# Department of the Treasury (2023) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/agency%3Airs%3A11f8a9f18945ad6a ## Record - **Collection:** Agency decision - **Document type:** Agency decision ## Text Department of the Treasury Internal Revenue Service Contents What's New . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Reminders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Publication 15 Cat. No. 10000W Calendar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 (Circular E), Employer's Tax Guide Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 For use in 2023 1. Employer Identification Number (EIN) . . . . . . . 11 2. Who Are Employees? . . . . . . . . . . . . . . . . . . . . 11 3. Family Employees . . . . . . . . . . . . . . . . . . . . . . 13 4. Employee's Social Security Number (SSN) . . . 14 5. Wages and Other Compensation . . . . . . . . . . . 15 6. Tips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 7. Supplemental Wages . . . . . . . . . . . . . . . . . . . . 19 8. Payroll Period . . . . . . . . . . . . . . . . . . . . . . . . . . 20 9. Withholding From Employees' Wages . . . . . . . 21 10. Required Notice to Employees About the Earned Income Credit (EIC) . . . . . . . . . . . . . . 26 11. Depositing Taxes . . . . . . . . . . . . . . . . . . . . . . 26 12. Filing Form 941 or Form 944 . . . . . . . . . . . . . . 32 13. Reporting Adjustments to Form 941 or Form 944 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 14. Federal Unemployment (FUTA) Tax . . . . . . . . 37 15. Special Rules for Various Types of Services and Payments . . . . . . . . . . . . . . . . . 40 16. Third-Party Payer Arrangements . . . . . . . . . . 45 How To Get Tax Help . . . . . . . . . . . . . . . . . . . . . . 46 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Future Developments For the latest information about developments related to Pub. 15, such as legislation enacted after it was published, go to IRS.gov/Pub15. What's New Get forms and other information faster and easier at: • IRS.gov (English) • IRS.gov/Spanish (Español) • IRS.gov/Chinese (中文) Dec 13, 2022 • IRS.gov/Korean (한국어) • IRS.gov/Russian (Pусский) • IRS.gov/Vietnamese (Tiếng Việt) Social security and Medicare tax for 2023. The rate of social security tax on taxable wages, including qualified sick leave wages and qualified family leave wages paid in 2023 for leave taken after March 31, 2021, and before October 1, 2021, is 6.2% each for the employer and employee or 12.4% for both. Qualified sick leave wages and qualified family leave wages paid in 2023 for leave taken after March 31, 2020, and before April 1, 2021, aren't subject to the employer share of social security tax; therefore, the tax rate on these wages is 6.2%. The social security wage base limit is $160,200. The Medicare tax rate is 1.45% each for the employee and employer, unchanged from 2022. There is no wage base limit for Medicare tax. Social security and Medicare taxes apply to the wages of household workers you pay $2,600 or more in cash wages in 2023. Social security and Medicare taxes apply to election workers who are paid $2,200 or more in cash or an equivalent form of compensation in 2023. Qualified small business payroll tax credit for increasing research activities. For tax years beginning before January 1, 2023, a qualified small business may elect to claim up to $250,000 of its credit for increasing research activities as a payroll tax credit. The Inflation Reduction Act of 2022 (the IRA) increases the election amount to $500,000 for tax years beginning after December 31, 2022. The payroll tax credit election must be made on or before the due date of the originally filed income tax return (including extensions). The portion of the credit used against payroll taxes is allowed in the first calendar quarter beginning after the date that the qualified small business filed its income tax return. The election and determination of the credit amount that will be used against the employer’s payroll taxes are made on Form 6765, Credit for Increasing Research Activities. The amount from Form 6765, line 44, must then be reported on Form 8974, Qualified Small Business Payroll Tax Credit for Increasing Research Activities. Starting in the first quarter of 2023, the payroll tax credit is first used to reduce the employer share of social security tax up to $250,000 per quarter and any remaining credit reduces the employer share of Medicare tax for the quarter. Any remaining credit, after reducing the employer share of social security tax and the employer share of Medicare tax, is then carried forward to the next quarter. Form 8974 is used to determine the amount of the credit that can be used in the current quarter. The amount from Form 8974, line 12, or, if applicable, line 17, is reported on Form 941 or Form 944. For more information about the payroll tax credit, see IRS.gov/ResearchPayrollTC. Also see the line 16 instructions in the Instructions for Form 941 (line 13 instructions in the Instructions for Form 944) for information on reducing your record of tax liability for this credit. Forms 941-SS and 941-PR discontinued after 2023. Form 941-SS, Employer’s QUARTERLY Federal Tax Return—American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands, and Form 941-PR, Planilla para la Declaración Federal TRIMESTRAL del Patrono, will no longer be available after the fourth quarter of 2023. Instead, employers in the U.S. territories will file Form 941, Employer’s QUARTERLY Federal Tax Return, or, if you prefer your form and instructions in Spanish, you can file new Form 941 (sp), Declaración del Impuesto Federal TRIMESTRAL del Empleador. Pubs. 51, 80, and 179 discontinued after 2023. Pub. 51, Agricultural Employer’s Tax Guide; Pub. 80, Federal Tax Guide for Employers in the U.S. Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Page 2 Mariana Islands; and Pub. 179, Guía Contributiva Federal para Patronos Puertorriqueños, will no longer be available after 2023. Instead, information specific to agricultural employers and employers in the U.S. territories will be included in Pub. 15 beginning with the Pub. 15 for use in 2024 (published December 2023). Beginning in 2024, there will be a new Pub. 15 (sp) that is a Spanish-language version of Pub. 15. Reminders The COVID-19 related credit for qualified sick and family leave wages is limited to leave taken after March 31, 2020, and before October 1, 2021. Generally, the credit for qualified sick and family leave wages as enacted under the Families First Coronavirus Response Act (FFCRA) and amended and extended by the COVID-related Tax Relief Act of 2020 for leave taken after March 31, 2020, and before April 1, 2021, and the credit for qualified sick and family leave wages under sections 3131, 3132, and 3133 of the Internal Revenue Code, as enacted under the American Rescue Plan Act of 2021 (the ARP), for leave taken after March 31, 2021, and before October 1, 2021, have expired. However, employers that pay qualified sick and family leave wages in 2023 for leave taken after March 31, 2020, and before October 1, 2021, are eligible to claim a credit for qualified sick and family leave wages in 2023. See the March 2023 revision of the Instructions for Form 941 or the 2023 Instructions for Form 944 for more information. Disaster tax relief. Disaster tax relief is available for those impacted by disasters. For more information about disaster relief, go to IRS.gov/DisasterTaxRelief. Payroll tax credit for certain tax-exempt organizations affected by qualified disasters. Section 303(d) of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 allows for a payroll tax credit for certain tax-exempt organizations affected by certain qualified disasters not related to COVID-19. This credit is claimed on Form 5884-D (not on Form 941 and Form 944). Form 5884-D is filed after the Form 941 for the quarter or Form 944 for the year for which the credit is being claimed has been filed. For more information about this credit, go to IRS.gov/ Form5884D. 2023 withholding tables. The Percentage Method and Wage Bracket Method withholding tables, the employer instructions on how to figure employee withholding, and the amount to add to a nonresident alien employee's wages for figuring income tax withholding are included in Pub. 15-T, Federal Income Tax Withholding Methods, available at IRS.gov/Pub15T. Moving expense reimbursement. P.L. 115-97 suspends the exclusion for qualified moving expense reimbursements from your employee's income for tax years beginning after 2017 and before 2026. However, the exclusion is still available in the case of a member of the U.S. Armed Forces on active duty who moves because of a permanent change of station due to a military order. The exclusion applies only to reimbursement of moving Publication 15 (2023) expenses that the member could deduct if they had paid or incurred them without reimbursement. See Moving Expenses in Pub. 3, Armed Forces' Tax Guide, for the definition of what constitutes a permanent change of station and to learn which moving expenses are deductible. Withholding on supplemental wages. P.L. 115-97 lowered the withholding rates on supplemental wages for tax years beginning after 2017 and before 2026. See section 7 for the withholding rates. Backup withholding. P.L. 115-97 lowered the backup withholding rate to 24% for tax years beginning after 2017 and before 2026. For more information on backup withholding, see Backup withholding, later. Certification program for professional employer organizations (PEOs). The Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014 required the IRS to establish a voluntary certification program for PEOs. PEOs handle various payroll administration and tax reporting responsibilities for their business clients and are typically paid a fee based on payroll costs. To become and remain certified under the certification program, certified professional employer organizations (CPEOs) must meet various requirements described in sections 3511 and 7705 and related published guidance. Certification as a CPEO may affect the employment tax liabilities of both the CPEO and its customers. A CPEO is generally treated for employment tax purposes as the employer of any individual who performs services for a customer of the CPEO and is covered by a contract described in section 7705(e)(2) between the CPEO and the customer (CPEO contract), but only for wages and other compensation paid to the individual by the CPEO. To become a CPEO, the organization must apply through the IRS Online Registration System. For more information or to apply to become a CPEO, go to IRS.gov/CPEO. Also see Revenue Procedure 2017-14, 2017-3 I.R.B. 426, available at IRS.gov/irb/ 2017-03_IRB#RP-2017-14. Outsourcing payroll duties. Generally, as an employer, you’re responsible to ensure that tax returns are filed and deposits and payments are made, even if you contract with a third party to perform these acts. You remain responsible if the third party fails to perform any required action. Before you choose to outsource any of your payroll and related tax duties (that is, withholding, reporting, and paying over social security, Medicare, FUTA, and income taxes) to a third-party payer, such as a payroll service proIRS.gov/ vider or reporting agent, go to OutsourcingPayrollDuties for helpful information on this topic. If a CPEO pays wages and other compensation to an individual performing services for you, and the services are covered by a contract described in section 7705(e)(2) between you and the CPEO (CPEO contract), then the CPEO is generally treated as the employer, but only for wages and other compensation paid to the individual by the CPEO. However, with respect to certain employees covered by a CPEO contract, you may also be treated as an employer of the employees and, consequently, may also be liable for federal employment taxes imposed on wages and other compensation paid by the CPEO to such employees. For more information on the different types of third-party payer arrangements, see section 16. Publication 15 (2023) Aggregate Form 941 filers. Approved section 3504 agents and CPEOs must complete Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, when filing an aggregate Form 941. Aggregate Forms 941 are filed by agents approved by the IRS under section 3504 of the Internal Revenue Code. To request approval to act as an agent for an employer, the agent files Form 2678 with the IRS unless you're a state or local government agency acting as an agent under the special procedures provided in Revenue Procedure 2013-39, 2013-52 I.R.B. 830, available at IRS.gov/irb/ 2013-52_IRB#RP-2013-39. Aggregate Forms 941 are also filed by CPEOs approved by the IRS under section 7705. To become a CPEO, the organization must apply through the IRS Online Registration System at IRS.gov/ CPEO. CPEOs file Form 8973, Certified Professional Employer Organization/Customer Reporting Agreement, to notify the IRS that they’ve started or ended a service contract with a client or customer. CPEOs must generally file Form 941 and Schedule R (Form 941) electronically. For more information about a CPEO's requirement to file electronically, see Revenue Procedure 2017-14, 2017-3 I.R.B. 426, available at IRS.gov/irb/2017-03_IRB#RP-2017-14. Other third-party payers that file aggregate Forms 941, such as non-certified PEOs, must complete and file Schedule R (Form 941) if they have clients that are claiming any employment tax credit (for example, the qualified small business payroll tax credit for increasing research activities). Aggregate Form 940 filers. Approved section 3504 agents and CPEOs must complete Schedule R (Form 940), Allocation Schedule for Aggregate Form 940 Filers, when filing an aggregate Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. Aggregate Forms 940 can be filed by agents acting on behalf of home care service recipients who receive home care services through a program administered by a federal, state, or local government. To request approval to act as an agent on behalf of home care service recipients, the agent files Form 2678 with the IRS unless you're a state or local government agency acting as an agent under the special procedures provided in Revenue Procedure 2013-39. Aggregate Forms 940 are also filed by CPEOs approved by the IRS under section 7705. CPEOs file Form 8973 to notify the IRS that they’ve started or ended a service contract with a client or customer. CPEOs must generally file Form 940 and Schedule R (Form 940) electronically. For more information about a CPEO's requirement to file electronically, see Revenue Procedure 2017-14. Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans. Qualified tax-exempt organizations that hire eligible unemployed veterans may be able to claim the work opportunity tax credit against their payroll tax liability using Form 5884-C. For more information, go to IRS.gov/WOTC. Medicaid waiver payments. Notice 2014-7 provides that certain Medicaid waiver payments are excludable from income for federal income tax purposes. See Notice 2014-7, 2014-4 I.R.B. 445, available at IRS.gov/irb/ Page 3 2014-04_IRB#NOT-2014-7. For more information, including questions and answers related to Notice 2014-7, go to IRS.gov/MedicaidWaiverPayments. No federal income tax withholding on disability payments for injuries incurred as a direct result of a terrorist attack directed against the United States. Disability payments for injuries incurred as a direct result of a terrorist attack directed against the United States (or its allies) aren't included in income. Because federal income tax withholding is only required when a payment is includible in income, no federal income tax should be withheld from these payments. See Pub. 907, Tax Highlights for Persons With Disabilities, and Pub. 3920, Tax Relief for Victims of Terrorist Attacks. Voluntary withholding on dividends and other distributions by an Alaska Native Corporation (ANC). A shareholder of an ANC may request voluntary income tax withholding on dividends and other distributions paid by an ANC. A shareholder may request voluntary withholding by giving the ANC a completed Form W-4V. For more information, see Notice 2013-77, 2013-50 I.R.B. 632, available at IRS.gov/irb/2013-50_IRB#NOT-2013-77. Definition of marriage. A marriage of two individuals is recognized for federal tax purposes if the marriage is recognized by the state, possession, or territory of the United States in which the marriage is entered into, regardless of legal residence. Two individuals who enter into a relationship that is denominated as marriage under the laws of a foreign jurisdiction are recognized as married for federal tax purposes if the relationship would be recognized as marriage under the laws of at least one state, possession, or territory of the United States, regardless of legal residence. Individuals who have entered into a registered domestic partnership, civil union, or other similar relationship that isn't denominated as a marriage under the law of the state, possession, or territory of the United States where such relationship was entered into aren't lawfully married for federal tax purposes, regardless of legal residence. Severance payments. Severance payments are wages subject to social security and Medicare taxes, income tax withholding, and FUTA tax. You must receive written notice from the IRS to file Form 944. If you’ve been filing Forms 941 (or Forms 941-SS or Formularios 941-PR), and believe your employment taxes for the calendar year will be $1,000 or less, and you would like to file Form 944 instead of Forms 941, you must contact the IRS during the first calendar quarter of the tax year to request to file Form 944. You must receive written notice from the IRS to file Form 944 instead of Forms 941 before you may file this form. For more information on requesting to file Form 944, including the methods and deadlines for making a request, see the Instructions for Form 944. Employers can request to file Forms 941 instead of Form 944. If you received notice from the IRS to file Form 944 but would like to file Forms 941 instead, you must contact the IRS during the first calendar quarter of the tax year to request to file Forms 941. You must receive written notice from the IRS to file Forms 941 instead of Form 944 before you may file these forms. For more Page 4 information on requesting to file Forms 941, including the methods and deadlines for making a request, see the Instructions for Form 944. Correcting Form 941 or 944. If you discover an error on a previously filed Form 941, make the correction using Form 941-X. If you discover an error on a previously filed Form 944, make the correction using Form 944-X. Forms 941-X and 944-X are filed separately from Forms 941 and 944. Forms 941-X and 944-X are used by employers to claim refunds or abatements of employment taxes, rather than Form 843. See section 13 for more information. Zero wage return. If you haven't filed a “final” Form 940 and "final" Form 941 or 944, or aren't a “seasonal” employer (Form 941 only), you must continue to file a Form 940 and Forms 941 or Form 944, even for periods during which you paid no wages. The IRS encourages you to file your “zero wage” Form 940 and Form 941 or 944 electronically. Go to IRS.gov/EmploymentEfile for more information on electronic filing. Federal tax deposits must be made by electronic funds transfer (EFT). You must use EFT to make all federal tax deposits. Generally, an EFT is made using the Electronic Federal Tax Payment System (EFTPS). If you don't want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. EFTPS is a free service provided by the Department of the Treasury. Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. For more information on making federal tax deposits, see How To Deposit in section 11. To get more information about EFTPS or to enroll in EFTPS, go to EFTPS.gov or call 800-555-4477. To contact EFTPS using Telecommunications Relay Services (TRS) for people who are deaf, hard of hearing, or have a speech disability, dial 711 and then provide the TRS assistant the 800-555-4477 number above or 800-733-4829. Additional information about EFTPS is also available in Pub. 966. Pub. 5146 explains employment tax examinations and appeal rights. Pub. 5146 provides employers with information on how the IRS selects employment tax returns to be examined, what happens during an exam, and what options an employer has in responding to the results of an exam, including how to appeal the results. Pub. 5146 also includes information on worker classification issues and tip exams. Electronic Filing and Payment Businesses can enjoy the benefits of filing and paying their federal taxes electronically. Whether you rely on a tax professional or handle your own taxes, the IRS offers you convenient programs to make filing and payment easier. Publication 15 (2023) Spend less time worrying about taxes and more time running your business. Use e-file and EFTPS to your benefit. • For e-file, go to IRS.gov/EmploymentEfile for additional information. A fee may be charged to file electronically. • For EFTPS, go to EFTPS.gov or call EFTPS Customer Service at 800-555-4477. To contact EFTPS using TRS for people who are deaf, hard of hearing, or have a speech disability, dial 711 and then provide the TRS assistant the 800-555-4477 number above or 800-733-4829. • For electronic filing of Forms W-2, Wage and Tax Statement, go to SSA.gov/employer. You may be required to file Forms W-2 electronically. For details, see the General Instructions for Forms W-2 and W-3. If you’re filing your tax return or paying your federal taxes electronically, a valid employer identifiCAUTION cation number (EIN) is required at the time the return is filed or the payment is made. If a valid EIN isn't provided, the return or payment won't be processed. This may result in penalties. See section 1 for information about applying for an EIN. ! Electronic funds withdrawal (EFW). If you file your employment tax return electronically, you can e-file and use EFW to pay the balance due in a single step using tax preparation software or through a tax professional. However, don't use EFW to make federal tax deposits. For more information on paying your taxes using EFW, go to IRS.gov/EFW. Credit or debit card payments. You can pay the balance due shown on your employment tax return by credit or debit card. Your payment will be processed by a payment processor who will charge a processing fee. Don't use a credit or debit card to make federal tax deposits. For more information on paying your taxes with a credit or debit card, go to IRS.gov/PayByCard. Online payment agreement. You may be eligible to apply for an installment agreement online if you can’t pay the full amount of tax you owe when you file your employment tax return. For more information, see the instructions for your employment tax return or go to IRS.gov/OPA. Forms in Spanish You can provide Formulario W-4(SP), Certificado de Retenciones del Empleado, in place of Form W-4, Employee's Withholding Certificate, to your Spanish-speaking employees. For more information, see Pub. 17(SP), El Impuesto Federal sobre los Ingresos (Para Personas Físicas). For nonemployees, such as independent contractors, Formulario W-9(SP), Solicitud y Certificación del Número de Identificación del Contribuyente, may be used in place of Form W-9, Request for Taxpayer Identification Number and Certification. Publication 15 (2023) Hiring New Employees Eligibility for employment. You must verify that each new employee is legally eligible to work in the United States. This includes completing the U.S. Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. You can get Form I-9 at USCIS.gov/ Forms. For more information, go to the USCIS website at USCIS.gov/I-9-Central, or call 800-375-5283 or 800-767-1833 (TTY). You may use the Social Security Number Verification Service (SSNVS) at SSA.gov/employer/ssnv.htm to verify that an employee name matches an SSN. A person may have a valid SSN but not be authorized to work in the United States. You may use E-Verify at E-Verify.gov to confirm the employment eligibility of newly hired employees. New hire reporting. You’re required to report any new employee to a designated state new hire registry. A new employee is an employee who hasn't previously been employed by you or was previously employed by you but has been separated from such prior employment for at least 60 consecutive days. Many states accept a copy of Form W-4 with employer information added. Go to the Office of Child Support Enforcement website at acf.hhs.gov/programs/css/ employers for more information. W-4 request. Ask each new employee to complete the 2023 Form W-4. See section 9. Name and social security number (SSN). Record each new employee's name and SSN from their social security card. Any employee without a social security card should apply for one. See section 4. Information Returns You must file Forms W-2 to report wages paid to employees. You may also be required to file information returns to report certain types of payments made during the year. For example, you must file Form 1099-NEC, Nonemployee Compensation, to report payments of $600 or more to persons not treated as employees (for example, independent contractors) for services performed for your trade or business. For details about filing Forms 1099 and for information about required electronic filing, see the General Instructions for Certain Information Returns for general information, and the separate, specific instructions for each information return you file (for example, the Instructions for Forms 1099-MISC and 1099-NEC). Generally, don't use Forms 1099 to report wages and other compensation you paid to employees; report these on Form W-2. See the General Instructions for Forms W-2 and W-3 for details about filing Form W-2 and for information about required electronic filing. Technical Services Operation (TSO). The IRS operates the TSO to answer questions about reporting on Forms W-2, W-3, and 1099, and other information returns. If you have questions related to reporting on information returns, call 866-455-7438 (toll free) or 304-263-8700 (toll Page 5 Employer Responsibilities The following list provides a brief summary of your basic responsibilities. Because the individual circumstances for each employer can vary greatly, responsibilities for withholding, depositing, and reporting employment taxes can differ. Each item in this list has a page reference to a more detailed discussion in this publication. New Employees: Page Verify work eligibility of new employees . . . . . . . 5 Record employees' names and SSNs from social security cards . . . . . . . . . . . . . . . . . . . . 5 Ask employees for Form W-4 . . . . . . . . . . . . . . 5 Each Payday: Withhold federal income tax based on each employee's Form W-4 . . . . . . . . . . . . . . . . . . . 21 Withhold employee's share of social security and Medicare taxes . . . . . . . . . . . . . . . . . . . . 24 Deposit: • Withheld income tax • Withheld and employer social security taxes • Withheld and employer Medicare taxes . . . . . 26 Note: Due date of deposit generally depends on your deposit schedule (monthly or semiweekly). Quarterly (By April 30, July 31, October 31, and January 31): Deposit FUTA tax if undeposited amount is over $500 . . . . . . . . . . . . . . . . . . . . . . . . . . 38 File Form 941 (pay tax with return if not required to deposit) . . . . . . . . . . . . . . . . . . . . . 32 call). The center can also be reached by email at mccirp@irs.gov. Don't include taxpayer identification numbers (TINs) or attachments in email because email isn't secure. Federal Income Tax Withholding Withhold federal income tax from each wage payment or supplemental unemployment compensation plan benefit payment according to the employee's Form W-4 and the correct withholding table in Pub. 15-T. If you're paying supplemental wages to an employee, see section 7. If you have nonresident alien employees, see Withholding income taxes on the wages of nonresident alien employees in section 9. See section 8 of Pub. 15-A, Employer’s Supplemental Tax Guide, for information about withholding on pensions (including distributions from tax-favored retirement plans), annuities, and individual retirement arrangements (IRAs). Nonpayroll Income Tax Withholding Nonpayroll federal income tax withholding (reported on Forms 1099 and Form W-2G, Certain Gambling Page 6 Annually (see Calendar for due dates): Page File Form 944 if required (pay tax with return if not required to deposit) . . . . . . . . . . . . . . . . . . . . . 