The law provides that wages paid to certain employees hired by federal, state, or local governments to respond to an emergency are not subject to social security and Medicare taxes. In order for this exemption to apply the employee must be hired to perform serves on a temporary basis on account of a storm, snow, earthquake, flood, or similar emergency.
The employee must have been hired specifically to perform services in connection with the emergency and is not intended to become a permanent employee. The exemption applies only with respect to wages paid for services performed related to the emergency for which the employee was hired. How long the employee remains employed on an emergency basis depends upon the facts and circumstances of the case. If a temporary employee becomes permanent, the employee is subject to general rules for social security and Medicare coverage.
Long-term or permanent federal, state, or local government employees who perform services in emergency situations, such as municipal firefighters, are not eligible for this exception. Even if such employees work part-time, intermittently, or additional time because of an emergency situation, their wages are subject to the regular rules for social security and Medicare coverage. They may be subject to mandatory social security coverage, covered under a section 218 Agreement through their state Social Security Administrator, or exempt from social security because they participate in a public retirement system. For more information, see Publication 963, Federal State Reference Guide.
The following Q&As provide guidance on how the emergency exception is to be applied:
Q-1. Are wages paid by a local government to temporary employees hired to clean up hurricane debris exempt from social security and Medicare taxes under the emergency exemption?
A-1. Yes. The wages are exempt from social security and Medicare taxes under the emergency exemption because the employees were hired and are working on a temporary basis to perform services in response to an emergency.
Q-2. A local government requires its police officers to work overtime to enforce a curfew imposed following a hurricane. Are the overtime wages paid by the local government exempt from social security and Medicare taxes under the emergency exemption?
A-2. No. The police officers were not newly hired on a temporary basis to perform services in response to an emergency. Their overtime wages are subject to the regular rules for social security and Medicare coverage.
Contact FSLG with any questions you have regarding federal tax rules that apply to government employees.
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