Circular e pdf

Taking too long? Reload document Open in new tab Circular E Publication 15 [1. Save my name, email, and website in this browser for the next time I comment. Table of Contents. Reload document. His most recent Form W-4 is from , and he is single, claims one withholding allowance, and did not enter an amount for additional withholding on his Form W You decide to use the Wage Bracket Method of withholding.

Using Worksheet 3 and the withholding tables in section 3 of Pub. You pay Sharon Warren a base salary on the 1st of each month. She submitted a Form W-4 and checked the box that she is Single or Married filing separately. She did not complete Steps 2, 3, and 4 on her Form W Using Worksheet 2 and the withholding tables in section 2 of Pub.

Electing to use supplemental wage withholding method 1b, you do the following. The facts are the same as in Example 2 , except you elect to use the flat rate method of withholding on the bonus.

Using supplemental wage withholding method 1b, you do the following. Withhold income tax on tips from wages earned by the employee or from other funds the employee makes available. Don't withhold the income tax due on tips from employee tips.

If an employee receives regular wages and reports tips, figure income tax withholding as if the tips were supplemental wages. If you withheld income tax from the regular wages in the current or immediately preceding calendar year, you can withhold on the tips by method 1a or 1b discussed earlier in this section under Supplemental wages identified separately from regular wages. Employers also have the option to treat tips as regular wages rather than supplemental wages.

Service charges aren't tips; therefore, withhold taxes on service charges as you would on regular wages. Vacation pay is subject to withholding as if it were a regular wage payment.

When vacation pay is in addition to regular wages for the vacation period for example, an annual lump-sum payment for unused vacation leave , treat it as a supplemental wage payment. If the vacation pay is for a time longer than your usual payroll period, spread it over the pay periods for which you pay it. Your payroll period is a period of service for which you usually pay wages. When you have a regular payroll period, withhold income tax for that time period even if your employee doesn't work the full period.

When you don't have a regular payroll period, withhold the tax as if you paid wages for a daily or miscellaneous payroll period.

Figure the number of days including Sundays and holidays in the period covered by the wage payment. If the wages are unrelated to a specific length of time for example, commissions paid on completion of a sale , count back the number of days from the payment period to the latest of:. When you pay an employee for a period of less than 1 week, and the employee signs a statement under penalties of perjury indicating he or she isn't working for any other employer during the same week for wages subject to withholding, figure withholding based on a weekly payroll period.

If the employee later begins to work for another employer for wages subject to withholding, the employee must notify you within 10 days. You then figure withholding based on the daily or miscellaneous period. Before , the value of a withholding allowance was tied to the amount of the personal exemption.

Step 1 and Step 5 apply to all employees. In Step 1, employees enter personal information like their name and filing status. In Step 5, employees sign the form. Employees who complete only Step 1 and Step 5 will have their withholding figured based on their filing status's standard deduction and tax rates with no other adjustments. If applicable, in Step 2, employees increase their withholding to account for higher tax rates due to income from other jobs in their household.

Under Step 2, employees either enter an additional amount to withhold per payroll period in Step 4 c or check the box in Step 2 c for higher withholding rate tables to apply to their wages.

In Step 3, employees decrease their withholding by reporting the annual amount of any credits they will claim on their income tax return. In Step 4, employees may increase or decrease their withholding based on the annual amount of other income or deductions they will report on their income tax return and they may also request any additional federal income tax they want withheld each pay period.

The withholding tables in Pub. All newly hired employees must use the redesigned form. Similarly, any other employees who wish to adjust their withholding must use the redesigned form.

This computational bridge allows you to use computational procedures and data fields for a and later Form W-4 to arrive at the equivalent withholding for an employee that would have applied using the computational procedures and data fields on a or earlier Form W Employer instructions on how to figure employee withholding are provided in Pub.

To know how much federal income tax to withhold from employees' wages, you should have a Form W-4 on file for each employee. Encourage your employees to file an updated Form W-4 for , especially if they owed taxes or received a large refund when filing their tax return.