32 Remind employees to submit a new Form W-4 if they need to change their withholding . . . . . . . . . . 21 Ask for a new Form W-4 from employees claiming exemption from income tax withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Reconcile Forms 941 (or Form 944) with Forms W-2 and W-3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Furnish each employee a Form W-2 . . . . . . . . . . . . 9 File Copy A of Forms W-2 and the transmittal Form W-3 with the SSA . . . . . . . . . . . . . . . . . . . . . 9 Furnish each other payee a Form 1099 (for example, Form 1099-NEC) . . . . . . . . . . . . . . . . . . . . . . . . . 9 File Forms 1099 and the transmittal Form 1096 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 9 File Form 940 . . . . . . . . . . . . . . . . . . . . . . . . . . . . File Form 945 for any nonpayroll income tax withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Winnings) must be reported on Form 945, Annual Return of Withheld Federal Income Tax. Separate deposits are required for payroll (Form 941 or Form 944) and nonpayroll (Form 945) withholding. Nonpayroll items include the following. • Pensions (including distributions from tax-favored retirement plans, for example, section 401(k), section 403(b), and governmental section 457(b) plans), annuities, and IRA distributions. • Military retirement. • Gambling winnings. • Indian gaming profits. • Certain government payments on which the recipient elected voluntary income tax withholding. • Dividends and other distributions by an ANC on which the recipient elected voluntary income tax withholding. • Payments subject to backup withholding. For details on depositing and reporting nonpayroll income tax withholding, see the Instructions for Form 945. Distributions from nonqualified pension plans and deferred compensation plans. Because distributions to participants from some nonqualified pension plans and deferred compensation plans (including section 457(b) plans of tax-exempt organizations) are treated as wages and are reported on Form W-2, income tax withheld must be reported on Form 941 or Form 944, not on Form 945. However, distributions from such plans to a beneficiary or Publication 15 (2023) estate of a deceased employee aren't wages and are reported on Forms 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.; income tax withheld must be reported on Form 945. Backup withholding. You must generally withhold 24% of certain taxable payments if the payee fails to furnish you with their correct TIN. This withholding is referred to as “backup withholding.” Payments subject to backup withholding include interest, dividends, patronage dividends, rents, royalties, commissions, nonemployee compensation, payments made in settlement of payment card or third-party network transactions, and certain other payments you make in the course of your trade or business. In addition, transactions by brokers and barter exchanges and certain payments made by fishing boat operators are subject to backup withholding. Backup withholding doesn't apply to wages, pensions, annuities, IRAs (including simplified emCAUTION ployee pension (SEP) and SIMPLE retirement plans), section 404(k) distributions from an employee stock ownership plan (ESOP), medical savings accounts (MSAs), health savings accounts (HSAs), long-term-care benefits, or real estate transactions. ! You can use Form W-9 or Formulario W-9(SP) to request payees to furnish a TIN. Form W-9 or Formulario W-9(SP) must be used when payees must certify that the number furnished is correct, or when payees must certify that they’re not subject to backup withholding or are exempt from backup withholding. The Instructions for the Requester of Form W-9 or Formulario W-9(SP) includes a list of types of payees who are exempt from backup withholding. For more information, see Pub. 1281, Backup Withholding for Missing and Incorrect Name/TIN(s). Recordkeeping Keep all records of employment taxes for at least 4 years. These should be available for IRS review. Your records should include the following information. • Your EIN. • Amounts and dates of all wage, annuity, and pension payments. • Amounts of tips reported to you by your employees. • Records of allocated tips. • The fair market value of in-kind wages paid. • Names, addresses, SSNs, and occupations of employees and recipients. • Any employee copies of Forms W-2 and W-2c returned to you as undeliverable. • Dates of employment for each employee. • Periods for which employees and recipients were paid while absent due to sickness or injury and the amount Publication 15 (2023) and weekly rate of payments you or third-party payers made to them. • Copies of employees' and recipients' income tax withholding certificates (Forms W-4, W-4P, W-4(SP), W-4S, and W-4V). • Dates and amounts of tax deposits you made and acknowledgment numbers for deposits made by EFTPS. • Copies of returns filed and confirmation numbers. • Records of fringe benefits and expense reimbursements provided to your employees, including substantiation. • Documentation to substantiate any credits claimed. Records related to qualified sick leave wages and qualified family leave wages for leave taken after March 31, 2021, and before October 1, 2021, and records related to qualified wages for the employee retention credit paid after June 30, 2021, should be kept for at least 6 years. For more information on substantiation requirements, go to IRS.gov/PLC and IRS.gov/ERC. • Documentation to substantiate the amount of any employer or employee share of social security tax that you deferred and paid for 2020. Change of Business Name Notify the IRS immediately if you change your business name. Write to the IRS office where you file your returns, using the Without a payment address provided in the instructions for your employment tax return, to notify the IRS of any business name change. See Pub. 1635 to see if you need to apply for a new EIN. Change of Business Address or Responsible Party Notify the IRS immediately if you change your business address or responsible party. Complete and mail Form 8822-B to notify the IRS of a business address or responsible party change. For a definition of “responsible party,” see the Instructions for Form SS-4. Filing Addresses Generally, your filing address for Form 940, 941, 943, 944, 945, or CT-1 depends on the location of your residence or principal place of business and whether or not you’re including a payment with your return. There are separate filing addresses for these returns if you’re a tax-exempt organization or government entity. See the separate instructions for Form 940, 941, 943, 944, 945, or CT-1 for the filing addresses. Page 7 Private Delivery Services You can use certain private delivery services (PDSs) designated by the IRS to meet the “timely mailing as timely filing” rule for tax returns. Go to IRS.gov/PDS for the current list of PDSs. The PDS can tell you how to get written proof of the mailing date. For the IRS mailing address to use if you're using a PDS, go to IRS.gov/PDSstreetAddresses. Select the mailing address listed on the webpage that is in the same state as the address to which you would mail returns filed without a payment, as shown in the instructions for your employment tax return. PDSs can't deliver items to P.O. boxes. You must use the U.S. Postal Service to mail any item to an CAUTION IRS P.O. box address. ! Dishonored Payments Any form of payment that is dishonored and returned from a financial institution is subject to a penalty. The penalty is $25 or 2% of the payment, whichever is more. However, the penalty on dishonored payments of $24.99 or less is an amount equal to the payment. For example, a dishonored payment of $18 is charged a penalty of $18. E-News for Payroll Professionals The IRS has a subscription-based email service for payroll professionals. Subscribers will receive periodic updates from the IRS. The updates may include information regarding recent legislative changes affecting federal payroll reporting, IRS news releases and special announcements pertaining to the payroll industry, new employment tax procedures, and other information specifically affecting federal payroll tax returns. To subscribe, go to IRS.gov/ENewsPayroll. Telephone Help Tax questions. You can call the IRS Business and Specialty Tax Line with your employment tax questions at 800-829-4933. Help for people with disabilities. You may call 800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability) with any employment tax questions. You may also use this number for assistance with unresolved tax problems. Additional information. Go to IRS.gov/ EmploymentTaxes for additional employment tax information. For information about employer responsibilities under the Affordable Care Act, go to IRS.gov/ACA. For Page 8 information about COVID-19 tax relief, go to IRS.gov/ Coronavirus. Ordering Employer Tax Forms, Instructions, and Publications You can view, download, or print most of the forms, instructions, and publications you may need at IRS.gov/ Forms. Otherwise, you can go to IRS.gov/OrderForms to place an order and have them mailed to you. The IRS will process your order as soon as possible. Don't resubmit requests you've already sent us. You can get forms, instructions, and publications faster online. Instead of ordering paper Forms W-2 and W-3, consider filing them electronically using the SSA's free e-file service. Go to the SSA's Employer W-2 Filing Instructions & Information webpage at SSA.gov/employer to register for Business Services Online. You’ll be able to create Forms W-2 online and submit them to the SSA by typing your wage information into easy-to-use fill-in fields. In addition, you can print out completed copies of Forms W-2 to file with state or local governments, distribute to your employees, and keep for your records. Form W-3 will be created for you based on your Forms W-2. Photographs of Missing Children The IRS is a proud partner with the National Center for Missing & Exploited Children® (NCMEC). Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Calendar The following is a list of important dates and responsibilities. The dates listed here haven’t been adjusted for Saturdays, Sundays, and legal holidays (see the TIP next). Pub. 509, Tax Calendars (for use in 2023), adjusts the dates for Saturdays, Sundays, and legal holidays. See section 11 for information about depositing taxes reported on Forms 941, 944, and 945. See section 14 for information about depositing FUTA tax. Due dates for forms required for health coverage reporting aren't listed here. For these dates, see Pub. 509. If any date shown next for filing a return, furnish- TIP ing a form, or depositing taxes falls on a Saturday, Sunday, or legal holiday, the due date is the next business day. The term "legal holiday" means any legal holiday in the District of Columbia. A statewide legal holiday delays a filing due date only if the IRS office where you’re required to file is located in that state. However, a Publication 15 (2023) statewide legal holiday doesn't delay the due date of federal tax deposits. See Deposits Due on Business Days Only in section 11. For any filing due date, you’ll meet the “file” or “furnish” requirement if the envelope containing the return or form is properly addressed, contains sufficient postage, and is postmarked by the U.S. Postal Service on or before the due date, or sent by an IRS-designated PDS on or before the due date. See Private Delivery Services under Reminders, earlier, for more information. File Form 945. File Form 945 to report any nonpayroll federal income tax withheld. If you deposited all taxes when due, you may file by February 10. See Nonpayroll Income Tax Withholding under Reminders, earlier, for more information. By February 15 Fiscal year taxpayers. The due dates listed next apply whether you use a calendar or a fiscal year. Request a new Form W-4 from exempt employees. Ask for a new Form W-4 from each employee who claimed exemption from income tax withholding last year. By January 31 On February 16 File Form 941 or Form 944. File Form 941 for the fourth quarter of the previous calendar year and deposit any undeposited income, social security, and Medicare taxes. You may pay these taxes with Form 941 if your total tax liability for the quarter (Form 941, line 12) is less than $2,500. File Form 944 for the previous calendar year instead of Form 941 if the IRS has notified you in writing to file Form 944. Pay any undeposited income, social security, and Medicare taxes with your Form 944. You may pay these taxes with Form 944 if your total tax liability for the year (Form 944, line 9) is less than $2,500. For additional rules on when you can pay your taxes with your return, see Payment with return in section 11. If you timely deposited all taxes when due, you may file by February 10. Forms W-4 claiming exemption from withholding expire. Any Form W-4 claiming exemption from withholding for the previous year has now expired. Begin withholding for any employee who previously claimed exemption from withholding but hasn't given you a new Form W-4 for the current year. If the employee doesn't give you a new Form W-4, withhold tax 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 2023 Form W-4. See section 9 for more information. If the employee gives you a new Form W-4 claiming exemption from withholding after February 15, you may apply the exemption to future wages, but don't refund taxes withheld while the exempt status wasn't