Department of the Treasury Contents

Internal Revenue Service

What's New . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Reminders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Publication 15
Cat. No. 10000W Calendar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

(Circular E),
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1. Employer Identification Number (EIN) . . . . . . . 11

Employer's 2. Who Are Employees? . . . . . . . . . . . . . . . . . . . . 11

3. Family Employees . . . . . . . . . . . . . . . . . . . . . . 13

Tax Guide 4. Employee's Social Security Number (SSN) . . . 14

5. Wages and Other Compensation . . . . . . . . . . . 15

For use in 2020 6. Tips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

7. Supplemental Wages . . . . . . . . . . . . . . . . . . . . 19
8. Payroll Period . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9. Withholding From Employees' Wages . . . . . . . 21
10. Required Notice to Employees About the
Earned Income Credit (EIC) . . . . . . . . . . . . . . 25
11. Depositing Taxes . . . . . . . . . . . . . . . . . . . . . . 25
12. Filing Form 941 or Form 944 . . . . . . . . . . . . . . 31
13. Reporting Adjustments to Form 941 or
Form 944 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
14. Federal Unemployment (FUTA) Tax . . . . . . . . 36
15. Special Rules for Various Types of
Services and Payments . . . . . . . . . . . . . . . . . 39
16. Third-Party Payer Arrangements . . . . . . . . . . 44
How To Get Tax Help . . . . . . . . . . . . . . . . . . . . . . 45
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

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
2020 withholding tables. The Percentage Method and
Wage Bracket Method withholding tables, as well as the
amount to add to a nonresident alien employee's wages
for figuring income tax withholding, are no longer included
in Pub. 15. These tables and the employer instructions on
how to figure employee withholding are now included in
Get forms and other information faster and easier at: Pub. 15-T, Federal Income Tax Withholding Methods. You
• IRS.gov (English) • IRS.gov/Korean (한국어)
• IRS.gov/Spanish (Español) • IRS.gov/Russian (Pусский) may also use the Income Tax Withholding Assistant for
• IRS.gov/Chinese (中文) • IRS.gov/Vietnamese (TiếngViệt)

Dec 23, 2019

Employers at IRS.gov/ITWA to help you figure federal in- employer, unchanged from 2019. The social security
come tax withholding. wage base limit is $137,700.
Redesigned Form W-4 for 2020. The IRS has rede- The Medicare tax rate is 1.45% each for the employee
signed Form W-4 for 2020. In the past, the value of a with- and employer, unchanged from 2019. There is no wage
holding allowance was tied to the amount of the personal base limit for Medicare tax.
exemption. Due to changes in the law, taxpayers can no Social security and Medicare taxes apply to the wages
longer claim personal exemptions or dependency exemp- of household workers you pay $2,200 or more in cash wa-
tions; therefore, the 2020 Form W-4 no longer asks an ges for 2020. Social security and Medicare taxes apply to
employee to report the number of withholding allowances election workers who are paid $1,900 or more in cash or
that they are claiming. The revised Form W-4 is divided an equivalent form of compensation in 2020.
into five steps. Step 1 and Step 5 apply to all employees. New Form 1099-NEC. There is a new Form 1099-NEC
In Step 1, employees enter personal information like their to report nonemployee compensation paid in 2020. The
name and filing status. In Step 5, employees sign the 2020 Form 1099-NEC will be due February 1, 2021. For
form. Employees who complete only Step 1 and Step 5 nonemployee compensation paid in 2019, continue to use
will have their withholding figured based on their filing sta- Form 1099-MISC, which is due January 31, 2020.
tus's standard deduction and tax rates with no other ad-
justments. If applicable, in Step 2, employees increase Disaster tax relief. Disaster tax relief is available for
their withholding to account for higher tax rates due to in- those impacted by disasters. For more information about
come from other jobs in their household. Under Step 2, disaster relief, go to IRS.gov/DisasterTaxRelief.
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 wa- Reminders
ges. In Step 3, employees decrease their withholding by
reporting the annual amount of any credits they will claim Moving expense reimbursement. P.L. 115-97 sus-
on their income tax return. In Step 4, employees may in- pends the exclusion for qualified moving expense reim-
crease or decrease their withholding based on the annual bursements from your employee's income for tax years
amount of other income or deductions they will report on beginning after 2017 and before 2026. However, the ex-
their income tax return and they may also request any ad- clusion is still available in the case of a member of the
ditional federal income tax they want withheld each pay U.S. Armed Forces on active duty who moves because of
period. a permanent change of station due to a military order. The
Employees who have submitted Form W-4 in any year exclusion applies only to reimbursement of moving expen-
before 2020 aren't required to submit a new form merely ses that the member could deduct if he or she had paid or
because of the redesign. Employers will continue to figure incurred them without reimbursement. See Moving Ex-
withholding based on the information from the employee's penses in Pub. 3, Armed Forces' Tax Guide, for the defini-
most recently submitted Form W-4. The withholding ta- tion of what constitutes a permanent change of station
bles in Pub. 15-T allow employers to figure withholding and to learn which moving expenses are deductible.
based on a Form W-4 for an earlier year as well as the re- Withholding on supplemental wages. P.L. 115-97
designed 2020 Form W-4. While you may ask your em- lowered the withholding rates on supplemental wages for
ployees first paid wages before 2020 to submit new tax years beginning after 2017 and before 2026. See sec-
Forms W-4 using the redesigned version of the form, you tion 7 for the withholding rates.
should explain to them that they’re not required to do this
Backup withholding. P.L. 115-97 lowered the backup
and if they don't submit a new Form W-4, withholding will
withholding rate to 24% for tax years beginning after 2017
continue based on a valid Form W-4 previously submitted.
and before 2026. For more information on backup with-
All newly hired employees first paid wages after 2019
holding, see Backup withholding, later.
must use the redesigned form. Similarly, any other em-
ployees who wish to adjust their withholding must use the Qualified small business payroll tax credit for in-
redesigned form. A new employee who is first paid wages creasing research activities. For tax years beginning
in 2020, including an employee who previously worked for after 2015, a qualified small business may elect to claim
you and was rehired in 2020, and who fails to furnish a up to $250,000 of its credit for increasing research activi-
Form W-4 will be treated as if they had checked the box ties as a payroll tax credit against the employer’s share of
for Single or Married filing separately in Step 1(c) and social security tax. The payroll tax credit must be elected
made no entries in Step 2, Step 3, or Step 4 of the 2020 on an original income tax return that is timely filed (includ-
Form W-4. However, an employee who was paid wages in ing extensions). The portion of the credit used against the
2019 and who failed to furnish a Form W-4 should con- employer’s share of social security tax is allowed in the
tinue to be treated as single and claiming zero allowances first calendar quarter beginning after the date that the
on a 2019 Form W-4. See section 9 for additional details. qualified small business filed its income tax return. The
For the latest information about developments related to election and determination of the credit amount that will
Form W-4, go to IRS.gov/FormW4. be used against the employer's share of social security
tax are made on Form 6765, Credit for Increasing Re-
Social security and Medicare tax for 2020. The social search Activities. The amount from Form 6765, line 44,
security tax rate is 6.2% each for the employee and must then be reported on Form 8974, Qualified Small

Page 2 Publication 15 (2020)

Business Payroll Tax Credit for Increasing Research Ac- Aggregate Form 941 Filers, when filing an aggregate
tivities. Form 8974 is used to determine the amount of the Form 941. Aggregate Forms 941 are filed by agents ap-
credit that can be used in the current quarter. The amount proved by the IRS under section 3504 of the Internal Rev-
from Form 8974, line 12, is reported on Form 941 or enue Code. To request approval to act as an agent for an
941-SS, line 11 (or Form 944, line 8). For more informa- employer, the agent files Form 2678 with the IRS. Aggre-
tion about the payroll tax credit, see Notice 2017-23, gate Forms 941 are also filed by CPEOs approved by the
2017-16 I.R.B. 1100, available at IRS.gov/irb/ IRS under section 7705. CPEOs file Form 8973, Certified
2017-16_IRB#NOT-2017-23, and IRS.gov/ Professional Employer Organization/Customer Reporting
ResearchPayrollTC. Also see the line 16 instructions in Agreement, to notify the IRS that they’ve started or ended
the Instructions for Form 941 (line 13 instructions in the In- a service contract with a client or customer.
structions for Form 944). Aggregate Form 940 filers. Agents and CPEOs must
Certification program for professional employer or- complete Schedule R (Form 940), Allocation Schedule for
ganizations (PEOs). The Stephen Beck, Jr., Achieving a Aggregate Form 940 Filers, when filing an aggregate
Better Life Experience Act of 2014 required the IRS to es- Form 940, Employer's Annual Federal Unemployment
tablish a voluntary certification program for PEOs. PEOs (FUTA) Tax Return. Aggregate Forms 940 can be filed by
handle various payroll administration and tax reporting re- agents acting on behalf of home care service recipients
sponsibilities for their business clients and are typically who receive home care services through a program ad-
paid a fee based on payroll costs. To become and remain ministered by a federal, state, or local government. To re-
certified under the certification program, certified profes- quest approval to act as an agent on behalf of home care
sional employer organizations (CPEOs) must meet vari- service recipients, the agent files Form 2678 with the IRS.
ous requirements described in sections 3511 and 7705 Aggregate Forms 940 are also filed by CPEOs approved
and related published guidance. Certification as a CPEO by the IRS under section 7705. CPEOs file Form 8973 to
may affect the employment tax liabilities of both the CPEO notify the IRS that they’ve started or ended a service con-
and its customers. A CPEO is generally treated for em- tract with a client or customer.
ployment tax purposes as the employer of any individual
Work opportunity tax credit for qualified tax-exempt
who performs services for a customer of the CPEO and is
organizations hiring qualified veterans. Qualified
covered by a contract described in section 7705(e)(2) be-
tax-exempt organizations that hire eligible unemployed
tween the CPEO and the customer (CPEO contract), but
veterans may be able to claim the work opportunity tax
only for wages and other compensation paid to the indi-
credit against their payroll tax liability using Form 5884-C.
vidual by the CPEO. To become a CPEO, the organization
For more information, go to IRS.gov/WOTC.
must apply through the IRS Online Registration System.
For more information or to apply to become a CPEO, go to COBRA premium assistance credit. Effective for tax
IRS.gov/CPEO. Also see Revenue Procedure 2017-14, periods beginning after 2013, the credit for COBRA pre-
2017-3 I.R.B. 426, available at IRS.gov/irb/ mium assistance payments can't be claimed on Form 941,
2017-03_IRB#RP-2017-14. Employer's QUARTERLY Federal Tax Return (or Form
944, Employer's ANNUAL Federal Tax Return). Instead,
Outsourcing payroll duties. Generally, as an employer,
after filing your Form 941 (or Form 944), file Form 941-X,
you’re responsible to ensure that tax returns are filed and
Adjusted Employer's QUARTERLY Federal Tax Return or
deposits and payments are made, even if you contract
Claim for Refund (or Form 944-X, Adjusted Employer's
with a third party to perform these acts. You remain re-
ANNUAL Federal Tax Return or Claim for Refund) to
sponsible if the third party fails to perform any required ac-
claim the COBRA premium assistance credit. Filing a
tion. Before you choose to outsource any of your payroll
Form 941-X (or Form 944-X) before filing a Form 941 (or
and related tax duties (that is, withholding, reporting, and
Form 944) for the return period may result in errors or de-
paying over social security, Medicare, FUTA, and income
lays in processing your Form 941-X (or Form 944-X). For
taxes) to a third-party payer, such as a payroll service pro-
more information, see the Instructions for Form 941 (or the
vider or reporting agent, go to IRS.gov/
Instructions for Form 944).
OutsourcingPayrollDuties for helpful information on this
topic. If a CPEO pays wages and other compensation to Medicaid waiver payments. Notice 2014-7 provides
an individual performing services for you, and the services that certain Medicaid waiver payments are excludable
are covered by a contract described in section 7705(e)(2) from income for federal income tax purposes. See Notice
between you and the CPEO (CPEO contract), then the 2014-7, 2014-4 I.R.B. 445, available at IRS.gov/irb/
CPEO is generally treated as the employer, but only for 2014-04_IRB#NOT-2014-7. For more information, includ-
wages and other compensation paid to the individual by ing questions and answers related to Notice 2014-7, go to
the CPEO. However, with respect to certain employees IRS.gov/MedicaidWaiverPayments.
covered by a CPEO contract, you may also be treated as No federal income tax withholding on disability pay-
an employer of the employees and, consequently, may ments for injuries incurred as a direct result of a ter-
also be liable for federal employment taxes imposed on rorist attack directed against the United States. Disa-
wages and other compensation paid by the CPEO to such bility payments for injuries incurred as a direct result of a
employees. For more information on the different types of terrorist attack directed against the United States (or its al-
third-party payer arrangements, see section 16. lies) aren't included in income. Because federal income
Aggregate Form 941 filers. Agents and CPEOs must tax withholding is only required when a payment is includi-
complete Schedule R (Form 941), Allocation Schedule for ble in income, no federal income tax should be withheld

