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Department of the Treasury Internal Revenue Service
Publication 15
Cat. No. 10000W
(Circular E),
Employer's
Tax Guide
For use in 2022
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Contents
What's New.............................. 1
Reminders............................... 2
Calendar................................. 9
Introduction............................. 10
1. Employer Identification Number (EIN)....... **11
- Who Are Employees?**.................... **12
- Family Employees**...................... **13
- Employee's Social Security Number (SSN)**... **14
- Wages and Other Compensation**........... **15
- Tips**.................................. **19
- Supplemental Wages**.................... **20
- Payroll Period**.......................... **21
- Withholding From Employees' Wages**....... **21
- Required Notice to Employees About the** Earned Income Credit (EIC).............. **26
- Depositing Taxes**...................... **27
- Filing Form 941 or Form 944**.............. **32
- Reporting Adjustments to Form 941 or** Form 944............................ **35
- Federal Unemployment (FUTA) Tax**........ **38
- Special Rules for Various Types of** Services and Payments................. **40
- 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/Pub.
What's New
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. Gener- ally, 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
Dec 16, 2021
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 2022 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 2022. See the March 2022 revision of the Instructions for Form 941 or the 2022 Instructions for Form 944 for more information.
The COVID-19 related employee retention credit has expired. The employee retention credit enacted under the Coronavirus Aid, Relief, and Economic Security (CARES) Act and amended and extended by the Tax- payer Certainty and Disaster Tax Relief Act of 2020 was limited to qualified wages paid after March 12, 2020, and before July 1, 2021. The employee retention credit under section 3134 of the Internal Revenue Code, as enacted by the ARP and amended by the Infrastructure Investment and Jobs Act, was limited to wages paid after June 30, 2021, and before October 1, 2021, unless the employer was a recovery startup business. An employer that was a recovery startup business could also claim the employee retention credit for wages paid after September 30, 2021, and before January 1, 2022.
Credit for COBRA premium assistance payments is limited to periods of coverage beginning on or after April 1, 2021, through periods of coverage beginning on or before September 30, 2021. Section 9501 of the ARP provides for COBRA premium assistance in the form of a full reduction in the premium otherwise payable by certain individuals and their families who elect COBRA continuation coverage due to a loss of coverage as the re- sult of a reduction in hours or an involuntary termination of employment (assistance eligible individuals). This CO- BRA premium assistance is available for periods of cover- age beginning on or after April 1, 2021, through periods of coverage beginning on or before September 30, 2021. A premium payee is entitled to the COBRA premium assis- tance credit at the time an eligible individual elects cover- age. Therefore, due to the COBRA notice and election pe- riod requirements (generally, employers have 60 days to provide notice and assistance eligible individuals have 60 days to elect coverage), some employers may be eligible to claim the COBRA premium assistance credit on em- ployment tax returns for the first quarter of 2022. See the March 2022 revision of the Instructions for Form 941 or the 2022 Instructions for Form 944 for more information.
Social security and Medicare tax for 2022. The rate of social security tax on taxable wages, including qualified sick leave wages and qualified family leave wages paid in 2022 for leave taken after March 31, 2021, and before Oc- tober 1, 2021, is 6.2% each for the employer and em- ployee or 12.4% for both. Qualified sick leave wages and qualified family leave wages paid in 2022 for leave taken after March 31, 2020, and before April 1, 2021, aren't sub- ject 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 $147,000.
The Medicare tax rate is 1.45% each for the employee and employer, unchanged from 2021. There is no wage base limit for Medicare tax. Social security and Medicare taxes apply to the wages of household workers you pay $2,400 or more in cash wa- ges in 2022. Social security and Medicare taxes apply to election workers who are paid $2,000 or more in cash or an equivalent form of compensation in 2022.