in place. File Form 940. File Form 940 to report any FUTA tax. However, if you deposited all of the FUTA tax when due, you may file by February 10. See section 14 for more information on FUTA tax. By February 28 File paper 2022 Forms 1099 and 1096. File Copy A of all paper 2022 Forms 1099, except Forms 1099-NEC, with Form 1096 with the IRS. For electronically filed returns, see By March 31, later. Furnish Forms 1099 and W-2. Furnish each employee a completed 2022 Form W-2. Furnish a 2022 Form 1099-NEC to payees for nonemployee compensation. Most Forms 1099 must be furnished to payees by January 31, but some can be furnished by February 15. For more information, see the Guide to Information Returns chart in the General Instructions for Certain Information Returns. File paper Form 8027. File paper Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips, with the IRS. See section 6. For electronically filed returns, see By March 31 next. File Form W-2. File with the SSA Copy A of all 2022 paper and electronic Forms W-2 with Form W-3, Transmittal of Wage and Tax Statements. For more information on reporting Form W-2 information to the SSA electronically, go to the SSA’s Employer W-2 Filing Instructions & Information webpage at SSA.gov/ employer. If filing electronically, via the SSA's Form W-2 Online service, the SSA will generate Form W-3 data from the electronic submission of Form(s) W-2. File electronic 2022 Forms 1099 and 8027. File electronic 2022 Forms 1099, except Forms 1099-NEC, with the IRS. Also file electronic Form 8027 with the IRS. For information on filing information returns electronically with the IRS, see Pub. 1220 and Pub. 1239, Specifications for Electronic Filing of Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips. File Form 1099-NEC reporting nonemployee compensation. File with the IRS Copy A of all 2022 paper and electronic Forms 1099-NEC. Paper forms must be filed with Form 1096, Annual Summary and Transmittal of U.S. Information Returns. For information on filing information returns electronically with the IRS, see Pub. 1220, Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G. Publication 15 (2023) By March 31 By April 30, July 31, October 31, and January 31 Deposit FUTA taxes. Deposit FUTA tax for the quarter (including any amount carried over from other quarters) if over $500. If $500 or less, carry it over to the next quarter. See section 14 for more information. Page 9 File Form 941. File Form 941 and deposit any undeposited income, social security, and Medicare taxes. You may pay these taxes with Form 941 if your total tax liability for the quarter (Form 941, line 12) is less than $2,500. If you timely deposited all taxes when due, you may file by May 10, August 10, November 10, or February 10, respectively. Don't file Form 941 for these quarters if you have been notified to file Form 944 and you didn't request and receive written notice from the IRS to file quarterly Forms 941. Before December 1 New Forms W-4. Remind employees to submit a new Form W-4 if their filing status, other income, deductions, or credits have changed or will change for the next year. Introduction This publication explains your tax responsibilities as an employer. It explains the requirements for withholding, depositing, reporting, paying, and correcting employment taxes. It explains the forms you must give to your employees, those your employees must give to you, and those you must send to the IRS and the SSA. References to “income tax” in this guide apply only to federal income tax. Contact your state or local tax department to determine their rules. When you pay your employees, you don't pay them all the money they earned. As their employer, you have the added responsibility of withholding taxes from their paychecks. The federal income tax and employees' share of social security and Medicare taxes that you withhold from your employees' paychecks are part of their wages that you pay to the U.S. Treasury instead of to your employees. Your employees trust that you pay the withheld taxes to the U.S. Treasury by making federal tax deposits. This is the reason that these withheld taxes are called trust fund taxes. If federal income, social security, or Medicare taxes that must be withheld aren't withheld or aren't deposited or paid to the U.S. Treasury, the trust fund recovery penalty may apply. See section 11 for more information. Additional employment tax information is available in Pubs. 15-A, 15-B, and 15-T. Pub. 15-A includes specialized information supplementing the basic employment tax information provided in this publication. Pub. 15-B, Employer's Tax Guide to Fringe Benefits, contains information about the employment tax treatment and valuation of various types of noncash compensation. Pub. 15-T includes the federal income tax withholding tables and instructions on how to use the tables. Most employers must withhold (except FUTA), deposit, report, and pay the following employment taxes. • Income tax. • Social security tax. • Medicare tax. • FUTA tax. Page 10 There are exceptions to these requirements. See section 15 for guidance. Railroad retirement taxes are explained in the Instructions for Form CT-1. Employment taxes for agricultural employers are explained in Pub. 51. If you have employees in the U.S. Virgin Islands, Guam, American Samoa, or the Commonwealth of the Northern Mariana Islands, see Pub. 80. Comments and suggestions. We welcome your comments about this publication and suggestions for future editions. You can send us comments through IRS.gov/ FormComments. Or, you can write to: Internal Revenue Service Tax Forms and Publications 1111 Constitution Ave. NW, IR-6526 Washington, DC 20224 Although we can’t respond individually to each comment received, we do appreciate your feedback and will consider your comments and suggestions as we revise our tax forms, instructions, and publications. Don’t send tax questions, tax returns, or payments to the above address. Getting answers to your tax questions. If you have a tax question not answered by this publication, check IRS.gov and How To Get Tax Help at the end of this publication. Getting tax forms, instructions, and publications. Go to IRS.gov/Forms to download current and prior-year forms, instructions, and publications. Ordering tax forms, instructions, and publications. Go to IRS.gov/OrderForms to order current forms, instructions, and publications; call 800-829-3676 to order prior-year forms and instructions. The IRS will process your order for forms and publications as soon as possible. Don’t resubmit requests you’ve already sent us. You can get forms and publications faster online. Federal government employers. The information in this publication, including the rules for making federal tax deposits, applies to federal agencies. State and local government employers. Payments to employees for services in the employ of state and local government employers are generally subject to federal income tax withholding but not FUTA tax. Most elected and appointed public officials of state or local governments are employees under common law rules. See chapter 3 of Pub. 963, Federal-State Reference Guide. In addition, wages, with certain exceptions, are subject to social security and Medicare taxes. See section 15 for more information on the exceptions. If an election worker is employed in another capacity with the same government entity, see Revenue Ruling 2000-6 on page 512 of Internal Revenue Bulletin 2000-6 at IRS.gov/pub/irs-irbs/irb00-06.pdf. Publication 15 (2023) You can get information on reporting and social security coverage from your local IRS office. If you have any questions about coverage under a section 218 (Social Security Act) agreement, contact the appropriate state official. To find your State Social Security Administrator, go to the National Conference of State Social Security Administrators website at NCSSSA.org. Indian tribal governments. See Pub. 4268 for employment tax information for Indian tribal governments. Disregarded entities and qualified subchapter S subsidiaries (QSubs). Eligible single-owner disregarded entities and QSubs are treated as separate entities for employment tax purposes. Eligible single-member entities must report and pay employment taxes on wages paid to their employees using the entities' own names and EINs. See Regulations sections 1.1361-4(a)(7) and 301.7701-2(c)(2)(iv). 1. Employer Identification Number (EIN) If you’re required to report employment taxes or give tax statements to employees or annuitants, you need an EIN. The EIN is a nine-digit number the IRS issues. The digits are arranged as follows: 00-0000000. It is used to identify the tax accounts of employers and certain others who have no employees. Use your EIN on all of the items you send to the IRS and the SSA. For more information, see Pub. 1635. If you don’t have an EIN, you may apply for one online by going to IRS.gov/EIN. You may also apply for an EIN by faxing or mailing Form SS-4 to the IRS. If the principal business was created or organized outside of the United States or U.S. territories, you may also apply for an EIN by calling 267-941-1099 (toll call). Don't use an SSN in place of an EIN. You should have only one EIN. If you have more than one and aren't sure which one to use, call 800-829-4933 or 800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). Give the numbers you have, the name and address to which each was assigned, and the address of your main place of business. The IRS will tell you which number to use. For more information, see Pub. 1635. If you took over another employer's business (see Successor employer in section 9), don't use that employer's EIN. If you’ve applied for an EIN but don't have your EIN by the time a return is due, file a paper return and write “Applied For” and the date you applied for it in the space shown for the number. Always be sure the EIN on the form you file exactly matches the EIN the IRS assigned to your CAUTION business. Don't use your SSN or individual taxpayer identification number (ITIN) on forms that ask for an EIN. If you used an EIN (including a prior owner's EIN) on ! Publication 15 (2023) Form 941, or Form 944, that is different from the EIN reported on Form W-3, see Box h—Other EIN used this year in the General Instructions for Forms W-2 and W-3. The name and EIN on Form 945 must match the name and EIN on your information returns where federal income tax withholding is reported (for example, backup withholding reported on Form 1099-NEC). Filing a Form 945 with an incorrect EIN or using another business's EIN may result in penalties and delays in processing your return. 2. Who Are Employees? Generally, employees are defined either under common law or under statutes for certain situations. See Pub. 15-A for details on statutory employees and nonemployees. Employee status under common law. Generally, a worker who performs services for you is your employee if you have the right to control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed. See Pub. 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. Generally, people in business for themselves aren't employees. For example, doctors, lawyers, veterinarians, and others in an independent trade in which they offer their services to the public are usually not employees. If the business is incorporated, corporate officers who work in the business are employees of the corporation. If an employer-employee relationship exists, it doesn't matter what it is called. The employee may be called an agent or independent contractor. It also doesn't matter how payments are measured or paid, what they’re called, or if the employee works full or part time. Statutory employees. If someone who works for you isn't an employee under the common law rules discussed earlier, don't withhold federal income tax from their pay, unless backup withholding applies. Although the following persons may not be common law employees, they’re considered employees by statute for social security and Medicare tax purposes under certain conditions. • An agent or commission driver who delivers meat, vegetable, fruit, or bakery products; beverages (other than milk); laundry; or dry cleaning for someone else. • A full-time life insurance salesperson who sells primarily for one company. • A homeworker who works at home or off premises according to guidelines of the person for whom the work is done, with materials or goods furnished by and returned to that person or to someone that person designates. • A traveling or city salesperson (other than an agent or commission driver) who works full time (except for sideline sales activities) for one firm or person getting orders from customers. The orders must be for Page 11 merchandise for resale or supplies for use in the customer's business. The customers must be retailers, wholesalers, contractors, or operators of hotels, restaurants, or other businesses dealing with food or lodging. If the employer didn't issue required information returns, the section 3509 rates are the following. For FUTA tax, an agent or commission driver and a traveling or city salesperson are considered statutory employees; however, a full-time life insurance salesperson and a homeworker aren't considered statutory employees. • For Medicare taxes: employer rate of 1.45% plus 40% Statutory nonemployees. Direct sellers, qualified real estate agents, and certain companion sitters are, by law, considered nonemployees. They’re generally treated as self-employed for all federal tax purposes, including income and employment taxes. See Pub. 15-A for more information. ployee rate of 0.9%) of wages subject to Additional Medicare Tax. H-2A agricultural workers. On Form W-2, don't check box 13 (Statutory employee), as H-2A workers aren't statutory employees. Treating employees as nonemployees. You’ll generally be liable for social security and Medicare taxes and withheld income tax if you don't deduct and withhold these taxes because you treated an employee as a nonemployee. You may be able to figure your