Ask all new employees to give you a signed Form W-4 when they start work. Make the form effective with the first wage payment. If a new employee doesn't give you a completed Form W-4 in including an employee who previously worked for you and was rehired in , and who fails to furnish a Form W-4 , treat the new employee as if they had checked the box for Single or Married filing separately in Step 1 c and made no entries in Step 2, Step 3, or Step 4 of the Form W An employee who was paid wages before and who failed to furnish a Form W-4 should continue to be treated as single and claiming zero allowances on a Form W You may establish a system to electronically receive Forms W-4 from your employees.

A Form W-4 for or earlier years remains in effect for unless the employee gives you a Form W When you receive a new Form W-4 from an employee, don't adjust withholding for pay periods before the effective date of the new form. If an employee gives you a Form W-4 that replaces an existing Form W-4, begin withholding no later than the start of the first payroll period ending on or after the 30th day from the date when you received the replacement Form W A Form W-4 that makes a change for the next calendar year won't take effect in the current calendar year.

See Revenue Procedure , I. The amount of any federal income tax withholding must be based on filing status, income including income from other jobs , deductions, and credits. Your employees may not base their withholding amounts on a fixed dollar amount or percentage.

However, an employee may specify a dollar amount to be withheld each pay period in addition to the amount of withholding based on filing status and other information reported on Form W Employees that are married filing jointly and have spouses that also currently work, or employees that hold more than one job at the same time, should account for their higher tax rate by completing Step 2 of their Form W Employees also have the option to report on their Form W-4 other income they will receive that isn't subject to withholding and other deductions they will claim in order to increase the accuracy of their federal income tax withholding.

Along with Form W-4, you may wish to order Pub. Don't accept any withholding or estimated tax payments from your employees in addition to withholding based on their Form W Employees who receive tips may provide funds to their employer for withholding on tips; see Collecting taxes on tips in section 6.

Generally, an employee may claim exemption from federal income tax withholding because he or she had no income tax liability last year and expects none this year. See the Form W-4 instructions for more information.

However, the wages are still subject to social security and Medicare taxes. See also Invalid Forms W-4 , later in this section. A Form W-4 claiming exemption from withholding is effective when it is given to the employer and only for that calendar year. To continue to be exempt from withholding, an employee must give you a new Form W-4 by February If the employee doesn't give you a new Form W-4 by February 15, begin withholding as if he or she had checked the box for Single or Married filing separately in Step 1 c and made no entries in Step 2, Step 3, or Step 4 of the Form W Withholding income taxes on the wages of nonresident alien employees.

In general, you must withhold federal income taxes on the wages of nonresident alien employees. However, see Pub. Also see section 3 of Pub. Nonresident aliens may not claim the standard deduction on their tax return; therefore, employers must add an amount to the wages of nonresident alien employees performing services within the United States in order to figure the amount of federal income tax to withhold from their wages.

The amount is added to their wages solely for calculating federal income tax withholding. The amount also doesn't increase the social security tax or Medicare tax liability of the employer or the employee, or the FUTA tax liability of the employer. Not claim exemption from income tax withholding even if they meet both of the conditions to claim exemption from withholding listed in the Form W-4 instructions ;.

Not claim the child tax credit or credit for other dependents in Step 3 of Form W-4 if the nonresident alien is a resident of Canada, Mexico, or South Korea, or a student from India, or a business apprentice from India, he or she may claim, under certain circumstances see Pub. If a nonresident alien employee claims a tax treaty exemption from withholding, the employee must submit Form with respect to the income exempt under the treaty, instead of Form W You may receive a notice from the IRS requiring you to submit a copy of Form W-4 for one or more of your named employees.

Send the requested copy or copies of Form W-4 to the IRS at the address provided and in the manner directed by the notice. The IRS uses information reported on Form W-2 to identify employees with withholding compliance problems. In some cases, if a serious underwithholding problem is found to exist for a particular employee, the IRS may issue a lock-in letter to the employer specifying the employee's permitted filing status and providing withholding instructions for the specific employee.

You must furnish the employee copy to the employee within 10 business days of receipt if the employee is employed by you as of the date of the notice. You may follow any reasonable business practice to furnish the employee copy to the employee. Begin withholding based on the notice on the date specified in the notice.

