It's always helpful to know the rules that govern your taxes. And the IRS has a handy guide called Pub 15—also known as Employer's Tax Guide. Here's everything you need to know about the IRS Publication 15 - Employer's Tax Guide.
IRS Publication 15 or Pub 15 is the Internal Revenue Service’s guide for determining the amount of federal income tax to withhold on taxable wages. The publication is updated annually, so it’s important to read it before you file your taxes. The IRS Pub 15 covers a range of topics that will help employers with their payrolls, including wage-bracket tables, withholding rate schedules, and backup withholding requirements.
Pub 15 also outlines rules for withholding on retirement payments, annuities, and periodic pensions. It also provides information on reporting agents, reporting agents with an approved Form 2678, and certified professional employer organizations. Publication 15 also includes a few specialized documents to help you along the way. Among the highlights is Pub 15-T, a federal income tax withholding guide. This document explains the best ways to keep your employees happy and your taxes in check.
Understanding Publication 15
Employers use Pub 15 to figure their
- Withholding amounts on employee salaries
- Wages paid to independent contractors
- And supplemental wages such as sick pay. If you pay an employee a sick pay allowance, you must withhold social security and Medicare taxes from the amount. You must also deposit these amounts promptly with the IRS.
More information about the tax deposit rules is in section 11 of Pub 15. The publication also contains instructions for calculating supplemental wages and fringe benefits withholding. It also describes the special withholding rates for certain tax-exempt entities and explains how the additional Medicare tax is calculated.
What Else Pub 15 Covers?
Publication 15 is a general publication for employers that includes a lot of information on withholding and paying employment taxes. It also contains a section on fringe benefits that employees may receive from an employer, including reimbursements for personal expenses. It also discusses how to withhold federal income tax from supplemental wages.
IRS Publication 15, Circular E, Employers’ Tax Guide covers the rules for withholding, depositing, reporting, and paying employment taxes. It also explains the IRS’s withholding and deposit requirements for employee sick pay, golden parachute payments, and backup withholding on non-common-law wage payments.
In 2023, the IRS released a new form for figuring withholding on periodic pension and annuity payments and a draft version of a new form for nonperiodic payments. The new forms were not required to be used until January 1. In addition, Publication 15-T explains how to figure withholding using the new form and pre-2022 forms.
Generally, you must withhold social security and Medicare taxes from the wages of statutory employees, such as full-time employees and independent contractors. You don’t withhold these taxes on wages paid to an individual who is a contractor under a service contract. However, you do have to withhold these taxes if an individual is a statutory employee under other conditions.
For example, an employee’s wages must be reported to the Social Security Administration for a period of time when you pay them back pay, or special wage payments for services that aren’t taxable under common-law rules but that were awarded in a court or government agency action or settlement agreement or a directive issued by a government agency. This applies even if you’re an attorney who doesn’t work for the government.
If a third party pays a sick pay payment to an employee, the third party is liable for depositing the social security and Medicare taxes, as well as FUTA taxes, on that payment. The third-party must report the sick pay payment on Form W-2, Form W-3, Form 940, Form 941, or Form 944.