liability using special section 3509 rates for the employee share of social security and Medicare taxes and federal income tax withholding. The applicable rates depend on whether you filed required Forms 1099. You can't recover the employee share of social security tax, Medicare tax, or income tax withholding from the employee if the tax is paid under section 3509. You’re liable for the income tax withholding regardless of whether the employee paid income tax on the wages. You continue to owe the full employer share of social security and Medicare taxes. The employee remains liable for the employee share of social security and Medicare taxes. See section 3509 for details. Also see the Instructions for Form 941-X or the Instructions for Form 944-X. Section 3509 rates aren't available if you intentionally disregard the requirement to withhold taxes from the employee or if you withheld income taxes but not social security or Medicare taxes. Section 3509 isn't available for reclassifying statutory employees. See Statutory employees, earlier. If the employer issued required information returns, the section 3509 rates are the following. • For social security taxes: employer rate of 6.2% plus 20% of the employee rate of 6.2%, for a total rate of 7.44% of wages. • For Medicare taxes: employer rate of 1.45% plus 20% of the employee rate of 1.45%, for a total rate of 1.74% of wages. • For Additional Medicare Tax: 0.18% (20% of the employee rate of 0.9%) of wages subject to Additional Medicare Tax. • For federal income tax withholding, the rate is 1.5% of wages. Page 12 • For social security taxes: employer rate of 6.2% plus 40% of the employee rate of 6.2%, for a total rate of 8.68% of wages. of the employee rate of 1.45%, for a total rate of 2.03% of wages. • For Additional Medicare Tax: 0.36% (40% of the em• For federal income tax withholding, the rate is 3.0% of wages. Relief provisions. If you have a reasonable basis for not treating a worker as an employee, you may be relieved from having to pay employment taxes for that worker. To get this relief, you must file all required federal tax returns, including information returns, on a basis consistent with your treatment of the worker. You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977. See Pub. 1976, Do You Qualify for Relief Under Section 530. IRS help. If you want the IRS to determine whether a worker is an employee, file Form SS-8. Voluntary Classification Settlement Program (VCSP). Employers who are currently treating their workers (or a class or group of workers) as independent contractors or other nonemployees and want to voluntarily reclassify their workers as employees for future tax periods may be eligible to participate in the VCSP if certain requirements are met. File Form 8952 to apply for the VCSP. For more information, go to IRS.gov/VCSP. Business Owned and Operated by Spouses If you and your spouse jointly own and operate a business and share in the profits and losses, you may be partners in a partnership, whether or not you have a formal partnership agreement. See Pub. 541 for more details. The partnership is considered the employer of any employees, and is liable for any employment taxes due on wages paid to its employees. Exception—Qualified joint venture. For tax years beginning after 2006, the Small Business and Work Opportunity Tax Act of 2007 (Public Law 110-28) provides that a “qualified joint venture,” whose only members are spouses filing a joint income tax return, can elect not to be treated as a partnership for federal tax purposes. A qualified joint venture conducts a trade or business where: • The only members of the joint venture are spouses who file a joint income tax return, • Both spouses materially participate (see Material participation in the instructions for Schedule C (Form Publication 15 (2023) 1040), line G) in the trade or business (mere joint ownership of property isn't enough), • Both spouses elect to not be treated as a partnership, and • The business is co-owned by both spouses and isn't held in the name of a state law entity such as a partnership or limited liability company (LLC). To make the election, all items of income, gain, loss, deduction, and credit must be divided between the spouses, in accordance with each spouse's interest in the venture, and reported as sole proprietors on a separate Schedule C (Form 1040) or Schedule F (Form 1040). Each spouse must also file a separate Schedule SE (Form 1040) to pay self-employment taxes, as applicable. Spouses using the qualified joint venture rules are treated as sole proprietors for federal tax purposes and generally don't need an EIN. If employment taxes are owed by the qualified joint venture, either spouse may report and pay the employment taxes due on the wages paid to the employees using the EIN of that spouse's sole proprietorship. Generally, filing as a qualified joint venture won't increase the spouses' total tax owed on the joint income tax return. However, it gives each spouse credit for social security earnings on which retirement benefits are based and for Medicare coverage without filing a partnership return. Note. If your spouse is your employee, not your partner, see One spouse employed by another in section 3. For more information on qualified joint ventures, go to IRS.gov/QJV. Exception—Community income. If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U.S. possession, you can treat the business either as a sole proprietorship (of the spouse who carried on the business) or a partnership. You may still make an election to be taxed as a qualified joint venture instead of a partnership. See Exception—Qualified joint venture, earlier. 3. Family Employees Child employed by parents. Payments for the services of a child under age 18 who works for their parent in a trade or business aren't subject to social security and Medicare taxes if the trade or business is a sole proprietorship or a partnership in which each partner is a parent of the child. If these payments are for work other than in a trade or business, such as domestic work in the parent's private home, they’re not subject to social security and Medicare taxes until the child reaches age 21. However, see Covered services of a child or spouse, later. Payments for the services of a child under age 21 who works for their parent, whether or not in a trade or business, aren't subject to FUTA tax. Payments for the services of a child of any age who works for their parent are generally subject to income tax withholding unless the payments are for domestic work in the parent's home, or unless the Publication 15 (2023) payments are for work other than in a trade or business and are less than $50 in the quarter or the child isn't regularly employed to do such work. One spouse employed by another. The wages for the services of an individual who works for their spouse in a trade or business are subject to income tax withholding and social security and Medicare taxes, but not to FUTA tax. However, the payments for services of one spouse employed by another in other than a trade or business, such as domestic service in a private home, aren't subject to social security, Medicare, and FUTA taxes. Covered services of a child or spouse. The wages for the services of a child or spouse are subject to income tax withholding as well as social security, Medicare, and FUTA taxes if they work for: • A corporation, even if it is controlled by the child's parent or the individual's spouse; • A partnership, even if the child's parent is a partner, unless each partner is a parent of the child; • A partnership, even if the individual's spouse is a partner; or • An estate, even if it is the estate of a deceased parent. In these situations, the child or spouse is considered to work for the corporation, partnership, or estate, not you. Parent employed by their child. When the employer is a child employing their parent, the following rules apply. • Payments for the services of a parent in their child’s (the employer’s) trade or business are subject to income tax withholding and social security and Medicare taxes. • Payments for the services of a parent not in their child’s (the employer’s) trade or business are generally not subject to social security and Medicare taxes. Social security and Medicare taxes do apply to payments made to a parent for domestic services CAUTION if all of the following apply. ! • The parent is employed by their child (the employer). • The employer has a child or stepchild (including an adopted child) living in the home. • The employer is a surviving spouse, divorced and not remarried, or living with a spouse who, because of a mental or physical condition, can't care for their child or stepchild for at least 4 continuous weeks in the calendar quarter in which the service is performed. • The child or stepchild of the employer is either under age 18 or, due to a mental or physical condition, requires the personal care of an adult for at least 4 continuous weeks in the calendar quarter in which the service is performed. Payments made to a parent employed by their child aren't subject to FUTA tax, regardless of the type of services provided. Page 13 4. Employee's Social Security Number (SSN) You’re required to get each employee's name and SSN and to enter them on Form W-2. This requirement also applies to resident and nonresident alien employees. You should ask your employee to show you their social security card. The employee may show the card if it is available. Don't accept a social security card that says “Not valid for employment.” An SSN issued with this CAUTION legend doesn't permit employment. ! You may, but aren't required to, photocopy the social security card if the employee provides it. If you don't provide the correct employee name and SSN on Form W-2, you may owe a penalty unless you have reasonable cause. See Pub. 1586, Reasonable Cause Regulations & Requirements for Missing and Incorrect Name/TINs, for information on the requirement to solicit the employee's SSN. Applying for a social security card. Any employee who is legally eligible to work in the United States and doesn't have a social security card can get one by completing Form SS-5, Application for a Social Security Card, and submitting the necessary documentation. You can get Form SS-5 from the SSA website at SSA.gov/forms/ ss-5.pdf, at SSA offices, or by calling 800-772-1213 or 800-325-0778 (TTY). The employee must complete and sign Form SS-5; it can't be filed by the employer. You may be asked to supply a letter to accompany Form SS-5 if the employee has exceeded their yearly or lifetime limit for the number of replacement cards allowed. Applying for an SSN. If you file Form W-2 on paper and your employee applied for an SSN but doesn't have one when you must file Form W-2, enter “Applied For” on the form. If you’re filing electronically, enter all zeros (000-00-0000 if creating forms online or 000000000 if uploading a file) in the SSN field. When the employee receives the SSN, file Copy A of Form W-2c, Corrected Wage and Tax Statement, with the SSA to show the employee's SSN. Furnish Copies B, C, and 2 of Form W-2c to the employee. Up to 25 Forms W-2c for each Form W-3c, Transmittal of Corrected Wage and Tax Statements, may be filed per session over the Internet, with no limit on the number of sessions. For more information, go to the SSA's Employer W-2 Filing Instructions & Information webpage at SSA.gov/employer. Advise your employee to correct the SSN on their original Form W-2. Correctly record the employee's name and SSN. Record the name and SSN of each employee as they’re shown on the employee's social security card. If the employee's name isn't correct as shown on the card (for example, because of marriage or divorce), the employee should request an updated card from the SSA. Continue to report the employee's wages under the old name until Page 14 the employee shows you the updated social security card with the corrected name. If the SSA issues the employee an updated card after a name change, or a new card with a different SSN after a change in alien work status, file a Form W-2c to correct the name/SSN reported for the most recently filed Form W-2. It isn't necessary to correct other years if the previous name and number were used for years before the most recent Form W-2. IRS individual taxpayer identification numbers (ITINs) for aliens. Don't accept an ITIN in place of an SSN for employee identification or for work. An ITIN is only available to resident and nonresident aliens who aren't eligible for U.S. employment and need identification for other tax purposes. You can identify an ITIN because it is a nine-digit number, formatted like an SSN, that starts with the number "9" and has a range of numbers from “50– 65,” “70–88,” “90–92,” and “94–99” for the fourth and fifth digits (for example, 9NN-7N-NNNN). For more information about ITINs, see the Instructions for Form W-7 or go to IRS.gov/ITIN. An individual with an ITIN who later becomes eligible to work in the United States must obtain an CAUTION SSN. If the individual is currently eligible to work in the United States, instruct the individual to apply for an SSN and follow the instructions under Applying for an SSN, earlier. Don't use an ITIN in place of an SSN on Form W-2. ! Verification of SSNs. Employers and authorized reporting agents can use the Social Security Number Verification Service (SSNVS) to instantly verify that an employee name matches an SSN for up to 10 names and SSNs (per screen) at a time, or submit an electronic file of up to 250,000 names and SSNs and usually receive the results the next business day. Go to SSA.gov/employer/ssnv.htm for more information. A person may have a valid SSN but not be authorized to work in the United States. Employers may use E-Verify at E-Verify.gov to confirm the employment eligibility of newly hired employees. Registering for SSNVS. You must register online to use SSNVS. To register, go to the SSA's website at SSA.gov/bso and click on the Register link under Business