Reminders
Paying the deferred amount of the employer share of social security tax. The CARES Act allowed employers to defer the deposit and payment of the employer share of social security tax. The deferred amount of the employer share of social security tax was only available for deposits due on or after March 27, 2020, and before January 1, 2021, as well as deposits and payments due after January 1, 2021, that were required for wages paid on or after March 27, 2020, and before January 1, 2021. One-half of the employer share of social security tax is due by De- cember 31, 2021, and the remainder is due by December 31, 2022. Because both December 31, 2021, and Decem- ber 31, 2022, are nonbusiness days, payments made on the next business day will be considered timely. Any pay- ments or deposits you make before December 31, 2021, are first applied against your payment due on December 31, 2021, and then applied against your payment due on December 31, 2022. For more information, go to IRS.gov/ ETD. Also see the Instructions for Form 941 or the Instruc- tions for Form 944 for more information, including how to pay the deferred amount. Paying the deferred amount of the employee share of social security tax. The Presidential Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster, issued on August 8, 2020, directed the Secretary of the Treasury to defer the withholding, de- posit, and payment of the employee share of social secur- ity tax on wages paid during the period from September 1, 2020, through December 31, 2020. The deferral of the withholding and payment of the employee share of social security tax was available for employees whose social se- curity wages paid for a biweekly pay period were less than $4,000, or the equivalent threshold amount for other pay periods. The employer was required to withhold and pay the total deferred employee share of social security tax ratably from wages paid to the employee between Janu- ary 1, 2021, and December 31, 2021. If necessary, the employer could have made arrangements to otherwise collect the total deferred taxes from the employee. The employer is liable to pay the deferred taxes to the IRS and must do so before January 1, 2022, to avoid interest, pen- alties, and additions to tax on those amounts. Because January 1, 2022, is a nonbusiness day, payments made on January 3, 2022, will be considered timely. For more information about the deferral of employee social security tax, see Notice 2020-65, 2020-38 I.R.B. 567, available at IRS.gov/irb/2020-38_IRB#NOT-2020-65 , and Notice 2021-11, 2021-06 I.R.B. 827, available at IRS.gov/irb/ 2021-06_IRB#NOT-2021-11. Also see the Instructions for
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employees. For more information on the different types of third-party payer arrangements, see section 16.
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 govern- ment agency acting as an agent under the special proce- dures provided in Revenue Procedure 2013-39, 2013- 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
- To become a CPEO, the organization must apply through the IRS Online Registration System at IRS.gov/ CPEO. CPEOs file Form 8973, Certified Professional Em- ployer Organization/Customer Reporting Agreement, to notify the IRS that they’ve started or ended a service con- tract 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 elec- tronically, see Revenue Procedure 2017-14, 2017-3 I.R.B. 426, available at IRS.gov/irb/2017-03_IRB#RP-2017-.
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 claim- ing 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) elec- tronically. For more information about a CPEO's require- ment to file electronically, see Revenue Procedure 2017-.
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/ 2014-04_IRB#NOT-2014-7. For more information, includ- ing questions and answers related to Notice 2014-7, go to IRS.gov/MedicaidWaiverPayments. No federal income tax withholding on disability pay- ments for injuries incurred as a direct result of a ter- rorist attack directed against the United States. Disa- bility payments for injuries incurred as a direct result of a terrorist attack directed against the United States (or its al- lies) aren't included in income. Because federal income tax withholding is only required when a payment is includi- ble in income, no federal income tax should be withheld from these payments. See Pub. 907, Tax Highlights for Persons With Disabilities. Voluntary withholding on dividends and other distri- butions 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 in- formation, see Notice 2013-77, 2013-50 I.R.B. 632, avail- able at IRS.gov/irb/2013-50_IRB#NOT-2013-. Definition of marriage. A marriage of two individuals is recognized for federal tax purposes if the marriage is rec- ognized 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 relation- ship 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 resi- dence. Individuals who have entered into a registered do- mestic 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, Employer's QUARTERLY Federal Tax Re- turn—American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands; or Formularios 941-PR, Planilla para la Declaración Federal TRIMESTRAL del Patrono), 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 re- questing 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
Page 4 Publication 15 (2022)
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 infor- mation on requesting to file Forms 941, including the methods and deadlines for making a request, see the In- structions 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
- 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” em- ployer (Form 941 only), you must continue to file a Form 940 and Form 941 or 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 be- half. 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 Treas- ury. 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 informa- tion about EFTPS or to enroll in EFTPS, go to EFTPS.gov , or call 800-555-4477 or 800-733-4829 (TDD). 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 re- turns 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 is- sues 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.