Publication 15 (2020) Page 3

from these payments. See Pub. 907, Tax Highlights for 944. Forms 941-X and 944-X are used by employers to
Persons With Disabilities. claim refunds or abatements of employment taxes, rather
Voluntary withholding on dividends and other distri- than Form 843. See section 13 for more information.
butions by an Alaska Native Corporation (ANC). A Zero wage return. If you haven't filed a “final” Form 940
shareholder of an ANC may request voluntary income tax and "final" Form 941 or 944, or aren't a “seasonal” em-
withholding on dividends and other distributions paid by ployer (Form 941 only), you must continue to file a Form
an ANC. A shareholder may request voluntary withholding 940 and Form 941 or 944, even for periods during which
by giving the ANC a completed Form W-4V. For more in- you paid no wages. The IRS encourages you to file your
formation, see Notice 2013-77, 2013-50 I.R.B. 632, avail- “zero wage” Form 940 and Form 941 or 944 electronically.
able at IRS.gov/irb/2013-50_IRB#NOT-2013-77. Go to IRS.gov/EmploymentEfile for more information on
Definition of marriage. A marriage of two individuals is electronic filing.
recognized for federal tax purposes if the marriage is rec- Federal tax deposits must be made by electronic
ognized by the state, possession, or territory of the United funds transfer (EFT). You must use EFT to make all
States in which the marriage is entered into, regardless of federal tax deposits. Generally, an EFT is made using the
legal residence. Two individuals who enter into a relation- Electronic Federal Tax Payment System (EFTPS). If you
ship that is denominated as marriage under the laws of a don't want to use EFTPS, you can arrange for your tax
foreign jurisdiction are recognized as married for federal professional, financial institution, payroll service, or other
tax purposes if the relationship would be recognized as trusted third party to make electronic deposits on your be-
marriage under the laws of at least one state, possession, half. Also, you may arrange for your financial institution to
or territory of the United States, regardless of legal resi- initiate a same-day wire payment on your behalf. EFTPS
dence. Individuals who have entered into a registered do- is a free service provided by the Department of the Treas-
mestic partnership, civil union, or other similar relationship ury. Services provided by your tax professional, financial
that isn't denominated as a marriage under the law of the institution, payroll service, or other third party may have a
state, possession, or territory of the United States where fee.
such relationship was entered into aren't lawfully married For more information on making federal tax deposits,
for federal tax purposes, regardless of legal residence. see How To Deposit in section 11. To get more informa-
Severance payments. Severance payments are wages tion about EFTPS or to enroll in EFTPS, go to EFTPS.gov,
subject to social security and Medicare taxes, income tax or call 800-555-4477 or 800-733-4829 (TDD). Additional
withholding, and FUTA tax. information about EFTPS is also available in Pub. 966.
You must receive written notice from the IRS to file Pub. 5146 explains employment tax examinations
Form 944. If you’ve been filing Forms 941 (or Forms and appeal rights. Pub. 5146 provides employers with
941-SS, Employer's QUARTERLY Federal Tax Re- information on how the IRS selects employment tax re-
turn—American Samoa, Guam, the Commonwealth of the turns to be examined, what happens during an exam, and
Northern Mariana Islands, and the U.S. Virgin Islands, or what options an employer has in responding to the results
Formularios 941-PR, Planilla para la Declaración Federal of an exam, including how to appeal the results. Pub.
TRIMESTRAL del Patrono), and believe your employment 5146 also includes information on worker classification is-
taxes for the calendar year will be $1,000 or less, and you sues and tip exams.
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
Electronic Filing and Payment
before you may file this form. For more information on re- Businesses can enjoy the benefits of filing and paying
questing to file Form 944, including the methods and their federal taxes electronically. Whether you rely on a
deadlines for making a request, see the Instructions for tax professional or handle your own taxes, the IRS offers
Form 944. you convenient programs to make filing and payment
Employers can request to file Forms 941 instead of easier.
Form 944. If you received notice from the IRS to file Spend less time worrying about taxes and more time
Form 944 but would like to file Forms 941 instead, you running your business. Use e-file and EFTPS to your
must contact the IRS during the first calendar quarter of benefit.
the tax year to request to file Forms 941. You must receive
• For e-file, go to IRS.gov/EmploymentEfile for
written notice from the IRS to file Forms 941 instead of additional information. A fee may be charged to file
Form 944 before you may file these forms. For more infor- electronically.
mation on requesting to file Forms 941, including the
methods and deadlines for making a request, see the In- • For EFTPS, go to EFTPS.gov or call EFTPS Customer
structions for Form 944. Service at 800-555-4477 or 800-733-4829 (TDD).
Correcting Form 941 or 944. If you discover an error on • For electronic filing of Forms W-2, Wage and Tax
a previously filed Form 941, make the correction using Statement, go to SSA.gov/employer.
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

Page 4 Publication 15 (2020)

 If you’re filing your tax return or paying your fed- employee is an employee who hasn't previously been em-
! eral taxes electronically, a valid EIN is required at ployed by you or was previously employed by you but has
CAUTION the time the return is filed or the payment is made. been separated from such prior employment for at least
If a valid EIN isn't provided, the return or payment won't be 60 consecutive days.
processed. This may result in penalties. See section 1 for Many states accept a copy of Form W-4 with employer
information about applying for an EIN. information added. Visit the Office of Child Support En-
Electronic funds withdrawal (EFW). If you file your em- forcement website at acf.hhs.gov/programs/css/
ployment tax return electronically, you can e-file and use employers for more information.
EFW to pay the balance due in a single step using tax W-4 request. Ask each new employee to complete the
preparation software or through a tax professional. How- 2020 Form W-4. See section 9.
ever, don't use EFW to make federal tax deposits. For Name and social security number (SSN). Record
more information on paying your taxes using EFW, go to each new employee's name and SSN from his or her so-
IRS.gov/EFW. cial security card. Any employee without a social security
Credit or debit card payments. You can pay the bal- card should apply for one. See section 4.
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 Information Returns
more information on paying your taxes with a credit or You must file Forms W-2 to report wages paid to
debit card, go to IRS.gov/PayByCard. employees. You may also be required to file information
Online payment agreement. You may be eligible to ap- returns to report certain types of payments made during
ply for an installment agreement online if you can’t pay the the year. For example, you must file Form 1099-MISC,
full amount of tax you owe when you file your employment Miscellaneous Income, to report payments of $600 or
tax return. For more information, see the instructions for more in 2019 to persons not treated as employees (for
your employment tax return or go to IRS.gov/OPA. example, independent contractors) for services performed
for your trade or business. For details about filing Forms
1099 and for information about required electronic filing,
Forms in Spanish see the General Instructions for Certain Information
Returns for general information, and the separate, specific
You can provide Formulario W-4(SP), Certificado de instructions for each information return you file (for
Retenciones del Empleado, in place of Form W-4, example, the 2019 Instructions for Form 1099-MISC).
Employee's Withholding Certificate, to your Generally, don't use Forms 1099 to report wages and
Spanish-speaking employees. For more information, see other compensation you paid to employees; report these
Pub. 17(SP), El Impuesto Federal sobre los Ingresos on Form W-2. See the General Instructions for Forms W-2
(Para Personas Físicas). For nonemployees, such as and W-3 for details about filing Form W-2 and for
independent contractors, Formulario W-9(SP), Solicitud y information about required electronic filing. If you file 250
Certificación del Número de Identificación del or more Forms 1099-MISC in calendar year 2020, you
Contribuyente, may be used in place of Form W-9, must file them electronically. If you file 250 or more Forms
Request for Taxpayer Identification Number and W-2 in calendar year 2020, you must file them
Certification. electronically.
There is a new Form 1099-NEC to report nonem-
TIP ployee compensation paid in 2020. The 2020
Hiring New Employees Form 1099-NEC will be due February 1, 2021.

Eligibility for employment. You must verify that each Information reporting customer service site. The IRS
new employee is legally eligible to work in the United operates an information return customer service site to
States. This includes completing the U.S. Citizenship and answer questions about reporting on Forms W-2, W-3,
Immigration Services (USCIS) Form I-9, Employment Eli- 1099, and other information returns. If you have questions
gibility Verification. You can get Form I-9 at USCIS.gov/ related to reporting on information returns, call
Forms. For more information, visit the USCIS website at 866-455-7438 (toll free), 304-263-8700 (toll call), or
USCIS.gov/I-9-Central or call 800-375-5283 or 304-579-4827 (TDD/TTY for persons who are deaf, hard
800-767-1833 (TTY). of hearing, or have a speech disability). The center can
You may use the Social Security Number Verification also be reached by email at [email protected]. Don't include
Service (SSNVS) at SSA.gov/employer/ssnv.htm to verify tax identification numbers (TINs) or attachments in email
that an employee name matches an SSN. A person may correspondence because electronic mail isn't secure.
have a valid SSN but not be authorized to work in the Uni-
ted States. You may use E-Verify at e-verify.gov to con-
firm 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

Publication 15 (2020) Page 5

 nonpayroll (Form 945) withholding. Nonpayroll items
Federal Income Tax include the following.
• Pensions (including distributions from tax-favored
Withholding retirement plans, for example, section 401(k), section
403(b), and governmental section 457(b) plans),
Withhold federal income tax from each wage payment or
annuities, and IRA distributions.
supplemental unemployment compensation plan benefit
payment according to the employee's Form W-4 and the • Military retirement.
correct withholding table in Pub. 15-T. If you're paying • Gambling winnings.
supplemental wages to an employee, see section 7. If you
have nonresident alien employees, see Withholding • Indian gaming profits.
income taxes on the wages of nonresident alien • Certain government payments on which the recipient
employees in section 9. elected voluntary income tax withholding.
See section 8 of Pub. 15-A, Employer’s Supplemental
Tax Guide, for information about withholding on pensions • Dividends and other distributions by an ANC on which
(including distributions from tax-favored retirement plans), the recipient elected voluntary income tax withholding.
annuities, and individual retirement arrangements (IRAs). • Payments subject to backup withholding.
For details on depositing and reporting nonpayroll
income tax withholding, see the Instructions for Form 945.
Nonpayroll Income Tax Distributions from nonqualified pension plans and
Withholding deferred compensation plans. Because distributions to
participants from some nonqualified pension plans and
deferred compensation plans (including section 457(b)
Nonpayroll federal income tax withholding (reported on
plans of tax-exempt organizations) are treated as wages
Forms 1099 and Form W-2G, Certain Gambling
and are reported on Form W-2, income tax withheld must
Winnings) must be reported on Form 945, Annual Return
be reported on Form 941 or Form 944, not on Form 945.
of Withheld Federal Income Tax. Separate deposits are
However, distributions from such plans to a beneficiary or
required for payroll (Form 941 or Form 944) and
estate of a deceased employee aren't wages and are re-
ported on Forms 1099-R, Distributions From Pensions,