Services Online. Follow the registration instructions to obtain a user identification (ID) and password. You’ll need to provide the following information about yourself and your company. • Name. • SSN. • Date of birth. • Type of employer. • EIN. • Company name, address, and telephone number. • Email address. When you have completed the online registration process, the SSA will mail a one-time activation code to you. Publication 15 (2023) You must enter the activation code online to use SSNVS. Your employees must receive authorization from you to use SSNVS. If your employees register, the one-time activation code will be mailed to you. 5. Wages and Other Compensation Wages subject to federal employment taxes generally include all pay you give to an employee for services performed. The pay may be in cash or in other forms. It includes salaries, vacation allowances, bonuses, commissions, and taxable fringe benefits. It doesn't matter how you measure or make the payments. Amounts an employer pays as a bonus for signing or ratifying a contract in connection with the establishment of an employer-employee relationship and an amount paid to an employee for cancellation of an employment contract and relinquishment of contract rights are wages subject to social security, Medicare, and FUTA taxes and income tax withholding. Also, compensation paid to a former employee for services performed while still employed is wages subject to employment taxes. More information. See section 6 for a discussion of tips and section 7 for a discussion of supplemental wages. Also, see section 15 for exceptions to the general rules for wages. Pub. 15-A provides additional information on wages, including nonqualified deferred compensation, and other compensation. Pub. 15-B provides information on other forms of compensation, including: • Accident and health benefits, • Achievement awards, • Adoption assistance, • Athletic facilities, • De minimis (minimal) benefits, • Dependent care assistance, • Educational assistance, • Employee discounts, • Employee stock options, • Employer-provided cell phones, • Group-term life insurance coverage, • Health savings accounts, • Lodging on your business premises, • Meals, • No-additional-cost services, • Retirement planning services, • Transportation (commuting) benefits, • Tuition reduction, and • Working condition benefits. Publication 15 (2023) Employee business expense reimbursements. A reimbursement or allowance arrangement is a system by which you pay the advances, reimbursements, and charges for your employees' business expenses. How you report a reimbursement or allowance amount depends on whether you have an accountable or a nonaccountable plan. If a single payment includes both wages and an expense reimbursement, you must specify the amount of the reimbursement. These rules apply to all allowable ordinary and necessary employee business expenses. Accountable plan. To be an accountable plan, your reimbursement or allowance arrangement must require your employees to meet all three of the following rules. 1. They must have paid or incurred allowable expenses while performing services as your employees. The reimbursement or advance must be payment for the expenses and must not be an amount that would have otherwise been paid to the employee as wages. 2. They must substantiate these expenses to you within a reasonable period of time. 3. They must return any amounts in excess of substantiated expenses within a reasonable period of time. Amounts paid under an accountable plan aren't wages and aren't subject to income, social security, Medicare, and FUTA taxes. If the expenses covered by this arrangement aren't substantiated (or amounts in excess of substantiated expenses aren't returned within a reasonable period of time), the amount paid under the arrangement in excess of the substantiated expenses is treated as paid under a nonaccountable plan. This amount is subject to income, social security, Medicare, and FUTA taxes for the first payroll period following the end of the reasonable period of time. A reasonable period of time depends on the facts and circumstances. Generally, it is considered reasonable if your employees receive their advance within 30 days of the time they pay or incur the expenses, adequately account for the expenses within 60 days after the expenses were paid or incurred, and return any amounts in excess of expenses within 120 days after the expenses were paid or incurred. Alternatively, it is considered reasonable if you give your employees a periodic statement (at least quarterly) that asks them to either return or adequately account for outstanding amounts and they do so within 120 days. Nonaccountable plan. Payments to your employee for travel and other necessary expenses of your business under a nonaccountable plan are wages and are treated as supplemental wages and subject to income, social security, Medicare, and FUTA taxes. Your payments are treated as paid under a nonaccountable plan if: • Your employee isn't required to or doesn't substanti- ate timely those expenses to you with receipts or other documentation, • You advance an amount to your employee for busi- ness expenses and your employee isn't required to or Page 15 doesn't return timely any amount they don’t use for business expenses, • You advance or pay an amount to your employee regardless of whether you reasonably expect the employee to have business expenses related to your business, or • You pay an amount as a reimbursement you would have otherwise paid as wages. See section 7 for more information on supplemental wages. Per diem or other fixed allowance. You may reimburse your employees by travel days, miles, or some other fixed allowance under the applicable revenue procedure. In these cases, your employee is considered to have accounted to you if your reimbursement doesn't exceed rates established by the federal government. The standard mileage rate for auto expenses is provided in Pub. 15-B. The government per diem rates for meals and lodging in the continental United States can be found by going to the U.S. General Services Administration website at GSA.gov/PerDiemRates. Other than the amount of these expenses, your employees' business expenses must be substantiated (for example, the business purpose of the travel or the number of business miles driven). For information on substantiation methods, see Pub. 463. If the per diem or allowance paid exceeds the amounts substantiated, you must report the excess amount as wages. This excess amount is subject to income tax withholding and payment of social security, Medicare, and FUTA taxes. Show the amount equal to the substantiated amount (that is, the nontaxable portion) in box 12 of Form W-2 using code “L.” Wages not paid in money. If in the course of your trade or business you pay your employees in a medium that is neither cash nor a readily negotiable instrument, such as a check, you’re said to pay them “in kind.” Payments in kind may be in the form of goods, lodging, food, clothing, or services. Generally, the fair market value of such payments at the time they’re provided is subject to federal income tax withholding and social security, Medicare, and FUTA taxes. However, noncash payments for household work, agricultural labor, and service not in the employer's trade or business are exempt from social security, Medicare, and FUTA taxes. Withhold income tax on these payments only if you and the employee agree to do so. Nonetheless, noncash payments for agricultural labor, such as commodity wages, are treated as cash payments subject to employment taxes if the substance of the transaction is a cash payment. Meals and lodging. The value of meals isn't taxable income and isn't subject to federal income tax withholding and social security, Medicare, and FUTA taxes if the meals are furnished for the employer's convenience and on the employer's premises. The value of lodging isn't subject to federal income tax withholding and social security, Medicare, and FUTA taxes if the lodging is furPage 16 nished for the employer's convenience, on the employer's premises, and as a condition of employment. “For the convenience of the employer” means you have a substantial business reason for providing the meals and lodging other than to provide additional compensation to the employee. For example, meals you provide at the place of work so that an employee is available for emergencies during their lunch period are generally considered to be for your convenience. You must be able to show these emergency calls have occurred or can reasonably be expected to occur, and that the calls have resulted, or will result, in you calling on your employees to perform their jobs during their meal period. Whether meals or lodging are provided for the convenience of the employer depends on all of the facts and circumstances. A written statement that the meals or lodging are for your convenience isn't sufficient. 50% test. If over 50% of the employees who are provided meals on an employer's business premises receive these meals for the convenience of the employer, all meals provided on the premises are treated as furnished for the convenience of the employer. If this 50% test is met, the value of the meals is excludable from income for all employees and isn't subject to federal income tax withholding or employment taxes. For more information, see Pub. 15-B. Health insurance plans. If you pay the cost of an accident or health insurance plan for your employees, including an employee's spouse and dependents, your payments aren't wages and aren't subject to social security, Medicare, and FUTA taxes, or federal income tax withholding. Generally, this exclusion also applies to qualified long-term-care insurance contracts. However, for income tax withholding, the value of health insurance benefits must be included in the wages of S corporation employees who own more than 2% of the S corporation (2% shareholders). For social security, Medicare, and FUTA taxes, the health insurance benefits are excluded from the 2% shareholder's wages. See Announcement 92-16 for more information. You can find Announcement 92-16 on page 53 of Internal Revenue Bulletin 1992-5. Health savings accounts (HSAs) and medical savings accounts (MSAs). Your contributions to an employee's HSA or Archer MSA aren't subject to social security, Medicare, or FUTA taxes, or federal income tax withholding if it is reasonable to believe at the time of payment of the contributions they’ll be excludable from the income of the employee. To the extent it isn't reasonable to believe they’ll be excludable, your contributions are subject to these taxes. Employee contributions to their HSAs or MSAs through a payroll deduction plan must be included in wages and are subject to social security, Medicare, and FUTA taxes and income tax withholding. However, HSA contributions made under a salary reduction arrangement in a section 125 cafeteria plan aren't wages and aren't subject to employment taxes or withholding. For more information, see the Instructions for Form 8889. Publication 15 (2023) Medical care reimbursements. Generally, medical care reimbursements paid for an employee under an employer's self-insured medical reimbursement plan aren't wages and aren't subject to social security, Medicare, and FUTA taxes, or income tax withholding. See Pub. 15-B for a rule regarding inclusion of certain reimbursements in the gross income of highly compensated individuals. Differential wage payments. Differential wage payments are any payments made by an employer to an individual for a period during which the individual is performing service in the uniformed services while on active duty for a period of more than 30 days and represent all or a portion of the wages the individual would have received from the employer if the individual were performing services for the employer. Differential wage payments are wages for income tax withholding, but aren't subject to social security, Medicare, or FUTA taxes. Employers should report differential wage payments in box 1 of Form W-2. For more information about the tax treatment of differential wage payments, see Revenue Ruling 2009-11, 2009-18 I.R.B. 896, available at IRS.gov/irb/2009-18_IRB#RR-2009-11. Fringe benefits. You must generally include fringe benefits in an employee's wages (but see Nontaxable fringe benefits next). The benefits are subject to income tax withholding and employment taxes. Fringe benefits include cars you provide, flights on aircraft you provide, free or discounted commercial flights, vacations, discounts on property or services, memberships in country clubs or other social clubs, and tickets to entertainment or sporting events. In general, the amount you must include is the amount by which the fair market value of the benefit is more than the sum of what the employee paid for it plus any amount the law excludes. There are other special rules you and your employees may use to value certain fringe benefits. See Pub. 15-B for more information. Nontaxable fringe benefits. Some fringe benefits aren't taxable (or are minimally taxable) if certain conditions are met. See Pub. 15-B for details. The following are some examples of nontaxable fringe benefits. • Services provided to your employees at no additional cost to you. • Qualified employee discounts. • Working condition fringes that are property or services that would be allowable as a business expense or depreciation expense deduction to the employee if they had paid for them. Examples include a company car for business use and subscriptions to business magazines. • Certain minimal value fringes (including an occasional cab ride when an employee must work overtime and meals you provide at eating places you run for your employees if the meals aren't furnished at below cost). • Qualified transportation fringes subject to specified conditions and dollar limitations (including transportation in a commuter highway vehicle, any transit pass, and qualified parking). Publication 15 (2023) • The use of