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 or 800-733- (TDD).
- 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 fed- eral taxes electronically, a valid 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 em- ployment 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. How- ever, 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 bal- ance due shown on your employment tax return by credit or debit card. Your payment will be processed by a pay- ment 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 ap- ply 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.
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However, distributions from such plans to a beneficiary or estate of a deceased employee aren't wages and are re- ported on Forms 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insur- ance Contracts, etc.; income tax withheld must be repor- ted on Form 945.
Backup withholding. You must generally withhold 24% of certain taxable payments if the payee fails to furnish you with his or her correct taxpayer identification number (TIN). This withholding is referred to as “backup withhold- ing.” Payments subject to backup withholding include inter- est, dividends, patronage dividends, rents, royalties, com- missions, nonemployee compensation, payments made in settlement of payment card or third-party network transac- tions, 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, pen- sions, annuities, IRAs (including simplified em- 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 re- quest payees to furnish a TIN. Form W-9 or Formulario
CAUTION
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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 ex- empt 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 with- holding. 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.
Employer Responsibilities
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 Annually (see Calendar for due dates): Page Verify work eligibility of new employees....... 5 File Form 944 if required (pay tax with return if Record employees' names and SSNs from not required to deposit)..................... 33 social security cards.................... 6 Remind employees to submit a new Form W- Ask employees for Form W-4.............. 6 if they need to change their withholding.......... 22 Each Payday: Ask for a new Form W-4 from employees Withhold federal income tax based on each claiming exemption from income tax employee's Form W-4................... 22 withholding.............................. 23 Withhold employee's share of social security Reconcile Forms 941 (or Form 944) with Forms and Medicare taxes.................... 25 W-2 and W-3............................ 35 Deposit: Furnish each employee a Form W-2............ 10
- Withheld income tax File Copy A of Forms W-2 and the transmittal
- Withheld and employer social security taxes Form W-3 with the SSA..................... 10
- Withheld and employer Medicare taxes..... 27 Furnish each other payee a Form 1099 (for example, Note: Due date of deposit generally depends Form 1099-NEC)......................... 10 on your deposit schedule (monthly or File Forms 1099 and the transmittal Form semiweekly). 1096.................................. 10 Quarterly (By April 30, July 31, October 31, (^) File Form 940............................ 10 and January 31): File Form 945 for any nonpayroll income tax Deposit FUTA tax if undeposited amount withholding.............................. 10 is over $500.......................... 39 File Form 941 (pay tax with return if not required to deposit)..................... 33
Publication 15 (2022) Page 7
- Periods for which employees and recipients were paid while absent due to sickness or injury and the amount 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 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.
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 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 Spe- cialty 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 employ- ment tax questions. You may also use this number for as- sistance with unresolved tax problems. Additional information. Go to IRS.gov/ EmploymentTaxes for additional employment tax informa- tion. For information about employer responsibilities under the Affordable Care Act, go to IRS.gov/ACA. For
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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
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.
On February 16
Forms W-4 claiming exemption from withholding ex- pire. Any Form W-4 claiming exemption from with- holding 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 he or she had checked the box for Single or Married filing sepa- rately in Step 1(c) and made no entries in Step 2, Step 3, or Step 4 of the 2022 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.