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) . . . . . . . . . . . . . . . . . . . . . 31
social security cards . . . . . . . . . . . . . . . . . . . . 5 Remind employees to submit a new Form W-4
Ask employees for Form W-4 . . . . . . . . . . . . . . 5 if they need to change their withholding . . . . . . . . . . 21
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 . . . . . . . . . . . . . . . . . . . 21 withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Withhold employee's share of social security Reconcile Forms 941 (or Form 944) with Forms
and Medicare taxes . . . . . . . . . . . . . . . . . . . . 24 W-2 and W-3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Deposit: Furnish each employee a Form W-2 . . . . . . . . . . . . 9
• 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 . . . . . . . . . . . . . . . . . . . . . 9
• Withheld and employer Medicare taxes . . . . . 26 Furnish each other payee a Form 1099 (for example,
Note: Due date of deposit generally depends Form 1099-MISC) . . . . . . . . . . . . . . . . . . . . . . . . . 9
on your deposit schedule (monthly or File Forms 1099 and the transmittal Form
semiweekly). 1096 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Quarterly (By April 30, July 31, October 31, File Form 940 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
and January 31): File Form 945 for any nonpayroll income tax
Deposit FUTA tax if undeposited amount withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
is over $500 . . . . . . . . . . . . . . . . . . . . . . . . . . 37
File Form 941 (pay tax with return if not
required to deposit) . . . . . . . . . . . . . . . . . . . . . 31

Page 6 Publication 15 (2020)

Annuities, Retirement or Profit-Sharing Plans, IRAs, Insur- • Copies of employees' and recipients' income tax
ance Contracts, etc.; income tax withheld must be repor- withholding certificates (Forms W-4, W-4P, W-4(SP),
ted on Form 945. W-4S, and W-4V).
Backup withholding. You generally must withhold 24% • Dates and amounts of tax deposits you made and
of certain taxable payments if the payee fails to furnish acknowledgment numbers for deposits made by
you with his or her correct taxpayer identification number EFTPS.
(TIN). This withholding is referred to as “backup withhold-
ing.” • Copies of returns filed and confirmation numbers.
Payments subject to backup withholding include inter- • Records of fringe benefits and expense
est, dividends, patronage dividends, rents, royalties, com- reimbursements provided to your employees,
missions, nonemployee compensation, payments made in including substantiation.
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
Change of Business Name
made by fishing boat operators are subject to backup Notify the IRS immediately if you change your business
withholding. name. Write to the IRS office where you file your returns,
Backup withholding doesn't apply to wages, pen- using the Without a payment address provided in the
sions, annuities, IRAs (including simplified em- instructions for your employment tax return, to notify the
!
CAUTION ployee pension (SEP) and SIMPLE retirement IRS of any business name change. See Pub. 1635 to see
plans), section 404(k) distributions from an employee if you need to apply for a new EIN.
stock ownership plan (ESOP), medical savings accounts
(MSAs), health savings accounts (HSAs), long-term-care
benefits, or real estate transactions. Change of Business Address
You can use Form W-9 or Formulario W-9(SP) to re-
quest payees to furnish a TIN. Form W-9 or Formulario or Responsible Party
W-9(SP) must be used when payees must certify that the Notify the IRS immediately if you change your business
number furnished is correct, or when payees must certify address or responsible party. Complete and mail Form
that they’re not subject to backup withholding or are ex- 8822-B to notify the IRS of a business address or
empt from backup withholding. The Instructions for the responsible party change. For a definition of “responsible
Requester of Form W-9 or Formulario W-9(SP) includes a party,” see the Instructions for Form SS-4.
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).
Filing Addresses
Generally, your filing address for Form 940, 941, 943,
Recordkeeping 944, 945, or CT-1 depends on the location of your
residence or principal place of business and whether or
Keep all records of employment taxes for at least 4 years. not you’re including a payment with your return. There are
These should be available for IRS review. Your records separate filing addresses for these returns if you’re a
should include the following information. tax-exempt organization or government entity. See the
• Your EIN. separate instructions for Form 940, 941, 943, 944, 945, or
CT-1 for the filing addresses.
• Amounts and dates of all wage, annuity, and pension
payments.
• Amounts of tips reported to you by your employees.
Private Delivery Services
• Records of allocated tips.
You can use certain private delivery services (PDSs)
• The fair market value of in-kind wages paid.
designated by the IRS to meet the “timely mailing as
• Names, addresses, SSNs, and occupations of timely filing” rule for tax returns. Go to IRS.gov/PDS for the
employees and recipients. current list of PDSs.
• Any employee copies of Forms W-2 and W-2c The PDS can tell you how to get written proof of the
returned to you as undeliverable. mailing date.
For the IRS mailing address to use if you're using a
• Dates of employment for each employee. PDS, go to IRS.gov/PDSstreetAdresses. Select the
• Periods for which employees and recipients were paid mailing address listed on the webpage that is in the same
while absent due to sickness or injury and the amount state as the address to which you would mail returns filed
and weekly rate of payments you or third-party payers without a payment, as shown in the instructions for your
made to them. employment tax return.

Publication 15 (2020) Page 7

 PDSs can't deliver items to P.O. boxes. You must typing your wage information into easy-to-use fill-in fields.
! use the U.S. Postal Service to mail any item to an In addition, you can print out completed copies of Forms
CAUTION IRS P.O. box address. 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.

Dishonored Payments
Any form of payment that is dishonored and returned from Photographs of Missing
a financial institution is subject to a penalty. The penalty is
$25 or 2% of the payment, whichever is more. However, Children
the penalty on dishonored payments of $24.99 or less is The IRS is a proud partner with the National Center for
an amount equal to the payment. For example, a Missing & Exploited Children® (NCMEC). Photographs of
dishonored payment of $18 is charged a penalty of $18. 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
E-News for Payroll photographs and calling 1-800-THE-LOST
(1-800-843-5678) if you recognize a child.
Professionals
The IRS has a subscription-based email service for
payroll professionals. Subscribers will receive periodic Calendar
updates from the IRS. The updates may include
The following is a list of important dates and
information regarding recent legislative changes affecting
responsibilities. The dates listed here haven’t been
federal payroll reporting, IRS news releases and special
adjusted for Saturdays, Sundays, and legal holidays (see
announcements pertaining to the payroll industry, new
the TIP next). Pub. 509, Tax Calendars (for use in 2020),
employment tax procedures, and other information
adjusts the dates for Saturdays, Sundays, and legal
specifically affecting federal payroll tax returns. To
holidays. See section 11 for information about depositing
subscribe, go to IRS.gov/ENewsPayroll.
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
Telephone Help listed here. For these dates, see Pub. 509.

Tax questions. You can call the IRS Business and Spe- If any date shown next for filing a return, furnish-
cialty Tax Line with your employment tax questions at TIP ing a form, or depositing taxes falls on a Saturday,
800-829-4933. Sunday, or legal holiday, the due date is the next
Help for people with disabilities. You may call business day. The term "legal holiday" means any legal
800-829-4059 (TDD/TTY for persons who are deaf, hard holiday in the District of Columbia. A statewide legal holi-
of hearing, or have a speech disability) with any employ- day delays a filing due date only if the IRS office where
ment tax questions. You may also use this number for as- you’re required to file is located in that state. However, a
sistance with unresolved tax problems. statewide legal holiday doesn't delay the due date of fed-
eral tax deposits. See Deposits Due on Business Days
Additional information. Go to IRS.gov/
Only in section 11. For any filing due date, you’ll meet the
EmploymentTaxes for additional employment tax informa-
“file” or “furnish” requirement if the envelope containing
tion. For information about employer responsibilities under
the return or form is properly addressed, contains suffi-
the Affordable Care Act, go to IRS.gov/ACA.
cient postage, and is postmarked by the U.S. Postal Serv-
ice on or before the due date, or sent by an IRS-designa-
ted PDS on or before the due date. See Private Delivery
Ordering Employer Tax Forms, Services under Reminders, earlier, for more information.

Instructions, and Publications Fiscal year taxpayers. The due dates listed next apply
whether you use a calendar or a fiscal year.
You can view, download, or print most of the forms,
instructions, and publications you may need at IRS.gov/ By January 31
Forms. Otherwise, you can go to IRS.gov/OrderForms to
place an order and have them mailed to you. File Form 941 or Form 944. File Form 941 for the
Instead of ordering paper Forms W-2 and W-3, fourth quarter of the previous calendar year and deposit
consider filing them electronically using the SSA's free any undeposited income, social security, and Medicare
e-file service. Visit the SSA's Employer W-2 Filing taxes. You may pay these taxes with Form 941 if your
Instructions & Information website at SSA.gov/employer to total tax liability for the quarter is less than $2,500. File
register for Business Services Online. You’ll be able to Form 944 for the previous calendar year instead of Form
create Forms W-2 online and submit them to the SSA by 941 if the IRS has notified you in writing to file Form 944.

Page 8 Publication 15 (2020)

 Pay any undeposited income, social security, and Medi- had checked the box for Single or Married filing sepa-
care taxes with your Form 944. You may pay these rately in Step 1(c) and made no entries in Step 2, Step
taxes with Form 944 if your total tax liability for the year 3, or Step 4 of the 2020 Form W-4. See section 9 for
is less than $2,500. For additional rules on when you more information. If the employee gives you a new Form
can pay your taxes with your return, see Payment with W-4 claiming exemption from withholding after February
return in section 11. If you timely deposited all taxes 15, you may apply the exemption to future wages, but
when due, you may file by February 10. 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. By February 28
Furnish Forms 1099 and W-2. Furnish each em- File paper 2019 Forms 1099 and 1096. File Copy A
ployee a completed 2019 Form W-2. Furnish 2019 Form of all paper 2019 Forms 1099, except Forms
1099-MISC to payees for nonemployee compensation. 1099-MISC reporting nonemployee compensation, with
Most Forms 1099 must be furnished to payees by Janu- Form 1096 with the IRS. For electronically filed returns,
ary 31, but some can be furnished by February 15. For see By March 31, later.
more information, see When to furnish forms or state-
ments in part M of the General Instructions for Certain By February 29
Information Returns.
File paper Form 8027. File paper Form 8027, Em-
File Form W-2. File with the SSA Copy A of all 2019 ployer's Annual Information Return of Tip Income and
paper and electronic Forms W-2 with Form W-3, Trans- Allocated Tips, with the IRS. See section 6. For elec-
mittal of Wage and Tax Statements. For more informa- tronically filed returns, see By March 31 next.
tion on reporting Form W-2 information to the SSA elec-
tronically, visit the SSA’s Employer W-2 Filing By March 31
Instructions & Information webpage at SSA.gov/
employer. If filing electronically, via the SSA's Form W-2 File electronic 2019 Forms 1099 and 8027. File
Online service, the SSA will generate Form W-3 data electronic 2019 Forms 1099, except Forms 1099-MISC
from the electronic submission of Form(s) W-2. reporting nonemployee compensation, with the IRS.
Also file electronic Form 8027 with the IRS. For informa-
File Form 1099-MISC reporting nonemployee com- tion on filing information returns electronically with the
pensation. File with the IRS Copy A of all 2019 pa- IRS, see Pub. 1220 and Pub. 1239, Specifications for
per and electronic Forms 1099-MISC that report nonem- Electronic Filing of Form 8027, Employer's Annual Infor-
ployee compensation, with Form 1096, Annual mation Return of Tip Income and Allocated Tips.
Summary and Transmittal of U.S. Information Returns.
For information on filing information returns electroni-
cally with the IRS, see Pub. 1220, Specifications for By April 30, July 31, October 31, and
Electronic Filing of Forms 1097, 1098, 1099, 3921, January 31
3922, 5498, and W-2G.
Deposit FUTA taxes. Deposit FUTA tax for the quar-
File Form 945. File Form 945 to report any nonpayroll ter (including any amount carried over from other quar-
federal income tax withheld. If you deposited all taxes ters) if over $500. If $500 or less, carry it over to the next
when due, you may file by February 10. See Nonpayroll quarter. See section 14 for more information.
Income Tax Withholding under Reminders, earlier, 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
By February 15 liability for the quarter is less than $2,500. If you timely
Request a new Form W-4 from exempt employees. deposited all taxes when due, you may file by May 10,
Ask for a new Form W-4 from each employee who August 10, November 10, or February 10, respectively.
claimed exemption from income tax withholding last Don't file Form 941 for these quarters if you have been
year. notified to file Form 944 and you didn't request and re-
ceive written notice from the IRS to file quarterly Forms
941.
On February 16
Forms W-4 claiming exemption from withholding ex- Before December 1
pire. Any Form W-4 claiming exemption from with-
holding for the previous year has now expired. Begin New Forms W-4. Remind employees to submit a new
withholding for any employee who previously claimed Form W-4 if their filing status, other income, deductions,
exemption from withholding but hasn't given you a new or credits have changed or will change for the next year.
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