on-premises athletic facilities operated by you if substantially all of the use is by employees, their spouses, and their dependent children. • Qualified tuition reduction an educational organization provides to its employees for education. For more information, see Pub. 970. • Employer-provided cell phones provided primarily for a noncompensatory business reason. However, don't exclude the following fringe benefits from the wages of highly compensated employees unless the benefit is available to other employees on a nondiscriminatory basis. • No-additional-cost services. • Qualified employee discounts. • Meals provided at an employer-operated eating facility. • Reduced tuition for education. For more information, including the definition of a highly compensated employee, see Pub. 15-B. When taxable fringe benefits are treated as paid. You may choose to treat certain taxable noncash fringe benefits as paid by the pay period, by the quarter, or on any other basis you choose, as long as you treat the benefits as paid at least once a year. You don't have to make a formal choice of payment dates or notify the IRS of the dates you choose. You don't have to make this choice for all employees. You may change methods as often as you like, as long as you treat all benefits provided in a calendar year as paid by December 31 of the calendar year. See section 4 of Pub. 15-B for more information, including a discussion of the special accounting rule for fringe benefits provided during November and December. Valuation of fringe benefits. Generally, you must determine the value of fringe benefits no later than January 31 of the next year. Before January 31, you may reasonably estimate the value of the fringe benefits for purposes of withholding and depositing on time. Withholding on fringe benefits. You may add the value of fringe benefits to regular wages for a payroll period and figure withholding taxes on the total, or you may withhold federal income tax on the value of the fringe benefits at the optional flat 22% supplemental wage rate. However, see Withholding on supplemental wages when an employee receives more than $1 million of supplemental wages during the calendar year in section 7. You may choose not to withhold income tax on the value of an employee's personal use of a vehicle you provide. You must, however, withhold social security and Medicare taxes on the use of the vehicle. See Pub. 15-B for more information on this election. Depositing taxes on fringe benefits. Once you choose when fringe benefits are paid, you must deposit taxes in the same deposit period you treat the fringe benefits as paid. To avoid a penalty, deposit the taxes following the general deposit rules for that deposit period. Page 17 If you determine by January 31 you overestimated the value of a fringe benefit at the time you withheld and deposited for it, you may claim a refund for the overpayment or have it applied to your next employment tax return. See Valuation of fringe benefits, earlier. If you underestimated the value and deposited too little, you may be subject to a failure-to-deposit (FTD) penalty. See section 11 for information on deposit penalties. If you deposited the required amount of taxes but withheld a lesser amount from the employee, you can recover from the employee the social security, Medicare, or income taxes you deposited on their behalf and included in the employee's Form W-2. However, you must recover the income taxes before April 1 of the following year. Sick pay. In general, sick pay is any amount you pay under a plan to an employee who is unable to work because of sickness or injury. These amounts are sometimes paid by a third party, such as an insurance company or an employees' trust. In either case, these payments are subject to social security, Medicare, and FUTA taxes. These taxes don't apply to sick pay paid more than 6 calendar months after the last calendar month in which the employee worked for the employer. The payments are always subject to federal income tax. See section 6 of Pub. 15-A for more information. For purposes of this publication, all references to TIP "sick pay" mean ordinary sick pay, not "qualified sick leave wages" under the FFCRA, as amended by the COVID-related Tax Relief Act of 2020, and the ARP. Identity protection services. The value of identity protection services provided by an employer to an employee isn't included in an employee's gross income and doesn't need to be reported on an information return (such as Form W-2) filed for an employee. This includes identity protection services provided before a data breach occurs. This exception doesn't apply to cash received instead of identity protection services or to proceeds received under an identity theft insurance policy. For more information, see Announcement 2015-22, 2015-35 I.R.B. 288, available at IRS.gov/irb/2015-35_IRB#ANN-2015-22; and Announcement 2016-02, 2016-3 I.R.B. 283, available at IRS.gov/irb/2016-03_IRB#ANN-2016-02. 6. Tips Cash tips your employee receives from customers are generally subject to withholding. Your employee must report cash tips to you by the 10th of the month after the month the tips are received. Cash tips include tips paid by cash, check, debit card, and credit card. The report should include tips you paid over to the employee for charge customers, tips the employee received directly from customers, and tips received from other employees under any tip-sharing arrangement. Both directly and indirectly tipped employees must report tips to you. No report is required for months when tips are less than $20. Your Page 18 employee reports the tips on Form 4070 or on a similar statement. The statement must be signed and dated by the employee and must include: • The employee's name, address, and SSN; • Your name and address; • The month and year (or the beginning and ending dates, if the statement is for a period of less than 1 calendar month) the report covers; and • The total of tips received during the month or period. Both Forms 4070 and 4070-A, Employee's Daily Record of Tips, are included in Pub. 1244, Employee's Daily Record of Tips and Report to Employer. You’re permitted to establish a system for elec- TIP tronic tip reporting by employees. See Regulations section 31.6053-1(d). Collecting taxes on tips. You must collect federal income tax, employee social security tax, and employee Medicare tax on the employee's tips. The withholding rules for withholding an employee's share of Medicare tax on tips also apply to withholding the Additional Medicare Tax once wages and tips exceed $200,000 in the calendar year. You can collect these taxes from the employee's wages (excluding tips) or from other funds they make available. See Tips are treated as supplemental wages in section 7 for more information. Stop collecting the employee social security tax when their wages and tips for tax year 2023 reach $160,200; collect the income and employee Medicare taxes for the whole year on all wages and tips. You’re responsible for the employer social security tax on wages and tips until the wages (including tips) reach the limit. You’re responsible for the employer Medicare tax for the whole year on all wages and tips. Tips are considered to be paid at the time the employee reports them to you. Deposit taxes on tips based on your deposit schedule as described in section 11. File Form 941 or Form 944 to report withholding and employment taxes on tips. Ordering rule. If, by the 10th of the month after the month for which you received an employee's report on tips, you don't have enough employee funds available to deduct the employee tax, you no longer have to collect it. If there aren't enough funds available, withhold taxes in the following order. 1. Withhold on regular wages and other compensation. 2. Withhold social security and Medicare taxes on tips. 3. Withhold income tax on tips. Reporting tips. Report tips and any collected and uncollected social security and Medicare taxes on Form W-2 and on Form 941, lines 5b, 5c, and, if applicable, 5d (Form 944, lines 4b, 4c, and, if applicable, 4d). Report a negative adjustment on Form 941, line 9 (Form 944, line 6), for the uncollected social security and Medicare taxes. Enter the amount of uncollected social security tax and Medicare tax in box 12 of Form W-2 with codes “A” Publication 15 (2023) and “B,” respectively. Don't include any uncollected Additional Medicare Tax in box 12 of Form W-2. For additional information on reporting tips, see section 13 and the General Instructions for Forms W-2 and W-3. Revenue Ruling 2012-18 provides guidance for employers regarding social security and Medicare taxes imposed on tips, including information on the reporting of the employer share of social security and Medicare taxes under section 3121(q), the difference between tips and service charges, and the section 45B credit. See Revenue Ruling 2012-18, 2012-26 I.R.B. 1032, available at IRS.gov/irb/2012-26_IRB#RR-2012-18. FUTA tax on tips. If an employee reports to you in writing $20 or more of tips in a month, the tips are also subject to FUTA tax. Allocated tips. If you operate a large food or beverage establishment, you must report allocated tips under certain circumstances. However, don't withhold income, social security, or Medicare taxes on allocated tips. A large food or beverage establishment is one that provides food or beverages for consumption on the premises, where tipping is customary, and where there were normally more than 10 employees on a typical business day during the preceding year. The tips may be allocated by one of three methods—hours worked, gross receipts, or good faith agreement. For information about these allocation methods, and for information about required electronic filing of Form 8027, see the Instructions for Form 8027. For more information on filing Form 8027 electronically with the IRS, see Pub. 1239. Tip Rate Determination and Education Program. Employers may participate in the Tip Rate Determination and Education Program. The program primarily consists of two voluntary agreements developed to improve tip income reporting by helping taxpayers to understand and meet their tip reporting responsibilities. The two agreements are the Tip Rate Determination Agreement (TRDA) and the Tip Reporting Alternative Commitment (TRAC). A tip agreement, the Gaming Industry Tip Compliance Agreement (GITCA), is available for the gaming (casino) industry. For more information, see Pub. 3144. More information. Advise your employees to see Pub. 531 or use the IRS Interactive Tax Assistant at IRS.gov/ TipIncome for help in determining if their tip income is taxable and for information about how to report tip income. 7. Supplemental Wages Supplemental wages are wage payments to an employee that aren't regular wages. They include, but aren't limited to, bonuses, commissions, overtime pay, payments for accumulated sick leave, severance pay, awards, prizes, back pay, reported tips, retroactive pay increases, and payments for nondeductible moving expenses. However, employers have the option to treat overtime pay and tips as regular wages instead of supplemental wages. Other Publication 15 (2023) payments subject to the supplemental wage rules include taxable fringe benefits and expense allowances paid under a nonaccountable plan. How you withhold on supplemental wages depends on whether the supplemental payment is identified as a separate payment from regular wages. See Regulations section 31.3402(g)-1 for additional guidance. Also see Revenue Ruling 2008-29, 2008-24 I.R.B. 1149, available at IRS.gov/irb/ 2008-24_IRB#RR-2008-29. Withholding on supplemental wages when an employee receives more than $1 million of supplemental wages from you during the calendar year. Special rules apply to the extent supplemental wages paid to any one employee during the calendar year exceed $1 million. If a supplemental wage payment, together with other supplemental wage payments made to the employee during the calendar year, exceeds $1 million, the excess is subject to withholding at 37% (or the highest rate of income tax for the year). Withhold using the 37% rate without regard to the employee's Form W-4. In determining supplemental wages paid to the employee during the year, include payments from all businesses under common control. For more information, see Treasury Decision 9276, 2006-37 I.R.B. 423, available at IRS.gov/irb/ 2006-37_IRB#TD-9276. Withholding on supplemental wage payments to an employee who doesn't receive $1 million of supplemental wages during the calendar year. If the supplemental wages paid to the employee during the calendar year are less than or equal to $1 million, the following rules apply in determining the amount of income tax to be withheld. Supplemental wages combined with regular wages. If you pay supplemental wages with regular wages but don't specify the amount of each, withhold federal income tax as if the total were a single payment for a regular payroll period. Supplemental wages identified separately from regular wages. If you pay supplemental wages separately (or combine them in a single payment and specify the amount of each), the federal income tax withholding method depends partly on whether you withhold income tax from your employee's regular wages. 