We have a farm in the US, with an employee paid with wheat rather than money. He is an ordinary employee that receives a W2. My accountant said that we don't have to withhold income tax or pay either employee or employer portions of FICA tax on his income, because it is "payment in kind".
Its hard to say why this sounds iffy, but in my experience with taxes, usually something that creates an obvious loophole is not correctly understood. For example, I could just operate the farm as a corporation, make myself an employee, take all profit as "payment in kind", and not pay self employment tax. Obvious loophole = I think my accountant is wrong about this.
Is my accountant wrong about "payment in kind" not being subject to payroll tax?
If not, is she partially correct in any way, in that, are there any changes to payroll tax requirements relating to "payment in kind", which might explain her position?
Would the situation be different if he was also paid in cash, like 50% cash reimbursement and 50% wheat reimbursement?
Please state the experience you have that justifies your answer. Thanks.