Publication 15 (2020) Page 9

 Although we can’t respond individually to each com-
Introduction ment received, we do appreciate your feedback and will
consider your comments as we revise our tax forms, in-
This publication explains your tax responsibilities as an structions, and publications. We can’t answer tax ques-
employer. It explains the requirements for withholding, de- tions sent to the above address.
positing, reporting, paying, and correcting employment
taxes. It explains the forms you must give to your employ- Federal government employers. The information in this
ees, those your employees must give to you, and those publication, including the rules for making federal tax de-
you must send to the IRS and the SSA. References to “in- posits, applies to federal agencies.
come tax” in this guide apply only to “federal” income tax.
State and local government employers. Payments to
Contact your state or local tax department to determine
employees for services in the employ of state and local
their rules.
government employers are generally subject to federal in-
When you pay your employees, you don't pay them all
come tax withholding but not FUTA tax. Most elected and
the money they earned. As their employer, you have the
appointed public officials of state or local governments are
added responsibility of withholding taxes from their pay-
employees under common law rules. See chapter 3 of
checks. The federal income tax and employees' share of
Pub. 963, Federal-State Reference Guide. In addition, wa-
social security and Medicare taxes that you withhold from
ges, with certain exceptions, are subject to social security
your employees' paychecks are part of their wages that
and Medicare taxes. See section 15 for more information
you pay to the U.S. Treasury instead of to your employ-
on the exceptions.
ees. Your employees trust that you pay the withheld taxes
If an election worker is employed in another capacity
to the U.S. Treasury by making federal tax deposits. This
with the same government entity, see Revenue Ruling
is the reason that these withheld taxes are called trust
2000-6 on page 512 of Internal Revenue Bulletin 2000-6
fund taxes. If federal income, social security, or Medicare
at IRS.gov/pub/irs-irbs/irb00-06.pdf.
taxes that must be withheld aren't withheld or aren't de-
You can get information on reporting and social secur-
posited or paid to the U.S. Treasury, the trust fund recov-
ity coverage from your local IRS office. If you have any
ery penalty may apply. See section 11 for more informa-
questions about coverage under a section 218 (Social Se-
tion.
curity Act) agreement, contact the appropriate state offi-
Additional employment tax information is available in
cial. To find your State Social Security Administrator, visit
Pubs. 15-A, 15-B, and 15-T. Pub. 15-A includes special-
the National Conference of State Social Security Adminis-
ized information supplementing the basic employment tax
trators website at NCSSSA.org.
information provided in this publication. Pub. 15-B, Em-
ployer's Tax Guide to Fringe Benefits, contains informa- Indian tribal governments. See Pub. 4268 for employ-
tion about the employment tax treatment and valuation of ment tax information for Indian tribal governments.
various types of noncash compensation. Pub. 15-T in-
cludes the federal income tax withholding tables and in- Disregarded entities and qualified subchapter S sub-
structions on how to use the tables. sidiaries (QSubs). Eligible single-owner disregarded en-
Most employers must withhold (except FUTA), deposit, tities and QSubs are treated as separate entities for em-
report, and pay the following employment taxes. ployment tax purposes. Eligible single-member entities
must report and pay employment taxes on wages paid to
• Income tax.
their employees using the entities' own names and EINs.
• Social security tax. See Regulations sections 1.1361-4(a)(7) and
• Medicare tax. 301.7701-2(c)(2)(iv).

• FUTA tax. COBRA premium assistance credit. The Consolidated

There are exceptions to these requirements. See sec- Omnibus Budget Reconciliation Act of 1985 (COBRA)
tion 15 for guidance. Railroad retirement taxes are ex- provides certain former employees, retirees, spouses, for-
plained in the Instructions for Form CT-1. Employment mer spouses, and dependent children the right to tempo-
taxes for agricultural employers are explained in Pub. 51. rary continuation of health coverage at group rates. CO-
BRA generally covers multiemployer health plans and
Comments and suggestions. We welcome your com- health plans maintained by private-sector employers
ments about this publication and your suggestions for fu- (other than churches) with 20 or more full- and part-time
ture editions. employees. Parallel requirements apply to these plans un-
You can send us comments from IRS.gov/ der the Employee Retirement Income Security Act of 1974
FormComments. (ERISA). Under the Public Health Service Act, COBRA re-
Or you can write to: quirements also apply to health plans covering state or lo-
cal government employees. Similar requirements apply
Internal Revenue Service under the Federal Employees Health Benefits Program
Tax Forms and Publications and under some state laws. For the premium assistance
1111 Constitution Ave. NW, IR-6526 (or subsidy) discussed below, these requirements are all
Washington, DC 20224 referred to as COBRA requirements.

Page 10 Publication 15 (2020)

 Under the American Recovery and Reinvestment Act of • Attestation of involuntary termination, including the
2009 (ARRA), employers are allowed a credit against date of the involuntary termination for each covered
“payroll taxes” (referred to in this publication as “employ- employee whose involuntary termination is the basis
ment taxes”) for providing COBRA premium assistance to for eligibility for the subsidy.
assistance-eligible individuals. For periods of COBRA
• Proof of each assistance-eligible individual's eligibility
continuation coverage beginning after February 16, 2009, for COBRA coverage and the election of COBRA cov-
a group health plan must treat an assistance-eligible indi- erage.
vidual as having paid the required COBRA continuation
coverage premium if the individual elects COBRA cover- • A record of the SSNs of all covered employees, the
age and pays 35% of the amount of the premium. amount of the subsidy reimbursed with respect to
An assistance-eligible individual is a qualified benefi- each covered employee, and whether the subsidy
ciary of an employer's group health plan who is eligible for was for one individual or two or more individuals.
COBRA continuation coverage during the period begin-
ning September 1, 2008, and ending May 31, 2010, due
to the involuntary termination from employment of a cov-
ered employee during the period and elects continuation
1. Employer Identification
COBRA coverage. The assistance for the coverage can
last up to 15 months.
Number (EIN)
The COBRA premium assistance credit was available If you’re required to report employment taxes or give tax
to an employer for premiums paid on behalf of employees statements to employees or annuitants, you need an EIN.
who were involuntarily terminated from employment be-
tween September 1, 2008, and May 31, 2010. The CO- The EIN is a nine-digit number the IRS issues. The dig-
BRA premium assistance credit isn’t available for individu- its are arranged as follows: 00-0000000. It is used to iden-
als who were involuntarily terminated after May 31, 2010. tify the tax accounts of employers and certain others who
Therefore, only in rare circumstances will the credit still be have no employees. Use your EIN on all of the items you
available, such as instances where COBRA eligibility was send to the IRS and the SSA. For more information, see
delayed as a result of employer-provided health insurance Pub. 1635.
coverage following termination. For more information If you don’t have an EIN, you may apply for one online
about the credit, see Notice 2009-27, 2009-16 I.R.B. 838, by visiting the IRS website at IRS.gov/EIN. You may also
available at IRS.gov/irb/2009-16_IRB#NOT-2009-27. apply for an EIN by faxing or mailing Form SS-4 to the
Administrators of the group health plans (or other enti- IRS. If the principal business was created or organized
ties) that provide or administer COBRA continuation cov- outside of the United States or U.S. territories, you may
erage must provide notice to assistance-eligible individu- also apply for an EIN by calling 267-941-1099 (toll call).
als of the COBRA premium assistance. Don't use an SSN in place of an EIN.
The 65% of the premium not paid by the assistance-eli-
gible individuals is reimbursed to the employer maintain- You should have only one EIN. If you have more than
ing the group health plan. The reimbursement is made one and aren't sure which one to use, call 800-829-4933
through a credit against the employer's employment tax li- or 800-829-4059 (TDD/TTY for persons who are deaf,
abilities. For information on how to claim the credit, see hard of hearing, or have a speech disability). Give the
the Instructions for Form 941-X or the Instructions for numbers you have, the name and address to which each
Form 944-X. The credit is treated as a deposit made on was assigned, and the address of your main place of busi-
the first day of the return period (quarter or year). In the ness. The IRS will tell you which number to use. For more
case of a multiemployer plan, the credit is claimed by the information, see Pub. 1635.
plan, rather than the employer. In the case of an insured If you took over another employer's business (see Suc-
plan subject to state law continuation coverage require- cessor employer in section 9), don't use that employer's
ments, the credit is claimed by the insurance company, EIN. If you’ve applied for an EIN but don't have your EIN
rather than the employer. by the time a return is due, file a paper return and write
Anyone claiming the credit for COBRA premium assis- “Applied For” and the date you applied for it in the space
tance payments must maintain the following information to shown for the number.
support their claim.
• Information on the receipt of the assistance-eligible in-
dividuals' 35% share of the premium, including dates
and amounts.
2. Who Are Employees?
• In the case of an insurance plan, a copy of an invoice Generally, employees are defined either under common
or other supporting statement from the insurance car- law or under statutes for certain situations. See Pub. 15-A
rier and proof of timely payment of the full premium to for details on statutory employees and nonemployees.
the insurance carrier required under COBRA.
Employee status under common law. Generally, a
• In the case of a self-insured plan, proof of the pre- worker who performs services for you is your employee if
mium amount and proof of the coverage provided to you have the right to control what will be done and how it
the assistance-eligible individuals. will be done. This is so even when you give the employee