By February 28
File paper 2021 Forms 1099 and 1096. File Copy A of all paper 2021 Forms 1099, except Forms 1099-NEC, with Form 1096 with the IRS. For electronically filed re- turns, see By March 31 , later.
File paper Form 8027. File paper Form 8027, Em- ployer's Annual Information Return of Tip Income and Allocated Tips, with the IRS. See section 6. For elec- tronically filed returns, see By March 31 next.
By March 31
File electronic 2021 Forms 1099 and 8027. File electronic 2021 Forms 1099, except Forms 1099-NEC, with the IRS. Also file electronic Form 8027 with the IRS. For information on filing information returns electroni- cally with the IRS, see Pub. 1220 and Pub. 1239, Speci- fications for Electronic Filing of Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips.
By April 30, July 31, October 31, and
January 31
Deposit FUTA taxes. Deposit FUTA tax for the quar- ter (including any amount carried over from other quar- ters) if over $500. If $500 or less, carry it over to the next quarter. See section 14 for more information.
File Form 941. File Form 941 and deposit any unde- posited 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 Febru- ary 10, respectively. Don't file Form 941 for these quar- ters 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. If you deferred the employer share of social se- curity tax under the CARES Act, one-half is due by December 31, 2021, and the remainder is due by December 31, 2022. Any payments or deposits you make before December 31, 2021, are first applied against your payment due on December 31, 2021, and then ap- plied against your payment due on December 31, 2022. If you deferred the employee share of social security taxes under Notice 2020-65 and Notice 2021-11, you must with- hold and pay the deferred taxes ratably from wages paid between January 1, 2021, and December 31, 2021. Be- cause both December 31, 2021, and December 31, 2022, are nonbusiness days, payments made on the next busi- ness day will be considered timely. For more information and payment instructions, see the Instructions for Form 941 or the Instructions for Form 944, IRS.gov/ETD, Notice 2020-65, and Notice 2021-11.
Introduction
This publication explains your tax responsibilities as an employer. It explains the requirements for withholding, de- positing, reporting, paying, and correcting employment taxes. It explains the forms you must give to your employ- ees, those your employees must give to you, and those you must send to the IRS and the SSA. References to “in- come 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 pay- checks. 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 employ- ees. 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
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taxes that must be withheld aren't withheld or aren't de- posited or paid to the U.S. Treasury, the trust fund recov- ery penalty may apply. See section 11 for more informa- tion. Additional employment tax information is available in Pubs. 15-A, 15-B, and 15-T. Pub. 15-A includes special- ized information supplementing the basic employment tax information provided in this publication. Pub. 15-B, Em- ployer's Tax Guide to Fringe Benefits, contains informa- tion about the employment tax treatment and valuation of various types of noncash compensation. Pub. 15-T in- cludes the federal income tax withholding tables and in- structions 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. There are exceptions to these requirements. See sec- tion 15 for guidance. Railroad retirement taxes are ex- plained 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 com- ments about this publication and your suggestions for fu- ture 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- Washington, DC 20224
Although we can’t respond individually to each com- ment received, we do appreciate your feedback and will consider your comments as we revise our tax forms, in- structions, and publications. Don’t send tax questions, tax returns, or payments to this 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 publi- cation.
Federal government employers. The information in this publication, including the rules for making federal tax de- posits, 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 in- come 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, wa- ges, 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- at IRS.gov/pub/irs-irbs/irb00-06.pdf. You can get information on reporting and social secur- ity coverage from your local IRS office. If you have any questions about coverage under a section 218 (Social Se- curity Act) agreement, contact the appropriate state offi- cial. To find your State Social Security Administrator, visit the National Conference of State Social Security Adminis- trators website at NCSSSA.org.
Indian tribal governments. See Pub. 4268 for employ- ment tax information for Indian tribal governments.
