[Code of Federal Regulations]
[Title 26, Volume 15]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR31.3401(a)(4)-1]

[Page 196-197]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 31_EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE--Table of Contents
 
              Subpart E_Collection of Income Tax at Source
 
Sec. 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 paragraphs (a)(1) and (2) of this 
section 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 Sec. 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 Sec. Sec. 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. Furthemore, 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 
cash-remuneration 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 or business for such employer for some portion of the 
day on at least 24 days (whether or not consecutive) during such 
calendar quarter; or
    (2) Such individual was regularly employed (as determined under 
paragraph (d)(1) of this section) by such employer in the performance of 
service not in the course of the employer's trade or business during the 
preceding calendar quarter.
    (e) In determining whether an employee has performed service not in 
the

[[Page 197]]

course of the employer's trade or business on at least 24 days during a 
calendar quarter, there shall be counted as one day--
    (1) Any day or portion thereof on which the employee actually 
performs such service; and
    (2) Any day or portion thereof on which the employee does not 
perform service of the prescribed character but with respect to which 
cash remuneration is paid or payable to the employee for such service, 
such as a day on which the employee is sick or on vacation.

An employee who on a particular day reports for work and, at the 
direction of his employer, holds himself in readiness to perform service 
not in the course of the employer's trade or business shall be 
considered to be engaged in the actual performance of such service on 
that day. For purposes of this exception, a day is a continuous period 
of 24 hours commencing at midnight and ending at midnight.