paid to the employee as remuneration at the time that the deduction is made. It is immaterial that any act of Congress, or the law of any State or of Puerto Rico, requires or permits such deductions and the payment of the amounts thereof to the United States, a State, a Territory, Puerto Rico, or the District of Columbia, or any political subdivision of any one or more of the foregoing.

(6) Payment by an employer of employee's tax, or employee's contributions under a State law. The term "wages" includes the amount paid by an employer on behalf of an employee (without deduction from the remuneration of, or other reimbursement from, the employee) on account of any payment required from an employee under a State unemployment compensation law, or on account of any tax imposed upon the employee by any taxing authority, including the taxes imposed by sections 3101 and 3201.

(7) Remuneration for services as employee of nonresident alien individual or foreign entity. The term "wages" includes remuneration for services performed by a citizen or resident of the United States as an employee of a nonresident alien individual, foreign partnership, or foreign corporation whether or not such alien individual or foreign entity is engaged in trade or business within the United States. Any person paying wages on behalf of a nonresident alien individual, foreign partnership, or foreign corporation, not engaged in trade or business within the United States (including Puerto Rico as if a part of the United States), is subject to all the provisions of law and regulations applicable with respect to an employer.

See

§ 31.3401 (d)-1, relating to the term "employer", and § 31.3401 (a) (8) (C)-1, relating to remuneration paid for services performed by a citizen of the United States in Puerto Rico.

(8) Amounts paid under wage continuation plans-(i) Amounts paid before January 1, 1956—(a) Amounts paid by employer for whom services are performed. (1) Withholding is not required upon amounts paid before January 1, 1956, to an employee by his employer under a wage continuation plan for a period during which the employee is absent from work on account of personal injuries or sickness, if such amounts are excludable from the gross income of the employee under section 105 (d) and the

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records maintained by the employer in accordance with the provisions of sections 6001 and 6051 and the provisions thereunder in Subpart G of the regulations in this part

(i) Separately show the amounts of such payments and distinguish such amounts from all other payments, and

(ii) Establish the facts necessary to show that the employee is entitled to the exclusion provided by section 105 (d), either by means of a written statement from the employee as to the injury, illness, or hospitalization, or by any other information which the employer believes to be accurate and which he is willing to accept for purposes of payments under the wage continuation plan.

(2) For the purpose of section 6051 and the regulations thereunder, relating to the requirement of receipts for employees, amounts paid before January 1, 1956, which are excludable from gross income under the provisions of section 105 (d) shall be included in the total wages required to be shown on Form W-2. The amount of any such wages on which the employer, in reliance on section 105 (d), does not withhold must be shown separately, and properly identified, on Form W-2 in such manner that it may be read on each copy of the form.

(3) See sections 6001 and 6051 and the provisions thereunder in Subpart G of the regulations in this part for rules with respect to the records which must be maintained in connection with wage continuation payments and for rules with respect to the statements which must be furnished an employee in connection with wage continuation payments, respectively. See also section 105 and the provisions thereunder in the Income Tax Regulations (Part 1 of this chapter).

(b) Amounts paid by person other than employer for whom services are performed. Withholding is not required upon any amounts paid before January 1, 1956, to an employee for a period during which the employee is absent from work on account of personal injuries or sickness, whether or not such amounts are excludable from the gross income of the employee, if such amounts are paid through accident or health insurance or under an accident or health plan by a person who is not the employer for whom the employee performs services but who is regarded as an employer under section 3401 (d) (1). For example, no withholding is required in connection with

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accident or health benefits paid by an insurance company under an accident or health policy, by a separate trust under an accident or health plan, or by a State agency from a sickness and disability fund maintained under State law.

(ii) Amounts paid after December 31, 1955-(a) In general. The term "wage continuation payment", as used in this subdivision, means any payment to an employee which is made after December 31, 1955, under a wage continuation plan (as defined in § 1.105-4 (a) of this chapter) for a period of absence from work on account of personal injuries or sickness, to the extent such payment is attributable to contributions made by the employer which were not includible in the employee's gross income or is paid by the employer. Any such payment, whether or not excluded from the gross income of the employee under section 105 (d), constitutes "wages" (unless specifically excepted under any of the numbered paragraphs of section 3401 (a) or under section 3402 (e)) and withholding thereon is required except as provided in (b) and (c) of this subdivision.