Publication 15 (2020) Page 11

freedom of action. What matters is that you have the right Treating employees as nonemployees. You’ll gener-
to control the details of how the services are performed. ally be liable for social security and Medicare taxes and
See Pub. 15-A for more information on how to determine withheld income tax if you don't deduct and withhold these
whether an individual providing services is an independ- taxes because you treated an employee as a nonem-
ent contractor or an employee. ployee. You may be able to figure your liability using spe-
Generally, people in business for themselves aren't cial section 3509 rates for the employee share of social
employees. For example, doctors, lawyers, veterinarians, security and Medicare taxes and federal income tax with-
and others in an independent trade in which they offer holding. The applicable rates depend on whether you filed
their services to the public are usually not employees. If required Forms 1099. You can't recover the employee
the business is incorporated, corporate officers who work share of social security tax, Medicare tax, or income tax
in the business are employees of the corporation. withholding from the employee if the tax is paid under sec-
If an employer-employee relationship exists, it doesn't tion 3509. You’re liable for the income tax withholding re-
matter what it is called. The employee may be called an gardless of whether the employee paid income tax on the
agent or independent contractor. It also doesn't matter wages. You continue to owe the full employer share of so-
how payments are measured or paid, what they’re called, cial security and Medicare taxes. The employee remains
or if the employee works full or part time. liable for the employee share of social security and Medi-
care taxes. See section 3509 for details. Also see the In-
Statutory employees. If someone who works for you structions for Form 941-X or the Instructions for Form
isn't an employee under the common law rules discussed 944-X.
earlier, don't withhold federal income tax from his or her Section 3509 rates aren't available if you intentionally
pay, unless backup withholding applies. Although the fol- disregard the requirement to withhold taxes from the em-
lowing persons may not be common law employees, ployee or if you withheld income taxes but not social se-
they’re considered employees by statute for social secur- curity or Medicare taxes. Section 3509 isn't available for
ity and Medicare tax purposes under certain conditions. reclassifying statutory employees. See Statutory employ-
• An agent or commission driver who delivers meat, ees, earlier.
vegetable, fruit, or bakery products; beverages (other If the employer issued required information returns, the
than milk); laundry; or dry cleaning for someone else. section 3509 rates are the following.
• A full-time life insurance salesperson who sells primar- • For social security taxes: employer rate of 6.2% plus
ily for one company. 20% of the employee rate of 6.2%, for a total rate of
7.44% of wages.
• A homeworker who works at home or off premises ac-
cording to guidelines of the person for whom the work • For Medicare taxes: employer rate of 1.45% plus 20%
is done, with materials or goods furnished by and re- of the employee rate of 1.45%, for a total rate of
turned to that person or to someone that person des- 1.74% of wages.
ignates. • For Additional Medicare Tax: 0.18% (20% of the em-
• A traveling or city salesperson (other than an agent or ployee rate of 0.9%) of wages subject to Additional
commission driver) who works full time (except for Medicare Tax.
sideline sales activities) for one firm or person getting • For income tax withholding, the rate is 1.5% of wages.
orders from customers. The orders must be for mer-
If the employer didn't issue required information re-
chandise for resale or supplies for use in the custom-
turns, the section 3509 rates are the following.
er's business. The customers must be retailers,
wholesalers, contractors, or operators of hotels, res- • For social security taxes: employer rate of 6.2% plus
taurants, or other businesses dealing with food or 40% of the employee rate of 6.2%, for a total rate of
lodging. 8.68% of wages.
For FUTA tax, an agent or commission driver and a • For Medicare taxes: employer rate of 1.45% plus 40%
traveling or city salesperson are considered statutory em- of the employee rate of 1.45%, for a total rate of
ployees; however, a full-time life insurance salesperson 2.03% of wages.
and a homeworker aren't considered statutory employees.
• For Additional Medicare Tax: 0.36% (40% of the em-
Statutory nonemployees. Direct sellers, qualified real ployee rate of 0.9%) of wages subject to Additional
estate agents, and certain companion sitters are, by law, Medicare Tax.
considered nonemployees. They’re generally treated as • For income tax withholding, the rate is 3.0% of wages.
self-employed for all federal tax purposes, including in-
come and employment taxes. See Pub. 15-A for more in- Relief provisions. If you have a reasonable basis for
formation. not treating a worker as an employee, you may be re-
lieved from having to pay employment taxes for that
H-2A agricultural workers. On Form W-2, don't check worker. To get this relief, you must file all required federal
box 13 (Statutory employee), as H-2A workers aren't stat- tax returns, including information returns, on a basis con-
utory employees. 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

Page 12 Publication 15 (2020)

periods beginning after 1977. See Pub. 1976, Do You increase the spouses' total tax owed on the joint income
Qualify for Relief Under Section 530. tax return. However, it gives each spouse credit for social
security earnings on which retirement benefits are based
IRS help. If you want the IRS to determine whether a and for Medicare coverage without filing a partnership re-
worker is an employee, file Form SS-8. turn.
Note. If your spouse is your employee, not your part-
Voluntary Classification Settlement Program (VCSP). ner, see One spouse employed by another in section 3.
Employers who are currently treating their workers (or a For more information on qualified joint ventures, go to
class or group of workers) as independent contractors or IRS.gov/QJV.
other nonemployees and want to voluntarily reclassify
their workers as employees for future tax periods may be Exception—Community income. If you and your
eligible to participate in the VCSP if certain requirements spouse wholly own an unincorporated business as com-
are met. File Form 8952 to apply for the VCSP. For more munity property under the community property laws of a
information, go to IRS.gov/VCSP. state, foreign country, or U.S. possession, you can treat
the business either as a sole proprietorship (of the spouse
Business Owned and Operated by who carried on the business) or a partnership. You may
Spouses still make an election to be taxed as a qualified joint ven-
ture instead of a partnership. See Exception—Qualified
If you and your spouse jointly own and operate a business joint venture, earlier.
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- 3. Family Employees
nership is considered the employer of any employees,
and is liable for any employment taxes due on wages paid Child employed by parents. Payments for the services
to its employees. 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
Exception—Qualified joint venture. For tax years be- Medicare taxes if the trade or business is a sole proprie-
ginning after 2006, the Small Business and Work Oppor- torship or a partnership in which each partner is a parent
tunity Tax Act of 2007 (Public Law 110-28) provides that a of the child. If these payments are for work other than in a
“qualified joint venture,” whose only members are spou- trade or business, such as domestic work in the parent's
ses filing a joint income tax return, can elect not to be trea- private home, they’re not subject to social security and
ted as a partnership for federal tax purposes. A qualified Medicare taxes until the child reaches age 21. However,
joint venture conducts a trade or business where: see Covered services of a child or spouse, later. Pay-
• The only members of the joint venture are spouses ments for the services of a child under age 21 who works
who file a joint income tax return, 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
• Both spouses materially participate (see Material par- child of any age who works for his or her parent are gener-
ticipation in the Instructions for Schedule C (Form
ally subject to income tax withholding unless the pay-
1040 or 1040-SR), line G) in the trade or business
ments are for domestic work in the parent's home, or un-
(mere joint ownership of property isn't enough),
less the payments are for work other than in a trade or
• Both spouses elect to not be treated as a partnership, business and are less than $50 in the quarter or the child
and isn't regularly employed to do such work.
• The business is co-owned by both spouses and isn't One spouse employed by another. The wages for the
held in the name of a state law entity such as a part- services of an individual who works for his or her spouse
nership or limited liability company (LLC). in a trade or business are subject to income tax withhold-
To make the election, all items of income, gain, loss, ing and social security and Medicare taxes, but not to
deduction, and credit must be divided between the spou- FUTA tax. However, the payments for services of one
ses, in accordance with each spouse's interest in the ven- spouse employed by another in other than a trade or busi-
ture, and reported as sole proprietors on a separate ness, such as domestic service in a private home, aren't
Schedule C (Form 1040 or 1040-SR) or Schedule F (Form subject to social security, Medicare, and FUTA taxes.
1040 or 1040-SR). Each spouse must also file a separate
Schedule SE (Form 1040 or 1040-SR) to pay self-employ- Covered services of a child or spouse. The wages for
ment taxes, as applicable. the services of a child or spouse are subject to income tax
Spouses using the qualified joint venture rules are trea- withholding as well as social security, Medicare, and
ted as sole proprietors for federal tax purposes and gener- FUTA taxes if he or she works for:
ally don't need an EIN. If employment taxes are owed by • A corporation, even if it is controlled by the child's pa-
the qualified joint venture, either spouse may report and rent or the individual's spouse;
pay the employment taxes due on the wages paid to the
employees using the EIN of that spouse's sole proprietor- • A partnership, even if the child's parent is a partner,
ship. Generally, filing as a qualified joint venture won't unless each partner is a parent of the child;

Publication 15 (2020) Page 13

 • A partnership, even if the individual's spouse is a part- W-2, you may owe a penalty unless you have reasonable
ner; or cause. See Pub. 1586, Reasonable Cause Regulations &
Requirements for Missing and Incorrect Name/TINs, for
• An estate, even if it is the estate of a deceased parent.
information on the requirement to solicit the employee's
In these situations, the child or spouse is considered to SSN.
work for the corporation, partnership, or estate, not you.
Applying for a social security card. Any employee
Parent employed by son or daughter. When the em- who is legally eligible to work in the United States and
ployer is a son or daughter employing his or her parent, doesn't have a social security card can get one by com-
the following rules apply. pleting Form SS-5, Application for a Social Security Card,
• Payments for the services of a parent in the son’s or and submitting the necessary documentation. You can get
daughter’s (the employer’s) trade or business are sub- Form SS-5 from the SSA website at SSA.gov/forms/
ject to income tax withholding and social security and ss-5.pdf, at SSA offices, or by calling 800-772-1213 or
Medicare taxes. 800-325-0778 (TTY). The employee must complete and
sign Form SS-5; it can't be filed by the employer. You may
• Payments for the services of a parent not in the son’s be asked to supply a letter to accompany Form SS-5 if the
or daughter’s (the employer’s) trade or business are
employee has exceeded his or her yearly or lifetime limit
generally not subject to social security and Medicare
for the number of replacement cards allowed.
taxes.
Social security and Medicare taxes do apply to Applying for an SSN. If you file Form W-2 on paper and
payments made to a parent for domestic services your employee applied for an SSN but doesn't have one
!
CAUTION if all of the following apply. when you must file Form W-2, enter “Applied For” on the
form. If you’re filing electronically, enter all zeros
• The parent is employed by his or her son or daughter. (000-00-0000 if creating forms online or 000000000 if up-
• The son or daughter (the employer) has a child or loading a file) in the SSN field. When the employee re-
stepchild (including an adopted child) living in the ceives the SSN, file Copy A of Form W-2c, Corrected
home. 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 son or daughter (the employer) is a widow or wid-
ower, divorced and not remarried, or living with a the employee. Up to 25 Forms W-2c for each Form W-3c,
spouse who, because of a mental or physical condi- Transmittal of Corrected Wage and Tax Statements, may
tion, can't care for the child or stepchild for at least 4 be filed per session over the Internet, with no limit on the
continuous weeks in the calendar quarter in which the number of sessions. For more information, visit the SSA's
service is performed. Employer W-2 Filing Instructions & Information webpage
at SSA.gov/employer. Advise your employee to correct
• The child or stepchild is either under age 18 or, due to the SSN on his or her original Form W-2.
a mental or physical condition, requires the personal
care of an adult for at least 4 continuous weeks in the Correctly record the employee's name and SSN. Re-
calendar quarter in which the service is performed. cord the name and SSN of each employee as they’re
shown on the employee's social security card. If the em-
Payments made to a parent employed by his or her ployee's name isn't correct as shown on the card (for ex-
child aren't subject to FUTA tax, regardless of the type of ample, because of marriage or divorce), the employee
services provided. should request an updated card from the SSA. Continue
to report the employee's wages under the old name until
the employee shows you the updated social security card
4. Employee's Social Security with the corrected name.

