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.