(b) Amounts paid by employer for whom services are performed. Withholding is not required with respect to any or all employees upon the amount of any wage continuation payment made to an employee directly by the employer for whom he performs services to the extent that such payment is excludable from the gross income of the employee under section 105 (d), provided the records maintained by the employer

(1) Separately show the amount of each such payment and the excludable portion thereof, and

(2) Contain data substantiating the employee's entitlement to the exclusion provided in section 105 (d) with respect to such amount, either by a written statement from the employee specifying whether his absence from work during the period for which the payment was made was due to a personal injury or whether such absence was due to sickness, and, if the latter, whether he was hospitalized for at least one day during this period; or by any other information which the employer reasonably believes establishes the employee's entitlement to the exclusion under section 105 (d). Employers shall not be required to ascertain the accuracy of the information

contained in any written statement submitted by an employee in accordance with (2) above. For purposes of this subdivision, computation of the amount excludable from the gross income of the employee under section 105 (d) may be made either on the basis of the wage continuation payments which are made directly by the employer for whom the employee performs services, or on the basis of such payments in conjunction with any wage continuation payments made on behalf of the employer by a person who is regarded as an employer under section 3401 (d) (1).

(c) Amounts paid by person other than the employer for whom services are performed. No tax shall be withheld upon any wage continuation payment made to an employee by or on behalf of a person who is not the employer for whom the employee performs services but who is regarded as an employer under section 3401 (d) (1). For example, no tax shall be withheld with respect to wage continuation payments made on behalf of an employer by an insurance company under an accident or health policy, by a separate trust under an accident or health plan, or by a State agency from a sickness and disability fund maintained under State law.

(d) Cross references. See sections 6001 and 6051 and the provisions thereunder in Subpart G of the regulations in this part for rules with respect to the records which must be maintained in connection with wage continuation payments and for rules with respect to the statements which must be furnished an employee in connection with wage continuation payments, respectively. See also section 105 and the provisions thereunder in the Income Tax Regulations (Part 1 of this chapter).

(9) Value of meals and lodging. The value of any meals or lodging furnished to an employee by his employer is not subject to withholding if the value of the meals or lodging is excludable from the gross income of the employee. See the Income Tax Regulations (Part 1 of this chapter) under section 119.

(10) Facilities or privileges. Ordinarily, facilities or privileges (such as entertainment, medical services, or socalled "courtesy" discounts on purchases), furnished or offered by an employer to his employees generally, are not considered as wages subject to withholding if such facilities or privileges are

of relatively small value and are offered or furnished by the employer merely as a means of promoting the health, good will, contentment, or efficiency of his employees.

(11) Tips or gratuities. Tips or gratuities paid directly to an employee by a customer of an employer, and not accounted for by the employee to the employer, are not subject to withholding.

(12) Remuneration for services performed by permanent resident of Virgin Islands (i) Exemption from withholding. No tax shall be withheld for the United States under chapter 24 from a payment of wages by an employer, including the United States or any agency thereof, to an employee if at the time of payment it is reasonable to believe that the employee will be required to satisfy his income tax obligations with respect to such wages under section 28 (a) of the Revised Organic Act of the Virgin Islands. That section provides that all persons whose permanent residence is in the Virgin Islands "shall satisfy their income tax obligations under applicable taxing statutes of the United States by paying their tax on income derived from all sources both within and outside the Virgin Islands into the treasury of the Virgin Islands".

(ii) Claiming exemption. If the employee furnishes to the employer a statement in duplicate that he expects to satisfy his income tax obligations under section 28 (a) of the Revised Organic Act of the Virgin Islands with respect to all wages subsequently to be paid to him by the employer during the taxable year to which the statement relates, the employer may, in the absence of information to the contrary, rely on such statement as establishing reasonable belief that the employee will so satisfy his income tax obligations. The employee's statement shall identify the taxable year to which it relates, and both the original and the duplicate copy thereof shall be signed and dated by the employee.

(iii) Disposition of statement. The original of the statement shall be retained by the employer. The duplicate copy of the statement shall be sent by the employer to the Director of International Operations, Washington 25, D. C., on or before the last day of the calendar year in which the employer receives the statement from the employee.

(iv) Applicability of subparagraph. This subparagraph has no application with respect to any payment of remuneration which is not subject to withholding by reason of any other provision of the regulations in this subpart.