When you receive the notice specifying the permitted filing status and providing withholding instructions, you may not withhold immediately on the basis of the notice. You must begin withholding tax on the basis of the notice for any wages paid after the date specified in the notice. The delay between your receipt of the notice and the date to begin the withholding on the basis of the notice permits the employee time to contact the IRS.

Seasonal employees and employees not currently performing services. You reasonably expect the employee to resume services within 12 months of the date of the notice. The employee is on a leave of absence that doesn't exceed 12 months or the employee has a right to reemployment after the leave of absence.

If you must furnish and withhold based on the notice and the employment relationship is terminated after the date of the notice, you must continue to withhold based on the notice if you continue to pay any wages subject to income tax withholding. You must also withhold based on the notice or modification notice explained next if the employee resumes the employment relationship with you within 12 months after the termination of the employment relationship.

After issuing the notice specifying the permitted filing status and providing withholding instructions, the IRS may issue a subsequent notice modification notice that modifies the original notice. The modification notice may change the permitted filing status and withholding instructions.

You must withhold federal income tax based on the effective date specified in the modification notice. After the IRS issues a notice or modification notice, if the employee provides you with a new Form W-4 claiming complete exemption from withholding or a completed Form W-4 that results in less withholding than would result under the IRS notice or modification notice, disregard the new Form W You must withhold based on the notice or modification notice unless the IRS notifies you to withhold based on the new Form W If the employee wants to put a new Form W-4 into effect that results in less withholding than required, the employee must contact the IRS.

If, after you receive an IRS notice or modification notice, your employee gives you a new completed Form W-4 that results in more withholding than would result under the notice or modification notice, you must withhold tax based on the new Form W Otherwise, disregard any subsequent Forms W-4 provided by the employee and withhold based on the IRS notice or modification notice.

If, in a year before , you received a lock-in letter for an employee, then for you should continue to follow the instructions in the lock-in letter. You will use the withholding methods described in Pub. You should continue following the instructions in the pre lock-in letter until you receive a letter releasing your employee from the lock-in procedures, you receive a modification notice, or your employee gives you a new Form W-4 that results in more withholding than would result under the notice.

For additional information about employer withholding compliance, see IRS. You may use a substitute version of Form W-4 to meet your business needs. However, your substitute Form W-4 must contain language that is identical to the official Form W-4 and your form must meet all current IRS rules for substitute forms. At the time you provide your substitute form to the employee, you must provide him or her with all tables, instructions, and worksheets from the current Form W You can't accept substitute Forms W-4 developed by employees.

An employee who submits an employee-developed substitute Form W-4 after October 10, , will be treated as failing to furnish a Form W However, continue to honor any valid employee-developed Forms W-4 you accepted before October 11, Any unauthorized change or addition to Form W-4 makes it invalid. This includes taking out any language by which the employee certifies the form is correct.

A Form W-4 is also invalid if, by the date an employee gives it to you, he or she clearly indicates it is false. When you get an invalid Form W-4, don't use it to figure federal income tax withholding. Tell the employee it is invalid and ask for another one.

If the employee doesn't give you a valid one, and you have an earlier Form W-4 for this employee that is valid, withhold as you did before.

If you don't have an earlier Form W-4 that is valid, withhold tax as if the employee had checked the box for Single or Married filing separately in Step 1 c and made no entries in Step 2, Step 3, or Step 4 of the Form W However, an employee who was paid wages in who never submitted a valid Form W-4 and submits an invalid Form W-4 in should continue to be treated as single and claiming zero allowances on a Form W If a levy issued in a prior year is still in effect and the taxpayer submits a new Statement of Exemptions and Filing Status, use the current year Pub.

The old-age, survivors, and disability insurance part is financed by the social security tax. The hospital insurance part is financed by the Medicare tax.

Each of these taxes is reported separately. Certain types of wages and compensation aren't subject to social security and Medicare taxes. See section 5 and section 15 for details. Generally, employee wages are subject to social security and Medicare taxes regardless of the employee's age or whether he or she is receiving social security benefits.