Disregarded entities and qualified subchapter S sub- sidiaries (QSubs). Eligible single-owner disregarded en- tities and QSubs are treated as separate entities for em- ployment 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 dig- its are arranged as follows: 00-0000000. It is used to iden- tify 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 visiting the IRS website at 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- 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 busi- ness. The IRS will tell you which number to use. For more information, see Pub. 1635. If you took over another employer's business (see Suc- cessor 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
Publication 15 (2022) Page 11
- 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 em- ployee rate of 0.9%) of wages subject to Additional Medicare Tax.
- For federal income tax withholding, the rate is 1.5% of wages. If the employer didn't issue required information re- turns, the section 3509 rates are the following.
- 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.
- For Medicare taxes: employer rate of 1.45% plus 40% 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- ployee rate of 0.9%) of wages subject to Additional Medicare Tax.
- 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 re- lieved 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 con- sistent 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 peri- ods 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 partner- ship agreement. See Pub. 541 for more details. The part- nership 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 be- ginning after 2006, the Small Business and Work Oppor- tunity Tax Act of 2007 (Public Law 110-28) provides that a
“qualified joint venture,” whose only members are spou- ses filing a joint income tax return, can elect not to be trea- ted 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 par- ticipation in the instructions for Schedule C (Form 1040), line G) in the trade or business (mere joint own- ership 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 part- nership or limited liability company (LLC). To make the election, all items of income, gain, loss, deduction, and credit must be divided between the spou- ses, in accordance with each spouse's interest in the ven- ture, 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
- to pay self-employment taxes, as applicable. Spouses using the qualified joint venture rules are trea- ted as sole proprietors for federal tax purposes and gener- ally 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 proprietor- ship. Generally, filing as a qualified joint venture won't in- crease the spouses' total tax owed on the joint income tax return. However, it gives each spouse credit for social se- curity earnings on which retirement benefits are based and for Medicare coverage without filing a partnership re- turn. Note. If your spouse is your employee, not your part- ner, 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 com- munity 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 ven- ture 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 his or her parent in a trade or business aren't subject to social security and Medicare taxes if the trade or business is a sole proprie- torship 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
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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. Pay- ments for the services of a child under age 21 who works for his or her 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 his or her parent are gener- ally subject to income tax withholding unless the pay- ments are for domestic work in the parent's home, or un- less the 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 his or her spouse in a trade or business are subject to income tax withhold- ing 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 busi- ness, 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 he or she works for:
- A corporation, even if it is controlled by the child's pa- rent 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 part- ner; 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 son or daughter. When the em- ployer is a son or daughter employing his or her parent, the following rules apply.
- Payments for the services of a parent in the son’s or daughter’s (the employer’s) trade or business are sub- ject to income tax withholding and social security and Medicare taxes.
- Payments for the services of a parent not in the son’s or daughter’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 _if all of the following apply.
- The parent is employed by his or her son or daughter.
- The son or daughter (the employer) has a child or_ stepchild (including an adopted child) living in the _home.
- The son or daughter (the employer) is a widow or wid-_ ower, divorced and not remarried, or living with a spouse who, because of a mental or physical
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condition, can't care for the child or stepchild for at least 4 continuous weeks in the calendar quarter in which the service is performed.
- The child or stepchild 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 his or her child aren't subject to FUTA tax, regardless of the type of services provided.
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 ap- plies to resident and nonresident alien employees. You should ask your employee to show you his or her 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 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 pro- vide 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 com- pleting 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 his or her 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 up- loading a file) in the SSN field. When the employee re- ceives the SSN, file Copy A of Form W-2c, Corrected Wage and Tax Statement, with the SSA to show the em- ployee'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 State- ments, may be filed per session over the Internet, with no
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- 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.
Employee business expense reimbursements. A re- imbursement 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 ex- pense reimbursement, you must specify the amount of the reimbursement. These rules apply to all allowable ordinary and neces- sary 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.
- They must have paid or incurred allowable expenses while performing services as your employees. The re- imbursement or advance must be payment for the ex- penses and must not be an amount that would have otherwise been paid to the employee as wages.