[T. D. 6155, 20 F. R. 10098, Dec. 30, 1955, as amended by T. D. 6259, 22 F. R. 8434, Oct. 26, 1957]

§ 31.3401 (a)-2 Exclusions from wages-(a) In general. (1) The term "wages" does not include any remuneration for services performed by an employee for his employer which is specifically excepted from wages under section 3401 (a) (see paragraph (b) of this section and §§ 31.3401 (a) (1)-1 to 31.3401 (a) (12)-1, inclusive).

(2) The exception attaches to the remuneration for services performed by an employee and not to the employee as an individual; that is, the exception applies only to the remuneration in an excepted category.

Example. A is an individual who is employed part time by B to perform domestic service in his home (see § 31.3401 (a) (3)-1). A is also employed by C part time to perform services as a clerk in a department store owned by him. While no withholding is required with respect to A's remuneration for services performed in the employ of B (the remuneration being excluded from wages), the exception does not embrace the remuneration for services performed by A in the employ of C and withholding is required with respect to the wages for such services.

(3) For provisions relating to the circumstances under which remuneration which is excepted is nevertheless deemed to be wages, and relating to the circumstances under which remuneration which is not excepted is nevertheless deemed not to be wages, see § 31.3402 (e)-1.

(b) Fees paid a public official. (1) Authorized fees paid to public officials such as notaries public, clerks of courts, sheriffs, etc., for services rendered in the performance of their official duties are excepted from wages and hence are not subject to withholding. However, salaries paid such officials by the Government, or by a Government agency or instrumentality, are subject to withholding.

(2) Amounts paid to precinct workers for services performed at election booths in State, county, and municipal elections and fees paid to jurors and witnesses are in the nature of fees paid to public officials and therefore are not subject to withholding.

§ 31.3401 (a) (1) Statutory provisions; definitions; wages; certain remuneration of members of the Armed Forces.

For

SEC. 3401. Definitions—(a) Wages. purposes of this chapter, the term "wages" means all remuneration for services performed by an employee for his employer **; except that such term shall not include remuneration paid

(1) For active service as a member of the Armed Forces of the United States performed in a month for which such member is entitled to the benefits of section 112; or

§ 31.3401 (a) (1)-1 Remuneration of members of the Armed Forces of the United States for active service in combat zone or while hospitalized as a result of such service. Remuneration paid for active service as a member of the Armed Forces of the United States performed in a month during any part of which such member served in a combat zone (as determined under section 112) or is hospitalized at any place as a result of wounds, disease, or injury incurred while serving in such a combat zone is excepted from wages and is, therefore, not subject to withholding. The exception with respect to hospitalization is applicable, however, only if during all of such month there are combatant activities in some combat zone (as determined under section 112). See the Income Tax Regulations (Part 1 of this chapter) under section 112.

§ 31.3401 (a) (2) Statutory provisions; definitions; wages; remuneration paid for agricultural labor.

SEC. 3401. Definitions—(a) Wages. For purposes of this chapter, the term "wages" means all remuneration for services performed by an employee for his employer **; except that such term shall not include remuneration paid—

(2) For agricultural labor (as defined in section 3121 (g)); or

§ 31.3401 (a) (2)-1 Agricultural labor. The term "wages" does not include remuneration for services which constitute agricultural labor as defined in section 3121 (g). For regulations relating to the definition of the term "agricultural labor", see § 31.3121 (g)-1 in Subpart B of this part.

§ 31.3401 (a) (3) Statutory provisions; definitions; wages; remuneration paid for domestic service.

SEC. 3401. Definitions-(a) Wages. For purposes of this chapter, the term "wages" means all remuneration • * for services

performed by an employee for his employer ; except that such term shall not include remuneration paid

(3) For domestic service in a private home, local college club, or local chapter of a college fraternity or sorority; or

§ 31.3401 (a) (3)-1 Remuneration for domestic service—(a) In a private home. (1) Remuneration paid for services of a household nature performed by an employee in or about a private home of the person by whom he is employed is excepted from wages and hence is not subject to withholding. A private home is a fixed place of abode of an individual or family. A separate and distinct dwelling unit maintained by an individual in an apartment house, hotel, or other similar establishment may constitute a private home. If a dwelling house is used primarily as a boarding or lodging house for the purpose of supplying board or lodging to the public as a business enterprise, it is not a private home, and the remuneration paid for services performed therein is not within the exception.