Number (SSN) 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
You’re required to get each employee's name and SSN the name/SSN reported for the most recently filed Form
and to enter them on Form W-2. This requirement also ap- W-2. It isn't necessary to correct other years if the previ-
plies to resident and nonresident alien employees. You ous name and number were used for years before the
should ask your employee to show you his or her social most recent Form W-2.
security card. The employee may show the card if it is
available. IRS individual taxpayer identification numbers
Don't accept a social security card that says “Not (ITINs) for aliens. Don't accept an ITIN in place of an
valid for employment.” A social security number SSN for employee identification or for work. An ITIN is
!
CAUTION issued with this legend doesn't permit employ- only available to resident and nonresident aliens who
ment. aren't eligible for U.S. employment and need identification
for other tax purposes. You can identify an ITIN because it
You may, but aren't required to, photocopy the social is a nine-digit number, formatted like an SSN, that starts
security card if the employee provides it. If you don't with the number "9" and has a range of numbers from “50–
provide the correct employee name and SSN on Form 65,” “70–88,” “90–92,” and “94–99” for the fourth and fifth

Page 14 Publication 15 (2020)

digits (for example, 9NN-7N-NNNN). For more informa- an employee for cancellation of an employment contract
tion about ITINs, see the Instructions for Form W-7 or go and relinquishment of contract rights are wages subject to
to IRS.gov/ITIN. social security, Medicare, and FUTA taxes and income
tax withholding. Also, compensation paid to a former em-
An individual with an ITIN who later becomes eli-
ployee for services performed while still employed is wa-
! gible to work in the United States must obtain an
CAUTION SSN. If the individual is currently eligible to work
ges subject to employment taxes.
in the United States, instruct the individual to apply for an More information. See section 6 for a discussion of tips
SSN and follow the instructions under Applying for an and section 7 for a discussion of supplemental wages.
SSN, earlier. Don't use an ITIN in place of an SSN on Also, see section 15 for exceptions to the general rules for
Form W-2. wages. Pub. 15-A provides additional information on wa-
ges, including nonqualified deferred compensation, and
Verification of SSNs. Employers and authorized report- other compensation. Pub. 15-B provides information on
ing agents can use the Social Security Number Verifica- other forms of compensation, including:
tion Service (SSNVS) to instantly verify that an employee
name matches an SSN for up to 10 names and SSNs (per • Accident and health benefits,
screen) at a time, or submit an electronic file of up to • Achievement awards,
250,000 names and SSNs and usually receive the results • Adoption assistance,
the next business day. Go to SSA.gov/employer/ssnv.htm
for more information. A person may have a valid SSN but • Athletic facilities,
not be authorized to work in the United States. Employers • De minimis (minimal) benefits,
may use E-Verify at e-verify.gov to confirm the employ-
ment eligibility of newly hired employees. • Dependent care assistance,

Registering for SSNVS. You must register online to • Educational assistance,

use SSNVS. To register, visit the SSA's website at • Employee discounts,
SSA.gov/bso and click on the Register link under Busi- • Employee stock options,
ness Services Online. Follow the registration instructions
to obtain a user identification (ID) and password. You’ll • Employer-provided cell phones,
need to provide the following information about yourself • Group-term life insurance coverage,
and your company.
• Health savings accounts,
• Name.
• Lodging on your business premises,
• SSN.
• Meals,
• Date of birth.
• No-additional-cost services,
• Type of employer.
• Retirement planning services,
• EIN.
• Transportation (commuting) benefits,
• Company name, address, and telephone number.
• Tuition reduction, and
• Email address.
• Working condition benefits.
When you have completed the online registration proc-
ess, the SSA will mail a one-time activation code to you. Employee business expense reimbursements. A re-
You must enter the activation code online to use SSNVS. imbursement or allowance arrangement is a system by
Your employees must receive authorization from you to which you pay the advances, reimbursements, and
use SSNVS. If your employees register, the one-time acti- charges for your employees' business expenses. How you
vation code will be mailed to 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-
5. Wages and Other pense reimbursement, you must specify the amount of the
reimbursement.
Compensation These rules apply to all allowable ordinary and neces-
sary employee business expenses.
Wages subject to federal employment taxes generally in-
Accountable plan. To be an accountable plan, your
clude all pay you give to an employee for services per-
reimbursement or allowance arrangement must require
formed. The pay may be in cash or in other forms. It in-
your employees to meet all three of the following rules.
cludes salaries, vacation allowances, bonuses,
commissions, and taxable fringe benefits. It doesn't matter 1. They must have paid or incurred allowable expenses
how you measure or make the payments. Amounts an while performing services as your employees. The re-
employer pays as a bonus for signing or ratifying a con- imbursement or advance must be payment for the ex-
tract in connection with the establishment of an penses and must not be an amount that would have
employer-employee relationship and an amount paid to otherwise been paid to the employee as wages.

Publication 15 (2020) Page 15

 2. They must substantiate these expenses to you within The government per diem rates for meals and lodging
a reasonable period of time. in the continental United States can be found by visiting
the U.S. General Services Administration website at
3. They must return any amounts in excess of substanti-
GSA.gov/PerDiemRates. Other than the amount of these
ated expenses within a reasonable period of time.
expenses, your employees' business expenses must be
Amounts paid under an accountable plan aren't wages substantiated (for example, the business purpose of the
and aren't subject to income, social security, Medicare, travel or the number of business miles driven). For infor-
and FUTA taxes. mation on substantiation methods, see Pub. 463.
If the expenses covered by this arrangement aren't If the per diem or allowance paid exceeds the amounts
substantiated (or amounts in excess of substantiated ex- substantiated, you must report the excess amount as wa-
penses aren't returned within a reasonable period of time), ges. This excess amount is subject to income tax with-
the amount paid under the arrangement in excess of the holding and payment of social security, Medicare, and
substantiated expenses is treated as paid under a nonac- FUTA taxes. Show the amount equal to the substantiated
countable plan. This amount is subject to income, social amount (that is, the nontaxable portion) in box 12 of Form
security, Medicare, and FUTA taxes for the first payroll pe- W-2 using code “L.”
riod following the end of the reasonable period of time.
A reasonable period of time depends on the facts and Wages not paid in money. If in the course of your trade
circumstances. Generally, it is considered reasonable if or business you pay your employees in a medium that is
your employees receive their advance within 30 days of neither cash nor a readily negotiable instrument, such as
the time they pay or incur the expenses, adequately ac- a check, you’re said to pay them “in kind.” Payments in
count for the expenses within 60 days after the expenses kind may be in the form of goods, lodging, food, clothing,
were paid or incurred, and return any amounts in excess or services. Generally, the fair market value of such pay-
of expenses within 120 days after the expenses were paid ments at the time they’re provided is subject to federal in-
or incurred. Alternatively, it is considered reasonable if come tax withholding and social security, Medicare, and
you give your employees a periodic statement (at least FUTA taxes.
quarterly) that asks them to either return or adequately ac- However, noncash payments for household work, agri-
count for outstanding amounts and they do so within 120 cultural labor, and service not in the employer's trade or
days. business are exempt from social security, Medicare, and
FUTA taxes. Withhold income tax on these payments only
Nonaccountable plan. Payments to your employee if you and the employee agree to do so. Nonetheless,
for travel and other necessary expenses of your business noncash payments for agricultural labor, such as com-
under a nonaccountable plan are wages and are treated modity wages, are treated as cash payments subject to
as supplemental wages and subject to income, social se- employment taxes if the substance of the transaction is a
curity, Medicare, and FUTA taxes. Your payments are cash payment.
treated as paid under a nonaccountable plan if:
Meals and lodging. The value of meals isn't taxable in-
• Your employee isn't required to or doesn't substanti-
come and isn't subject to federal income tax withholding
ate timely those expenses to you with receipts or other
and social security, Medicare, and FUTA taxes if the
documentation,
meals are furnished for the employer's convenience and
• You advance an amount to your employee for busi- on the employer's premises. The value of lodging isn't
ness expenses and your employee isn't required to or subject to federal income tax withholding and social se-
doesn't return timely any amount he or she doesn't curity, Medicare, and FUTA taxes if the lodging is fur-
use for business expenses, nished for the employer's convenience, on the employer's
• You advance or pay an amount to your employee re- premises, and as a condition of employment.
gardless of whether you reasonably expect the em- “For the convenience of the employer” means you have
ployee to have business expenses related to your a substantial business reason for providing the meals and
business, or lodging other than to provide additional compensation to
the employee. For example, meals you provide at the
• You pay an amount as a reimbursement you would place of work so that an employee is available for emer-
have otherwise paid as wages. gencies during his or her lunch period are generally con-
See section 7 for more information on supplemental sidered to be for your convenience. You must be able to
wages. show these emergency calls have occurred or can rea-
sonably be expected to occur, and that the calls have re-
Per diem or other fixed allowance. You may reim- sulted, or will result, in you calling on your employees to
burse your employees by travel days, miles, or some perform their jobs during their meal period.
other fixed allowance under the applicable revenue proce- Whether meals or lodging are provided for the conven-
dure. In these cases, your employee is considered to have ience of the employer depends on all of the facts and cir-
accounted to you if your reimbursement doesn't exceed cumstances. A written statement that the meals or lodging
rates established by the federal government. The stand- are for your convenience isn't sufficient.
ard mileage rate for auto expenses is provided in Pub.
15-B. 50% test. If over 50% of the employees who are pro-
vided meals on an employer's business premises receive

Page 16 Publication 15 (2020)

these meals for the convenience of the employer, all see Revenue Ruling 2009-11, 2009-18 I.R.B. 896, availa-
meals provided on the premises are treated as furnished ble at IRS.gov/irb/2009-18_IRB#RR-2009-11.
for the convenience of the employer. If this 50% test is
met, the value of the meals is excludable from income for Fringe benefits. You generally must include fringe bene-
all employees and isn't subject to federal income tax with- fits in an employee's wages (but see Nontaxable fringe
holding or employment taxes. For more information, see benefits next). The benefits are subject to income tax
Pub. 15-B. withholding and employment taxes. Fringe benefits in-
clude cars you provide, flights on aircraft you provide, free
Health insurance plans. If you pay the cost of an acci- or discounted commercial flights, vacations, discounts on
dent or health insurance plan for your employees, includ- property or services, memberships in country clubs or
ing an employee's spouse and dependents, your pay- other social clubs, and tickets to entertainment or sporting
ments aren't wages and aren't subject to social security, events. In general, the amount you must include is the
Medicare, and FUTA taxes, or federal income tax with- amount by which the fair market value of the benefit is
holding. Generally, this exclusion also applies to qualified more than the sum of what the employee paid for it plus
long-term care insurance contracts. However, for income any amount the law excludes. There are other special
tax withholding, the value of health insurance benefits rules you and your employees may use to value certain
must be included in the wages of S corporation employ- fringe benefits. See Pub. 15-B for more information.
ees who own more than 2% of the S corporation (2%
Nontaxable fringe benefits. Some fringe benefits
shareholders). For social security, Medicare, and FUTA
aren't taxable (or are minimally taxable) if certain condi-
taxes, the health insurance benefits are excluded from the
tions are met. See Pub. 15-B for details. The following are
2% shareholder's wages. See Announcement 92-16 for
some examples of nontaxable fringe benefits.
more information. You can find Announcement 92-16 on
page 53 of Internal Revenue Bulletin 1992-5. • Services provided to your employees at no additional
cost to you.
Health savings accounts (HSAs) and medical sav-
ings accounts (MSAs). Your contributions to an em- • Qualified employee discounts.
ployee's HSA or Archer MSA aren't subject to social se- • Working condition fringes that are property or services
curity, Medicare, or FUTA taxes, or federal income tax that would be allowable as a business expense or de-
withholding if it is reasonable to believe at the time of pay- preciation expense deduction to the employee if he or
ment of the contributions they’ll be excludable from the in- she had paid for them. Examples include a company
come of the employee. To the extent it isn't reasonable to car for business use and subscriptions to business
believe they’ll be excludable, your contributions are sub- magazines.
ject to these taxes. Employee contributions to their HSAs
or MSAs through a payroll deduction plan must be inclu- • Certain minimal value fringes (including an occasional
ded in wages and are subject to social security, Medicare, cab ride when an employee must work overtime and
and FUTA taxes and income tax withholding. However, meals you provide at eating places you run for your
HSA contributions made under a salary reduction ar- employees if the meals aren't furnished at below cost).
rangement in a section 125 cafeteria plan aren't wages • Qualified transportation fringes subject to specified
and aren't subject to employment taxes or withholding. conditions and dollar limitations (including transporta-
For more information, see the Instructions for Form 8889. tion in a commuter highway vehicle, any transit pass,
and qualified parking).
Medical care reimbursements. Generally, medical care
reimbursements paid for an employee under an employ- • The use of on-premises athletic facilities operated by
er's self-insured medical reimbursement plan aren't wa- you if substantially all of the use is by employees, their
ges and aren't subject to social security, Medicare, and spouses, and their dependent children.
FUTA taxes, or income tax withholding. See Pub. 15-B for • Qualified tuition reduction an educational organization
a rule regarding inclusion of certain reimbursements in the provides to its employees for education. For more in-
gross income of highly compensated individuals. formation, see Pub. 970.
Differential wage payments. Differential wage pay- • Employer-provided cell phones provided primarily for
ments are any payments made by an employer to an indi- a noncompensatory business reason.
vidual for a period during which the individual is perform- However, don't exclude the following fringe benefits
ing service in the uniformed services while on active duty from the wages of highly compensated employees unless
for a period of more than 30 days and represent all or a the benefit is available to other employees on a nondiscri-
portion of the wages the individual would have received minatory basis.
from the employer if the individual were performing serv-
ices for the employer. • No-additional-cost services.
Differential wage payments are wages for income tax • Qualified employee discounts.
withholding, but aren't subject to social security, Medi-
care, or FUTA taxes. Employers should report differential • Meals provided at an employer-operated eating fa-
cility.
wage payments in box 1 of Form W-2. For more informa-
tion about the tax treatment of differential wage payments, • Reduced tuition for education.