If the employee reported tips, see section 6. Social security and Medicare taxes have different rates and only the social security tax has a wage base limit. The wage base limit is the maximum wage subject to the tax for the year. Determine the amount of withholding for social security and Medicare taxes by multiplying each payment by the employee tax rate.

For , the social security tax rate is 6. The tax rate for Medicare is 1. There is no wage base limit for Medicare tax; all covered wages are subject to Medicare tax. Qualified sick leave wages and qualified family leave wages for leave taken after March 31, , and before April 1, , aren't subject to the employer share of social security tax; therefore, the tax rate on these wages is 6.

Qualified sick leave wages and qualified family leave wages for leave taken after March 31, , and before October 1, , are subject to both the employer share 6. In addition to withholding Medicare tax at 1. Additional Medicare Tax is only imposed on the employee. There is no employer share of Additional Medicare Tax.

For more information on what wages are subject to Medicare tax, see section Early in , you bought all of the assets of a plumbing business from Mr. Brown, who had been employed by Mr. The wages you paid to Mr. Medicare tax is due on all of the wages you pay him during the calendar year.

Brown received while employed by Mr. Martin in determining whether Mr. For more information, including the definition of a motion picture project employer and motion picture project worker, see section Withholding social security and Medicare taxes on nonresident alien employees. In general, if you pay wages to nonresident alien employees, you must withhold social security and Medicare taxes as you would for a U.

The United States has social security agreements, also known as totalization agreements, with many countries that eliminate dual social security coverage and taxation.

Compensation subject to social security and Medicare taxes may be exempt under one of these agreements. Also see Pub. Tax Guide for Aliens.

An exemption from social security and Medicare taxes is available to members of a recognized religious sect opposed to insurance. This exemption is available only if both the employee and the employer are members of the sect. Under section z , a foreign person who meets both of the following conditions is generally treated as an American employer for purposes of paying FICA taxes on wages paid to an employee who is a U.

The foreign person is a member of a domestically controlled group of entities. The employee of the foreign person performs services in connection with a contract between the U. Government or an instrumentality of the U. Government and any member of the domestically controlled group of entities.

Part-time workers and workers hired for short periods of time are treated the same as full-time employees for federal income tax withholding and social security, Medicare, and FUTA tax purposes.

Generally, it doesn't matter whether the part-time worker or worker hired for a short period of time has another job or has the maximum amount of social security tax withheld by another employer. See Successor employer , earlier, for an exception to this rule. Income tax withholding may be figured the same way as for full-time workers or it may be figured by the part-year employment method explained in section 6 of Pub. You must notify employees who have no federal income tax withheld that they may be able to claim a tax refund because of the EIC.

This is because eligible employees may get a refund of the amount of the EIC that is more than the tax they owe. If a substitute for Form W-2 is given to the employee on time but doesn't have the required statement, you must notify the employee within 1 week of the date the substitute for Form W-2 is given. If Form W-2 is required but isn't given on time, you must give the employee Notice or your written statement by the date Form W-2 is required to be given.

If Form W-2 isn't required, you must notify the employee by February 7, You may reduce your deposits of federal employment taxes in anticipation of the COBRA premium assistance credit with regard to a period of coverage as of the date you are entitled to the credit. Employers won't be subject to an FTD penalty for properly reducing their deposits if certain conditions are met.

For more information on reducing deposits, see Notice , I. For more information about the credit for qualified sick and family leave wages, go to IRS. Generally, you must deposit federal income tax withheld and both the employer and employee social security and Medicare taxes.

See How To Deposit , later in this section, for information on electronic deposit requirements. You may make a payment with a timely filed Form or Form instead of depositing, without incurring a penalty, if one of the following applies.

Separate deposit requirements for nonpayroll Form tax liabilities. Separate deposits are required for nonpayroll and payroll income tax withholding. Don't combine deposits for Forms or Form and Form tax liabilities. Generally, the deposit rules for nonpayroll liabilities are the same as discussed next, except the rules apply to an annual rather than a quarterly return period.