- They must substantiate these expenses to you within a reasonable period of time.
- They must return any amounts in excess of substanti- ated 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 ex- penses 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 nonac- countable plan. This amount is subject to income, social security, Medicare, and FUTA taxes for the first payroll pe- riod 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 ac- count 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 se- curity, 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 doesn't return timely any amount he or she doesn't use for business expenses,
- You advance or pay an amount to your employee re- gardless of whether you reasonably expect the em- ployee 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 reim- burse your employees by travel days, miles, or some other fixed allowance under the applicable revenue proce- dure. 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 stand- ard 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 visiting 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 infor- mation on substantiation methods, see Pub. 463. If the per diem or allowance paid exceeds the amounts substantiated, you must report the excess amount as wa- ges. This excess amount is subject to income tax with- holding 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 pay- ments at the time they’re provided is subject to federal in- come tax withholding and social security, Medicare, and FUTA taxes. However, noncash payments for household work, agri- cultural labor, and service not in the employer's trade or
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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 com- modity 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 in- come 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 se- curity, Medicare, and FUTA taxes if the lodging is fur- 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 emer- gencies during his or her lunch period are generally con- sidered to be for your convenience. You must be able to show these emergency calls have occurred or can rea- sonably be expected to occur, and that the calls have re- sulted, 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 conven- ience of the employer depends on all of the facts and cir- cumstances. 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 pro- vided 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 with- holding or employment taxes. For more information, see Pub. 15-B.
Health insurance plans. If you pay the cost of an acci- dent or health insurance plan for your employees, includ- ing an employee's spouse and dependents, your pay- ments aren't wages and aren't subject to social security, Medicare, and FUTA taxes, or federal income tax with- holding. 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 employ- ees 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 sav- ings accounts (MSAs). Your contributions to an em- ployee'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 pay- ment of the contributions they’ll be excludable from the in- come of the employee. To the extent it isn't reasonable to believe they’ll be excludable, your contributions are sub- ject to these taxes. Employee contributions to their HSAs or MSAs through a payroll deduction plan must be inclu- ded in wages and are subject to social security, Medicare, and FUTA taxes and income tax withholding. However, HSA contributions made under a salary reduction ar- rangement 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.
Medical care reimbursements. Generally, medical care reimbursements paid for an employee under an employ- er's self-insured medical reimbursement plan aren't wa- ges 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 pay- ments are any payments made by an employer to an indi- vidual for a period during which the individual is perform- ing 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 serv- ices for the employer. Differential wage payments are wages for income tax withholding, but aren't subject to social security, Medi- care, or FUTA taxes. Employers should report differential wage payments in box 1 of Form W-2. For more informa- tion about the tax treatment of differential wage payments, see Revenue Ruling 2009-11, 2009-18 I.R.B. 896, availa- ble at IRS.gov/irb/2009-18_IRB#RR-2009-.
Fringe benefits. You must generally include fringe bene- fits in an employee's wages (but see Nontaxable fringe benefits next). The benefits are subject to income tax withholding and employment taxes. Fringe benefits in- clude 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 condi- tions 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.
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6. Tips
Cash tips your employee receives from customers are generally subject to withholding. Your employee must re- port 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 indi- rectly tipped employees must report tips to you. No report is required for months when tips are less than $20. Your 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 Re- cord 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- tronic tip reporting by employees. See Regula- tions section 31.6053-1(d).
Collecting taxes on tips. You must collect federal in- come 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 calen- dar year. You can collect these taxes from the employee's wages (excluding tips) or from other funds he or she makes avail- able. See Tips are treated as supplemental wages in sec- tion 7 for more information. Stop collecting the employee social security tax when his or her wages and tips for tax year 2022 reach $147,000; collect the income and em- ployee Medicare taxes for the whole year on all wages and tips. You’re responsible for the employer social secur- ity tax on wages and tips until the wages (including tips) reach the limit. You’re responsible for the employer Medi- care 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.
