967, Idaho Annual Withholding Report, and the Idaho (“state”) copy of your employees’ W-2 forms.

Out-of-state employees

Employees who don’t live in Idaho

You must report the wages of any person working in Idaho. The wages are subject to Idaho income tax because the employee earned them in Idaho. You must withhold Idaho income tax if the person earns $1,000 or more in Idaho during the year.

Report all wages employees earned in Idaho as Idaho wages on Form W-2. It doesn’t matter if you withheld Idaho income tax or not.

Out-of-state companies and withholding Idaho income tax

You must withhold Idaho income tax if you’re an out-of-state employer and you have an employee who’s physically working in Idaho.

If the employee isn’t an Idaho resident, but earns more than $1,000 in Idaho in one year:

  • You must withhold Idaho income tax.
  • You must have an Idaho withholding account and report the employee’s wages to Idaho.

You don’t have to withhold Idaho income tax if the employee isn’t physically working in Idaho.

You can get an Idaho withholding account and voluntarily withhold Idaho income tax if the employee lives in Idaho and wants you to withhold tax.

Employees sent to another state to work

If you have employees who are Idaho residents working in another state:

  • Contact the state where the employee is working to determine that state’s withholding requirements.
  • You can also withhold Idaho income tax for income the employee earned in another state. All the employee’s income is taxable in Idaho because he or she is an Idaho resident.

Employees vs. independent contractors

Idaho law follows federal law regarding who’s an employee and who’s an independent contractor. The Internal Revenue Service (IRS) uses three characteristics to determine the relationship between a business and a worker.

Behavioral control

These facts show whether the business has a right to direct or control how the worker does the work. A worker is an employee when the business has the right to direct and control the worker. The business doesn’t actually have to direct or control the way the worker does work, as long as the business has the right to direct and control the work.

Financial control

These facts show whether the business has a right to direct and control the financial and business aspects of the worker’s job. These include:

  • The extent to which the worker has unreimbursed business expenses. An employee can also have unreimbursed business expenses.
  • The extent of the worker’s investment in the facilities used in performing services.
  • The extent to which the worker makes his or her services available to the relevant market.
  • The extent to which the worker can realize a profit or incur a loss.

Relationship of the parties

These facts show how the parties perceive their relationship. These include:

  • Written contracts describing the relationship the parties intended to create.
  • The extent to which the worker is available to perform services for other similar businesses.
  • Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay.
  • The permanency of the relationship.
  • The extent to which services the worker performs are a key aspect of the regular business of the company.

For more information about how to determine whether someone providing services is an independent contractor or an employee, see IRS Publication 15, Circular E, Employer’s Tax Guide and Publication 15-A, Employer’s Supplemental Tax Guide.