(2) In general, services of a household nature in or about a private home include services performed by cooks, waiters, butlers, housekeepers, governesses, maids, valets, baby sitters, janitors, laundresses, furnacemen, caretakers, handymen, gardeners, footmen, grooms, and chauffeurs of automobiles for family use.

(b) In a local college club or local chapter of a college fraternity or sorority. (1) Remuneration paid for services of a household nature performed by an employee in or about the club rooms or house of a local college club or of a local chapter of a college fraternity or sorority by which he is employed is excepted from wages and hence is not subject to withholding. A local college club or local chapter of a college fraternity or sorority does not include an alumni club or chapter. If the club rooms or house of a local college club or local chapter of a college fraternity or sorority is used primarily for the purpose of supplying board or lodging to students or the public as a business enterprise, the remuneration paid for services performed therein is not within the exception.

(2) In general, services of a household nature in or about the club rooms or house of a local college club or local chapter of a college fraternity or sorority include services rendered by cooks, waiters, butlers, maids, janitors, laundresses,

furnacemen, handymen, gardeners, housekeepers, and housemothers.

(c) Remuneration not excepted. Remuneration paid for services not of a household nature, such as services performed as a private secretary, tutor, or librarian, even though performed in the employer's private home or in a local college club or local chapter of a college fraternity or sorority, is not within the exception. Remuneration paid for services of a household nature is not within the exception if performed in or about rooming or lodging houses, boarding houses, clubs (except local college clubs), hotels, hospitals, eleemosynary institutions, or commercial offices or establishments.

§ 31.3401 (a) (4) Statutory provisions; definitions; wages; cash remuneration for service not in the course of employer's trade or business.

SEC. 3401. Definitions-(a) Wages. For purposes of this chapter, the term "wages" means all remuneration * * for services performed by an employee for his employer

*; except that such term shall not include remuneration paid

(4) For service not in the course of the employer's trade or business performed in any calendar quarter by an employee, unless the cash remuneration paid for such service is $50 or more and such service is performed by an individual who is regularly employed by such employer to perform such service. For purposes of this paragraph, an individual shall be deemed to be regularly employed by an employer during a calendar quarter only if—

(A) On each of some 24 days during such quarter such individual performs for such employer for some portion of the day service not in the course of the employer's trade or business; or

(B) Such individual was regularly employed (as determined under subparagraph (A)) by such employer in the performance of such service during the preceding calendar quarter; or

§ 31.3401 (a) (4)-1 Cash remuneration for service not in the course of employer's trade or business. (a) Cash remuneration paid for services not in the course of the employer's trade or business performed by an employee for an employer in a calendar quarter is excepted from wages and hence is not subject to withholding unless

(1) The cash remuneration paid for such services performed by the employee for the employer in the calendar quarter is $50 or more; and

(2) Such employee is regularly employed in the calendar quarter by such employer to perform such services. Unless the tests set forth in both subparagraphs (1) and (2) of this paragraph are met, cash remuneration for service not in the course of the employer's trade or business is excluded from wages. (For provisions relating to the exclusion from wages of remuneration paid in any medium other than cash for services not in the course of the employer's trade or business, see § 31.3401 (a) (11)-1.)

(b) The term "services not in the course of the employer's trade or business" includes services that do not promote or advance the trade or business of the employer. As used in this section, the term does not include service not in the course of the employer's trade or business performed on a farm operated for profit or domestic service in a private home, local college club, or local chapter of a college fraternity or sorority. Accordingly, this exception does not apply with respect to remuneration which is excepted from wages under section 3401 (a) (2) or section 3401 (a) (3) (see §§ 31.3401 (a) (2)-1 and 31.3401 (a) (3)-1, respectively). Remuneration paid for service performed for a corporation does not come within the exception.

(c) The test relating to cash remuneration of $50 or more is based on the remuneration earned during a calendar quarter rather than on the remuneration paid in a calendar quarter. However, for purposes of determining whether the test is met, it is also required that the remuneration be paid, although it is immaterial when the remuneration is paid. Furthermore, in determining whether $50 or more has been paid for service not in the course of the employer's trade or business, only cash remuneration for such service shall be taken into account. The term "cash remuneration" includes checks and other monetary media of exchange. Remuneration paid in any other medium, such as lodging, food, or other goods or commodities, is disregarded in determining whether the cashremuneration test is met.

(d) For purposes of this exception, an individual is deemed to be regularly employed by an employer during a calendar quarter only if—

(1) Such individual performs service not in the course of the employer's trade