TIP
If there aren't enough funds available, withhold taxes in the following order.
- Withhold on regular wages and other compensation.
- Withhold social security and Medicare taxes on tips.
- Withhold income tax on tips.
Reporting tips. Report tips and any collected and un- collected social security and Medicare taxes on Form W- 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” and “B,” respectively. Don't include any uncollected Addi- tional Medicare Tax in box 12 of Form W-2. For additional information on reporting tips, see section 13 and the Gen- eral Instructions for Forms W-2 and W-3. Revenue Ruling 2012-18 provides guidance for em- ployers regarding social security and Medicare taxes im- posed on tips, including information on the reporting of the employer share of social security and Medicare taxes un- der section 3121(q), the difference between tips and serv- ice 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-.
FUTA tax on tips. If an employee reports to you in writ- ing $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 cer- tain circumstances. However, don't withhold income, so- cial security, or Medicare taxes on allocated tips. A large food or beverage establishment is one that pro- vides food or beverages for consumption on the premises, where tipping is customary, and where there were nor- mally more than 10 employees on a typical business day during the preceding year. The tips may be allocated by one of three meth- ods—hours worked, gross receipts, or good faith agree- ment. For information about these allocation methods, and for information about required electronic filing of Form 8027, see the Instructions for Form 8027. For more infor- mation on filing Form 8027 electronically with the IRS, see Pub. 1239.
Tip Rate Determination and Education Program. Em- ployers 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 Agree- ment (GITCA), is available for the gaming (casino) indus- try. For more information, see Pub. 3144.
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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 tax- able 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 payments subject to the supplemental wage rules include taxable fringe benefits and expense allowances paid un- der a nonaccountable plan. How you withhold on supple- mental wages depends on whether the supplemental pay- ment is identified as a separate payment from regular wages. See Regulations section 31.3402(g)-1 for addi- tional guidance. Also see Revenue Ruling 2008-29, 2008-24 I.R.B. 1149, available at IRS.gov/irb/ 2008-24_IRB#RR-2008-.
Withholding on supplemental wages when an em- ployee receives more than $1 million of supplemen- tal 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 sup- plemental wage payments made to the employee during the calendar year, exceeds $1 million, the excess is sub- ject to withholding at 37% (or the highest rate of income tax for the year). Withhold using the 37% rate without re- gard to the employee's Form W-4. In determining supple- mental wages paid to the employee during the year, in- clude 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-.
Withholding on supplemental wage payments to an employee who doesn't receive $1 million of supple- mental wages during the calendar year. If the supple- mental 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 pay- roll period.
Supplemental wages identified separately from regu- lar 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.
- If you withheld income tax from an employee's regular wages in the current or immediately preceding calen- dar year, you can use one of the following methods for the supplemental wages. a. Withhold a flat 22% (no other percentage al- lowed). b. If the supplemental wages are paid concurrently with regular wages, add the supplemental wages to the concurrently paid regular wages and with- hold 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 sup- plemental wages to, alternatively, either the regu- lar wages paid or to be paid for the current 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 supplemen- tal wages is a single payment. Subtract the tax al- ready withheld or to be withheld from the regular wages. Withhold the remaining tax from the sup- plemental 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 supplemen- tal wages paid during the payroll period with the regular wages paid during the payroll period, fig- ure 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.
- 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. His most recent Form W-4 is from 2018, and he is single, claims one withholding allowance, and did not enter an amount for additional withholding on his Form W-4. In January, he 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 $29 from this amount. In Febru- ary, he 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 $78.
Example 2. You pay Sharon Warren a base salary on the 1st of each month. She submitted a 2022 Form W- and checked the box that she is Single or Married filing separately. She did not complete Steps 2, 3, and 4 on her Form W-4. Her May 1 pay is $2,000. You decide to use the Wage Bracket Method of withholding. Using
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