Publication 15 (2020) Page 17

For more information, including the definition of a highly to social security, Medicare, and FUTA taxes. These
compensated employee, see Pub. 15-B. taxes don't apply to sick pay paid more than 6 calendar
months after the last calendar month in which the em-
When taxable fringe benefits are treated as paid.
ployee worked for the employer. The payments are al-
You may choose to treat certain taxable noncash fringe
ways subject to federal income tax. See section 6 of Pub.
benefits as paid by the pay period, by the quarter, or on
15-A for more information.
any other basis you choose, as long as you treat the ben-
efits as paid at least once a year. You don't have to make Identity protection services. The value of identity pro-
a formal choice of payment dates or notify the IRS of the tection services provided by an employer to an employee
dates you choose. You don't have to make this choice for isn't included in an employee's gross income and doesn't
all employees. You may change methods as often as you need to be reported on an information return (such as
like, as long as you treat all benefits provided in a calen- Form W-2) filed for employees. This includes identity pro-
dar year as paid by December 31 of the calendar year. tection services provided before a data breach occurs.
See section 4 of Pub. 15-B for more information, including This exception doesn't apply to cash received instead of
a discussion of the special accounting rule for fringe bene- identity protection services or to proceeds received under
fits provided during November and December. an identity theft insurance policy. For more information,
Valuation of fringe benefits. Generally, you must see Announcement 2015-22, 2015-35 I.R.B. 288, availa-
determine the value of fringe benefits no later than Janu- ble at IRS.gov/irb/2015-35_IRB#ANN-2015-22, and An-
ary 31 of the next year. Before January 31, you may rea- nouncement 2016-02, 2016-3 I.R.B. 283, available at
sonably estimate the value of the fringe benefits for purpo- IRS.gov/irb/2016-03_IRB#ANN-2016-02.
ses of withholding and depositing on time.
Withholding on fringe benefits. You may add the
value of fringe benefits to regular wages for a payroll pe-
6. Tips
riod and figure withholding taxes on the total, or you may
withhold federal income tax on the value of the fringe ben- Cash tips your employee receives from customers are
efits at the optional flat 22% supplemental wage rate. generally subject to withholding. Your employee must re-
However, see Withholding on supplemental wages when port cash tips to you by the 10th of the month after the
an employee receives more than $1 million of supplemen- month the tips are received. Cash tips include tips paid by
tal wages during the calendar year in section 7. cash, check, debit card, and credit card. The report
You may choose not to withhold income tax on the should include tips you paid over to the employee for
value of an employee's personal use of a vehicle you pro- charge customers, tips the employee received directly
vide. You must, however, withhold social security and from customers, and tips received from other employees
Medicare taxes on the use of the vehicle. See Pub. 15-B under any tip-sharing arrangement. Both directly and indi-
for more information on this election. rectly tipped employees must report tips to you. No report
is required for months when tips are less than $20. Your
Depositing taxes on fringe benefits. Once you employee reports the tips on Form 4070 or on a similar
choose when fringe benefits are paid, you must deposit statement. The statement must be signed and dated by
taxes in the same deposit period you treat the fringe bene- the employee and must include:
fits as paid. To avoid a penalty, deposit the taxes following
the general deposit rules for that deposit period.
• The employee's name, address, and SSN;
If you determine by January 31 you overestimated the • Your name and address;
value of a fringe benefit at the time you withheld and de- • The month and year (or the beginning and ending
posited for it, you may claim a refund for the overpayment dates, if the statement is for a period of less than 1
or have it applied to your next employment tax return. See calendar month) the report covers; and
Valuation of fringe benefits, earlier. If you underestimated
the value and deposited too little, you may be subject to a • The total of tips received during the month or period.
failure-to-deposit (FTD) penalty. See section 11 for infor-
mation on deposit penalties. Both Forms 4070 and 4070-A, Employee's Daily Re-
If you deposited the required amount of taxes but with- cord of Tips, are included in Pub. 1244, Employee's Daily
held a lesser amount from the employee, you can recover Record of Tips and Report to Employer.
from the employee the social security, Medicare, or in- You’re permitted to establish a system for elec-
come taxes you deposited on his or her behalf, and inclu- TIP tronic tip reporting by employees. See Regula-
ded in the employee's Form W-2. However, you must re- tions section 31.6053-1(d).
cover the income taxes before April 1 of the following
year. Collecting taxes on tips. You must collect federal in-
come tax, employee social security tax, and employee
Sick pay. In general, sick pay is any amount you pay un-
Medicare tax on the employee's tips. The withholding
der a plan to an employee who is unable to work because
rules for withholding an employee's share of Medicare tax
of sickness or injury. These amounts are sometimes paid
on tips also apply to withholding the Additional Medicare
by a third party, such as an insurance company or an em-
Tax once wages and tips exceed $200,000 in the calen-
ployees' trust. In either case, these payments are subject
dar year.

Page 18 Publication 15 (2020)

 You can collect these taxes from the employee's wages The tips may be allocated by one of three meth-
(excluding tips) or from other funds he or she makes avail- ods—hours worked, gross receipts, or good faith agree-
able. See Tips are treated as supplemental wages in sec- ment. For information about these allocation methods, in-
tion 7 for more information. Stop collecting the employee cluding the requirement to file Forms 8027 electronically if
social security tax when his or her wages and tips for tax 250 or more forms are filed in calendar year 2020, see the
year 2020 reach $137,700; collect the income and em- Instructions for Form 8027. For information on filing Form
ployee Medicare taxes for the whole year on all wages 8027 electronically with the IRS, see Pub. 1239.
and tips. You’re responsible for the employer social secur-
ity tax on wages and tips until the wages (including tips) Tip Rate Determination and Education Program. Em-
reach the limit. You’re responsible for the employer Medi- ployers may participate in the Tip Rate Determination and
care tax for the whole year on all wages and tips. Tips are Education Program. The program primarily consists of two
considered to be paid at the time the employee reports voluntary agreements developed to improve tip income
them to you. Deposit taxes on tips based on your deposit reporting by helping taxpayers to understand and meet
schedule as described in section 11. File Form 941 or their tip reporting responsibilities. The two agreements are
Form 944 to report withholding and employment taxes on the Tip Rate Determination Agreement (TRDA) and the
tips. Tip Reporting Alternative Commitment (TRAC). A tip
agreement, the Gaming Industry Tip Compliance Agree-
Ordering rule. If, by the 10th of the month after the ment (GITCA), is available for the gaming (casino) indus-
month for which you received an employee's report on try. For more information, see Pub. 3144.
tips, you don't have enough employee funds available to
deduct the employee tax, you no longer have to collect it. More information. Advise your employees to see Pub.
If there aren't enough funds available, withhold taxes in 531 or use the IRS Interactive Tax Assistant at IRS.gov/
the following order. TipIncome for help in determining if their tip income is tax-
able and for information about how to report tip income.
1. Withhold on regular wages and other compensation.
2. Withhold social security and Medicare taxes on tips.
3. Withhold income tax on tips. 7. Supplemental Wages
Reporting tips. Report tips and any collected and un- Supplemental wages are wage payments to an employee
collected social security and Medicare taxes on Form W-2 that aren't regular wages. They include, but aren't limited
and on Form 941, lines 5b, 5c, and, if applicable, 5d to, bonuses, commissions, overtime pay, payments for
(Form 944, lines 4b, 4c, and, if applicable, 4d). Report a accumulated sick leave, severance pay, awards, prizes,
negative adjustment on Form 941, line 9 (Form 944, back pay, reported tips, retroactive pay increases, and
line 6), for the uncollected social security and Medicare payments for nondeductible moving expenses. However,
taxes. Enter the amount of uncollected social security tax employers have the option to treat overtime pay and tips
and Medicare tax on Form W-2, box 12, with codes “A” as regular wages instead of supplemental wages. Other
and “B.” Don't include any uncollected Additional Medi- payments subject to the supplemental wage rules include
care Tax in box 12 of Form W-2. For additional informa- taxable fringe benefits and expense allowances paid un-
tion on reporting tips, see section 13 and the General In- der a nonaccountable plan. How you withhold on supple-
structions for Forms W-2 and W-3. mental wages depends on whether the supplemental pay-
Revenue Ruling 2012-18 provides guidance for em- ment is identified as a separate payment from regular
ployers regarding social security and Medicare taxes im- wages. See Regulations section 31.3402(g)-1 for addi-
posed on tips, including information on the reporting of the tional guidance. Also see Revenue Ruling 2008-29,
employer share of social security and Medicare taxes un- 2008-24 I.R.B. 1149, available at IRS.gov/irb/
der section 3121(q), the difference between tips and serv- 2008-24_IRB#RR-2008-29.
ice charges, and the section 45B credit. See Revenue
Ruling 2012-18, 2012-26 I.R.B. 1032, available at Withholding on supplemental wages when an em-
IRS.gov/irb/2012-26_IRB#RR-2012-18. ployee receives more than $1 million of supplemen-
tal wages from you during the calendar year. Special
FUTA tax on tips. If an employee reports to you in writ- rules apply to the extent supplemental wages paid to any
ing $20 or more of tips in a month, the tips are also subject one employee during the calendar year exceed $1 million.
to FUTA tax. If a supplemental wage payment, together with other sup-
plemental wage payments made to the employee during
Allocated tips. If you operate a large food or beverage the calendar year, exceeds $1 million, the excess is sub-
establishment, you must report allocated tips under cer- ject to withholding at 37% (or the highest rate of income
tain circumstances. However, don't withhold income, so- tax for the year). Withhold using the 37% rate without re-
cial security, or Medicare taxes on allocated tips. gard to the employee's Form W-4. In determining supple-
A large food or beverage establishment is one that pro- mental wages paid to the employee during the year, in-
vides food or beverages for consumption on the premises, clude payments from all businesses under common
where tipping is customary, and where there were nor- control. For more information, see Treasury Decision
mally more than 10 employees on a typical business day
during the preceding year.