See the separate Instructions for Form for more information. There are two deposit schedules—monthly and semiweekly—for determining when you deposit social security, Medicare, and withheld federal income taxes. These schedules tell you when a deposit is due after a tax liability arises. Your tax liability is based on the dates payments were made or wages were paid. For taxable noncash fringe benefits, see When taxable fringe benefits are treated as paid in section 5.

The deposit schedule you must use is based on the total tax liability you reported on Form , line 12, or Form , line 9, during a lookback period, discussed next. Your deposit schedule isn't determined by how often you pay your employees or make deposits. See special rules for Forms and , later. Also see Application of Monthly and Semiweekly Schedules , later in this section. These rules don't apply to FUTA tax. See section 14 for information on depositing FUTA tax.

The lookback period begins July 1 and ends June 30 as shown next in Table 1. Table 1. Lookback Period for Calendar Year The lookback period for a Form filer who filed Form in either or is calendar year The lookback period for for a Form filer is calendar year Your total tax liability for the lookback period is determined based on the amount of taxes you reported on Form , line 12, or Form , line 9. Adjustments made on Form X, Form X, and Form X don't affect the amount of tax liability for previous periods for purposes of the lookback rule.

For monthly schedule depositors, the deposit period is a calendar month. The deposit periods for semiweekly schedule depositors are Wednesday through Friday and Saturday through Tuesday. If you're an agent with an approved Form , the deposit rules apply to you based on the total employment taxes accumulated by you for your own employees and on behalf of all employers for whom you're authorized to act.

For more information on an agent with an approved Form , see Revenue Procedure , I. Under the monthly deposit schedule, deposit employment taxes on payments made during a month by the 15th day of the following month. Monthly schedule depositors shouldn't file Form or Form on a monthly basis.

Your tax liability for any quarter in the lookback period before you started or acquired your business is considered to be zero. Semiweekly deposit period spanning two quarters Form filers.

If you have a pay date on Thursday, March 31, first quarter , and another pay date on Friday, April 1, second quarter , two separate deposits would be required even though the pay dates fall within the same semiweekly period. Both deposits would be due Wednesday, April 6, Semiweekly deposit period spanning two return periods Form or Form filers.

The period covered by a return is the return period. The return period for annual Forms and is a calendar year. If you have more than one pay date during a semiweekly period and the pay dates fall in different return periods, you'll need to make separate deposits for the separate liabilities. For example, if a return period ends on Thursday, taxes accumulated on Wednesday and Thursday are subject to one deposit obligation, and taxes accumulated on Friday are subject to a separate obligation.

Separate deposits are required because two different return periods are affected. Rose Co. However, for , Rose Co. If a deposit is required to be made on a day that isn't a business day, the deposit is considered timely if it is made by the close of the next business day. A business day is any day other than a Saturday, Sunday, or legal holiday. For example, if a deposit is required to be made on a Friday and Friday is a legal holiday, the deposit will be considered timely if it is made by the following Monday if that Monday is a business day.

Semiweekly schedule depositors have at least 3 business days following the close of the semiweekly period to make a deposit. For example, if a semiweekly schedule depositor accumulated taxes for payments made on Friday and the following Monday is a legal holiday, the deposit normally due on Wednesday may be made on Thursday this allows 3 business days to make the deposit.

Legal holidays for are listed next. The terms identify which set of deposit rules you must follow when an employment tax liability arises. The deposit rules are based on the dates when wages are paid cash basis , not on when tax liabilities are accrued for accounting purposes. Federal income tax is an obligation for all individuals required to pay taxes. Other states such as Tennessee and New Hampshire only entail interest income and tax dividends instead of income tax.

Taking too long? Reload document Open in new tab Circular E Publication 15 [1. Save my name, email, and website in this browser for the next time I comment. It is best to be prepared and be educated regarding it prior to you need to take care of it. Below are several of the adjustments associated with withholding tax all at once:.

According to the CARES Act, employers have the ability to delay half of their Social Security tax shares up until December 31, , and the remaining fifty percent up to December 31, This policy relates to self-employed also, but it does not for staff members.