1. If you withheld income tax from an employee's regular wages in the current or immediately preceding calendar year, you can use one of the following methods for the supplemental wages. a. Withhold a flat 22% (no other percentage allowed). b. If the supplemental wages are paid concurrently with regular wages, add the supplemental wages to the concurrently paid regular wages and withhold federal income tax as if the total were a single payment for a regular payroll period. If there are no concurrently paid regular wages, add the supplemental wages to, alternatively, either the regular wages paid or to be paid for the current Page 19 payroll period or the regular wages paid for the preceding payroll period. Figure the income tax withholding as if the total of the regular wages and supplemental wages is a single payment. Subtract the tax already withheld or to be withheld from the regular wages. Withhold the remaining tax from the supplemental wages. If there were other payments of supplemental wages paid during the payroll period made before the current payment of supplemental wages, aggregate all the payments of supplemental wages paid during the payroll period with the regular wages paid during the payroll period, figure the tax on the total, subtract the tax already withheld from the regular wages and the previous supplemental wage payments, and withhold the remaining tax. 2. If you didn't withhold income tax from the employee's regular wages in the current or immediately preceding calendar year, use method 1b. Regardless of the method you use to withhold income tax on supplemental wages, they’re subject to social security, Medicare, and FUTA taxes. Example 1. You pay John Peters a base salary on the 1st of each month. John’s most recent Form W-4 is from 2018, and John is single, claims one withholding allowance, and didn’t enter an amount for additional withholding on Form W-4. In January, John is paid $1,000. You decide to use the Wage Bracket Method of withholding. Using Worksheet 3 and the withholding tables in section 3 of Pub. 15-T, you withhold $20 from this amount. In February, John receives salary of $1,000 plus a commission of $500, which you combine with regular wages and don't separately identify. You figure the withholding based on the total of $1,500. The correct withholding from the tables is $72. Example 2. You pay Sharon Warren a base salary on the 1st of each month. Sharon submitted a 2023 Form W-4 and checked the box for Single or Married filing separately. Sharon didn’t complete Steps 2, 3, and 4 on Form W-4. Sharon’s May 1 pay is $2,000. You decide to use the Wage Bracket Method of withholding. Using Worksheet 2 and the withholding tables in section 2 of Pub. 15-T, you withhold $86. On May 15, Sharon receives a bonus of $1,000. Electing to use supplemental wage withholding method 1b, you do the following. 1. Add the bonus amount to the amount of wages from the most recent base salary pay date (May 1) ($2,000 + $1,000 = $3,000). 2. Determine the amount of withholding on the combined $3,000 amount to be $202 using the wage bracket tables. 3. Subtract the amount withheld from wages on the most recent base salary pay date (May 1) from the combined withholding amount ($202 – $86 = $116). 4. Withhold $116 from the bonus payment. Page 20 Example 3. The facts are the same as in Example 2, except you elect to use the flat rate method of withholding on the bonus. You withhold 22% of $1,000, or $220, from Sharon's bonus payment. Example 4. The facts are the same as in Example 2, except you elect to pay Sharon a second bonus of $2,000 on May 29. Using supplemental wage withholding method 1b, you do the following. 1. Add the first and second bonus amounts to the amount of wages from the most recent base salary pay date (May 1) ($2,000 + $1,000 + $2,000 = $5,000). 2. Determine the amount of withholding on the combined $5,000 amount to be $461 using the wage bracket tables. 3. Subtract the amounts withheld from wages on the most recent base salary pay date (May 1) and the amounts withheld from the first bonus payment from the combined withholding amount ($461 – $86 – $116 = $259). 4. Withhold $259 from the second bonus payment. Tips are treated as supplemental wages. 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. If you didn’t withhold income tax from the regular wages in the current or immediately preceding calendar year, add the tips to the regular wages and withhold income tax on the total by method 1b discussed earlier. 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. 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. 8. Payroll Period 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. No regular payroll period. When you don't have a regular payroll period, withhold the tax as if you paid wages Publication 15 (2023) 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: • The last wage payment made during the same calendar year; • The date employment began, if during the same calendar year; or • January 1 of the same year. Employee paid for period less than 1 week. When you pay an employee for a period of less than 1 week, and the employee signs a statement under penalties of perjury indicating they aren’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. 9. Withholding From Employees' Wages Federal Income Tax Withholding Redesigned Form W‐4. The IRS redesigned Form W‐4 for 2020 and subsequent years. Before 2020, the value of a withholding allowance was tied to the amount of the personal exemption. Due to changes in the law, taxpayers can no longer claim personal exemptions or dependency exemptions; therefore, Form W‐4 no longer asks an employee to report the number of withholding allowances that they are claiming. The revised Form W‐4 is divided into five steps. 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. Publication 15 (2023) An employee who submitted Form W‐4 in any year before 2020 isn’t required to submit a new form merely because of the redesign. Employers will continue to figure withholding based on the information from the employee's most recently submitted Form W‐4. The withholding tables in Pub. 15‐T allow employers to figure withholding based on a Form W‐4 for 2019 or earlier, as well as the redesigned Form W‐4. While you may ask your employee first paid wages before 2020 that hasn’t yet submitted a redesigned Form W‐4 to submit a new Form W‐4 using the redesigned version of the form, you should explain to them that they’re not required to do this and if they don't submit a new Form W‐4, withholding will continue based on a valid Form W‐4 previously submitted. All newly hired employees must use the redesigned form. Similarly, any other employees who wish to adjust their withholding must use the redesigned form. Pub. 15‐T provides an optional computational bridge to treat 2019 and earlier Forms W‐4 as if they were 2020 or later Forms W‐4 for purposes of figuring federal income tax withholding. This computational bridge allows you to use computational procedures and data fields for a 2020 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 2019 or earlier Form W-4. See How To Treat 2019 and Earlier Forms W‐4 as if They Were 2020 or Later Forms W‐4 in the Introduction section of Pub. 15-T. More information. For more information about the redesigned Form W‐4 and regulations that provide guidance for employers concerning income tax withholding from employees’ wages, see Treasury Decision 9924, 2020‐44 I.R.B. 943, available at IRS.gov/irb/2020‐44_IRB#TD‐ 9924. For information about Form W‐4, go to IRS.gov/ FormW4. Employer instructions on how to figure employee withholding are provided in Pub. 15‐T, available at IRS.gov/Pub15T. Using Form W-4 to figure withholding. 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 2023, especially if they owed taxes or received a large refund when filing their 2022 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 2023 (including an employee who previously worked for you and was rehired in 2023, 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 2023 Form W-4. An employee who was paid wages before 2020 and who failed to furnish a Form W-4 should continue to be treated as single and claiming zero allowances on a 2019 Form W-4. If you use the optional computational bridge, described earlier under Redesigned Form W-4, you may treat this employee as if they had checked the box for Single or Married filing separately in Step 1(c), and made no entries in Page 21 Step 2 and Step 3, an entry of $8,600 in Step 4(a), and an entry of zero in Step 4(b) of the 2023 Form W-4. Form in Spanish. You can provide Formulario W-4(SP) in place of Form W-4 to your Spanish-speaking employees. For more information, see Pub. 17(SP). The rules discussed in this section that apply to Form W-4 also apply to Formulario W-4(SP). Electronic system to receive Form W-4. You may establish a system to electronically receive Forms W-4 from your employees. See Regulations section 31.3402(f) (5)-1(c) and Pub. 15-T for more information. Effective date of Form W-4. A Form W-4 for 2022 or earlier years remains in effect for 2023 unless the employee gives you a 2023 Form W-4. 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-4. For exceptions, see Exemption from federal income tax withholding, IRS review of requested Forms W-4, and Invalid Forms W-4, later in this section. A Form W-4 that makes a change for the next calendar year won't take effect in the current calenCAUTION dar year. ! Successor employer. If you’re a successor employer (see Successor employer, later in this section), secure new Forms W-4 from the transferred employees unless the “Alternative Procedure” in section 5 of Revenue Procedure 2004-53 applies. See Revenue Procedure 2004-53, 2004-34 I.R.B. 320, available at IRS.gov/irb/ 2004-34_IRB#RP-2004-53. Completing Form W-4. 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-4. 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 2023 Form W-4. Employees also have the option to report on their 2023 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. See Pub. 505 for more information about completing Form W-4. Along with Form W-4, you may wish to order Pub. 505 for use by your employees. Don't accept any withholding or estimated tax payments from your employees in addition to withholding based on their Form W-4. If they require additional withholding, they should submit a new Form W-4 and, if Page 22 necessary, pay estimated tax by filing Form 1040-ES or by using EFTPS to make estimated tax payments. Employees who receive tips may provide funds to their employer for withholding on tips; see Collecting taxes on tips in section 6. Exemption from federal income tax withholding. Generally, an employee may claim exemption from federal income tax withholding because they had no income tax liability last year and expect 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 15. If the employee doesn't give you a new Form W-4 by February 15, begin withholding 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 2023 Form W-4. If the employee provides a new Form W-4 claiming exemption from withholding on February 16 or later, you may apply it to future wages but don't refund any taxes withheld while the exempt status wasn’t in place. 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. 515 for exceptions to this general rule. Also see section 3 of Pub. 51 for guidance on H-2A visa workers. Withholding adjustment for nonresident alien employees. Nonresident aliens may not claim the standard deduction on their tax returns; 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 isn’t included in any box on the employee's Form W-2 and doesn’t increase the income tax liability of the employee. 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. See Withholding Adjustment for Nonresident Alien Employees in the Introduction section of Pub. 15-T for the amount to add to their wages for the payroll period. Supplemental wage payment. The adjustment for determining the amount of income tax withholding for nonresident alien employees doesn't apply to a supplemental wage payment (see section 7) if the 37% mandatory flat rate withholding applies or if the 22% optional flat rate withholding is being used to calculate income tax withholding on the supplemental wage payment. Nonresident alien employee's Form W-4. When completing Forms W-4, nonresident aliens are required to: • Not claim exemption from income tax withholding (even if they meet both of the conditions to claim Publication 15 (2023) exemption from withholding listed in the Form W-4 instructions); • Request withholding as if they’re single, regardless of their actual filing status; • Not claim the child tax credit or credit for other de- pendents 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, they may claim, under certain circumstances (see Pub. 519), the child tax credit or credit for other dependents); and • Write “Nonresident Alien” or “NRA” in the space below Step 4(c) of Form W-4. If you maintain an electronic Form W-4 system, you should provide a field for nonresident aliens to enter nonresident alien status instead of writing “Nonresident Alien” or “NRA” in the space below Step 4(c) of Form W-4. You should instruct nonresident aliens to see Notice 1392, Supplemental Form W-4 Instructions for Nonresident Aliens, before completing Form W-4. Form 8233. If a nonresident alien employee claims a tax treaty exemption from withholding, the employee must submit Form 8233 with respect to the income exempt under the treaty, instead of Form W-4. For more information, see the Instructions for Form 8233 and Pay for Personal Services Performed under Withholding on Specific Income in Pub. 515. IRS review of requested Forms W-4. When requested by the IRS, you must make original Forms W-4 available for inspection by an IRS employee. You may also be directed to send certain Forms W-4 to the IRS. 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 may also require you to submit copies of Form W-4 to the IRS as directed by a revenue procedure or notice published in the Internal Revenue Bulletin. When we refer to Form W-4, the same rules apply to Formulario W-4(SP), its Spanish translation. After submitting a copy of a requested Form W-4 to the IRS, continue to withhold federal income tax based on that Form W-4 if it is valid (see Invalid Forms W-4, later in this section). However, if the IRS later notifies you in writing that the employee isn't entitled to claim exemption from withholding or a claimed amount of deductions or credits, withhold federal income tax based on the effective date, employee's permitted filing status, and withholding instructions specified in the IRS notice (commonly referre [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3A11f8a9f18945ad6a. Public record. Not legal advice.