Publication 15 (2020) Page 19

9276, 2006-37 I.R.B. 423, available at IRS.gov/irb/ Example 1. You pay John Peters a base salary on the
2006-37_IRB#TD-9276. 1st of each month. His most recent Form W-4 is from
2017, and he is single, claims one withholding allowance,
Withholding on supplemental wage payments to an and did not enter an amount for additional withholding on
employee who doesn't receive $1 million of supple- his Form W-4. In January, he is paid $1,000. You decide
mental wages during the calendar year. If the supple- to use the Wage Bracket Method of withholding. Using
mental wages paid to the employee during the calendar Worksheet 3 and the withholding tables in section 3 of
year are less than or equal to $1 million, the following Pub. 15-T, you withhold $32 from this amount. In Febru-
rules apply in determining the amount of income tax to be ary, he receives salary of $1,000 plus a commission of
withheld. $500, which you combine with regular wages and don't
separately identify. You figure the withholding based on
Supplemental wages combined with regular wages. the total of $1,500. The correct withholding from the tables
If you pay supplemental wages with regular wages but is $83.
don't specify the amount of each, withhold federal income
tax as if the total were a single payment for a regular pay- Example 2. You pay Sharon Warren a base salary on
roll period. the 1st of each month. She submitted a 2020 Form W-4
and checked the box that she is Single or Married filing
Supplemental wages identified separately from regu- separately. She did not complete Steps 2, 3, and 4 on her
lar wages. If you pay supplemental wages separately Form W-4. Her May 1 pay is $2,000. You decide to use
(or combine them in a single payment and specify the the Wage Bracket Method of withholding. Using Work-
amount of each), the federal income tax withholding sheet 2 and the withholding tables in section 2 of Pub.
method depends partly on whether you withhold income 15-T, you withhold $99. On May 15, she receives a bonus
tax from your employee's regular wages. of $1,000. Electing to use supplemental wage withholding
1. If you withheld income tax from an employee's regular method 1b, you do the following.
wages in the current or immediately preceding calen- 1. Add the bonus amount to the amount of wages from
dar year, you can use one of the following methods the most recent base salary pay date (May 1) ($2,000
for the supplemental wages. + $1,000 = $3,000).
a. Withhold a flat 22% (no other percentage al- 2. Determine the amount of withholding on the com-
lowed). bined $3,000 amount to be $217 using the wage
b. If the supplemental wages are paid concurrently bracket tables.
with regular wages, add the supplemental wages 3. Subtract the amount withheld from wages on the most
to the concurrently paid regular wages and with- recent base salary pay date (May 1) from the com-
hold federal income tax as if the total were a single bined withholding amount ($217 – $99 = $118).
payment for a regular payroll period. If there are
no concurrently paid regular wages, add the sup- 4. Withhold $118 from the bonus payment.
plemental wages to, alternatively, either the regu-
lar wages paid or to be paid for the current payroll Example 3. The facts are the same as in Example 2,
period or the regular wages paid for the preceding except you elect to use the flat rate method of withholding
payroll period. Figure the income tax withholding on the bonus. You withhold 22% of $1,000, or $220, from
as if the total of the regular wages and supplemen- Sharon's bonus payment.
tal wages is a single payment. Subtract the tax al-
Example 4. The facts are the same as in Example 2,
ready withheld or to be withheld from the regular
except you elect to pay Sharon a second bonus of $2,000
wages. Withhold the remaining tax from the sup-
on May 29. Using supplemental wage withholding method
plemental wages. If there were other payments of
1b, you do the following.
supplemental wages paid during the payroll period
made before the current payment of supplemental 1. Add the first and second bonus amounts to the
wages, aggregate all the payments of supplemen- amount of wages from the most recent base salary
tal wages paid during the payroll period with the pay date (May 1) ($2,000 + $1,000 + $2,000 =
regular wages paid during the payroll period, fig- $5,000).
ure the tax on the total, subtract the tax already
2. Determine the amount of withholding on the com-
withheld from the regular wages and the previous
bined $5,000 amount to be $515 using the wage
supplemental wage payments, and withhold the
bracket tables.
remaining tax.
3. Subtract the amounts withheld from wages on the
2. If you didn't withhold income tax from the employee's
most recent base salary pay date (May 1) and the
regular wages in the current or immediately preceding
amounts withheld from the first bonus payment from
calendar year, use method 1b.
the combined withholding amount ($515 – $99 – $118
Regardless of the method you use to withhold income tax = $298).
on supplemental wages, they’re subject to social security,
4. Withhold $298 from the second bonus payment.
Medicare, and FUTA taxes.

Page 20 Publication 15 (2020)

Tips are treated as supplemental wages. Withhold in-
come tax on tips from wages earned by the employee or
from other funds the employee makes available. Don't
9. Withholding From
withhold the income tax due on tips from employee tips. If
an employee receives regular wages and reports tips, fig-
Employees' Wages
ure income tax withholding as if the tips were supplemen-
tal wages. If you withheld income tax from the regular wa- Income Tax Withholding
ges in the current or immediately preceding calendar year,
The IRS has redesigned Form W-4 for 2020. Em-
you can withhold on the tips by method 1a or 1b dis-
cussed earlier in this section under Supplemental wages
TIP ployees who have submitted Form W-4 in any
year before 2020 aren't required to submit a new
identified separately from regular wages. If you didn’t with-
form merely because of the redesign. See Redesigned
hold income tax from the regular wages in the current or
Form W-4 for 2020, earlier, under What's New. Employer
immediately preceding calendar year, add the tips to the
instructions on how to figure employee withholding are
regular wages and withhold income tax on the total by
provided in Pub. 15-T. You may also use the Income Tax
method 1b discussed earlier. Employers also have the op-
Withholding Assistant for Employers at IRS.gov/ITWA to
tion to treat tips as regular wages rather than supplemen-
help you figure federal income tax withholding.
tal wages. Service charges aren't tips; therefore, withhold
taxes on service charges as you would on regular wages.
Using Form W-4 to figure withholding. To know how
Vacation pay. Vacation pay is subject to withholding as if much federal income tax to withhold from employees' wa-
it were a regular wage payment. When vacation pay is in ges, you should have a Form W-4 on file for each em-
addition to regular wages for the vacation period (for ex- ployee. Encourage your employees to file an updated
ample, an annual lump-sum payment for unused vacation Form W-4 for 2020, especially if they owed taxes or re-
leave), treat it as a supplemental wage payment. If the va- ceived a large refund when filing their 2019 tax return. Ad-
cation pay is for a time longer than your usual payroll pe- vise your employees to use the IRS Tax Withholding Esti-
riod, spread it over the pay periods for which you pay it. mator available at IRS.gov/W4App to determine accurate
withholding.
Ask all new employees to give you a signed Form W-4
8. Payroll Period 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, then how you will treat the em-
Your payroll period is a period of service for which you
ployee depends on when you first paid your employee wa-
usually pay wages. When you have a regular payroll pe-
ges. A new employee who is first paid wages in 2020, in-
riod, withhold income tax for that time period even if your
cluding an employee who previously worked for you and
employee doesn't work the full period.
was rehired in 2020, and who fails to furnish a Form W-4
No regular payroll period. When you don't have a reg- will be treated as if they had checked the box for Single or
ular payroll period, withhold the tax as if you paid wages Married filing separately in Step 1(c) and made no entries
for a daily or miscellaneous payroll period. Figure the in Step 2, Step 3, or Step 4 of the 2020 Form W-4. How-
number of days (including Sundays and holidays) in the ever, an employee who was paid wages in 2019 and who
period covered by the wage payment. If the wages are un- failed to furnish a Form W-4 should continue to be treated
related to a specific length of time (for example, commis- as single and claiming zero allowances on a 2019 Form
sions paid on completion of a sale), count back the num- W-4.
ber of days from the payment period to the latest of: Form in Spanish. You can provide Formulario
• The last wage payment made during the same calen- W-4(SP) in place of Form W-4 to your Spanish-speaking
dar year; employees. For more information, see Pub. 17(SP). The
rules discussed in this section that apply to Form W-4 also
• The date employment began, if during the same cal- apply to Formulario W-4(SP).
endar year; or
Electronic system to receive Form W-4. You may
• January 1 of the same year. establish a system to electronically receive Forms W-4
Employee paid for period less than 1 week. When from your employees. See Regulations section 31.3402(f)
you pay an employee for a period of less than 1 week, and (5)-1(c) for more information.
the employee signs a statement under penalties of perjury Effective date of Form W-4. A Form W-4 for 2019 or
indicating he or she isn't working for any other employer earlier years remains in effect for 2020 until the employee
during the same week for wages subject to withholding, gives you a 2020 Form W-4. When you receive a new
figure withholding based on a weekly payroll period. If the Form W-4 from an employee, don't adjust withholding for
employee later begins to work for another employer for pay periods before the effective date of the new form. If an
wages subject to withholding, the employee must notify employee gives you a Form W-4 that replaces an existing
you within 10 days. You then figure withholding based on Form W-4, begin withholding no later than the start of the
the daily or miscellaneous period. first payroll period ending on or after the 30th day from the
date when you received the replacement Form W-4. For

Publication 15 (2020) Page 21

exceptions, see Exemption from federal income tax with- Step 1(c) and made no entries in Step 2, Step 3, or Step 4
holding, IRS review of requested Forms W-4, and Invalid of the 2020 Form W-4. If the employee provides a new
Forms W-4, later in this section. Form W-4 claiming exemption from withholding on Febru-
ary 16 or later, you may apply it to future wages but don't
A Form W-4 that makes a change for the next cal-
refund any taxes withheld while the exempt status wasn’t
! endar year won't take effect in the current calen-
in place.
CAUTION dar year.
Withholding income taxes on the wages of nonresi-
Successor employer. If you’re a successor employer dent alien employees. In general, you must withhold
(see Successor employer, later in this section), secure federal income taxes on the wages of nonresident alien
new Forms W-4 from the transferred employees unless employees. However, see Pub. 515 for exceptions to this
the “Alternative Procedure” in section 5 of Revenue Pro- general rule. Also see section 3 of Pub. 51 for guidance
cedure 2004-53 applies. See Revenue Procedure on H-2A visa workers.
2004-53, 2004-34 I.R.B. 320, available at IRS.gov/irb/
2004-34_IRB#RP-2004-53. Withholding adjustment for nonresident alien em-
Completing Form W-4. The amount of any federal ployees. You must add an amount to the wages of non-
income tax withholding must be based on filing status, in- resident alien employees performing services within the
come (including income from other jobs), deductions, and United States in order to figure the amount of federal in-
credits. Your employees may not base their withholding come tax to withhold from their wages. The amount is
amounts on a fixed dollar amount or percentage. How- added to their wages solely for calculating federal income
ever, an employee may specify a dollar amount to be with- tax withholding. The amount isn’t included in any box on
held each pay period in addition to the amount of with- the employee's Form W-2 and doesn’t increase the in-
holding based on filing status and other information come tax liability of the employee. The amount also
reported on Form W-4. doesn't increase the social security tax or Medicare tax li-
Employees that are married filing jointly and have spou- ability of the employer or the employee, or the FUTA tax
ses that also currently work, or employees that hold more liability of the employer. See Withholding Adjustment for
than one job at the same time, should account for their Nonresident Alien Employees in section 1 of Pub. 15-T for
higher tax rate by completing Step 2 of their 2020 Form the amount to add to their wages for the payroll period.
W-4. Employees also have the option to report on their Supplemental wage payment. The adjustment for
2020 Form W-4 other income they will receive that isn't determining the amount of income tax withholding for non-
subject to withholding and other deductions they will claim resident alien employees doesn't apply to a supplemental
in order to increase the accuracy of their federal income wage payment (see section 7) if the 37% mandatory flat
tax withholding. rate withholding applies or if the 22% optional flat rate
See Pub. 505 for more information about completing withholding is being used to calculate income tax with-
Form W-4. Along with Form W-4, you may wish to order holding on the supplemental wage payment.
Pub. 505 for use by your employees.
Don't accept any withholding or estimated tax pay- Nonresident alien employee's Form W-4. When com-
ments from your employees in addition to withholding pleting Forms W-4, nonresident aliens are required to:
based on their Form W-4. If they require additional with- • Not claim exemption from income tax withholding;
holding, they should submit a new Form W-4 and, if nec-
essary, pay estimated tax by filing Form 1040-ES or by • Request withholding as if they’re single, regardless of
using EFTPS to make estimated tax payments. Employ- their actual filing status;
ees who receive tips may provide funds to their employer • Not claim the child tax credit or credit for other de-
for withholding on tips; see Collecting taxes on tips in sec- pendents in Step 3 of Form W-4 (if the nonresident
tion 6. alien is a resident of Canada, Mexico, or South Korea,
or a student from India, or a business apprentice from
Exemption from federal income tax withholding.
India, he or she may claim, under certain circumstan-
Generally, an employee may claim exemption from fed-
ces (see Notice 1392), the child tax credit or credit for
eral income tax withholding because he or she had no in-
other dependents); and
come tax liability last year and expects none this year.
See the Form W-4 instructions for more information. How- • Write “Nonresident Alien” or “NRA” in the space below
ever, the wages are still subject to social security and Step 4(c) of Form W-4.
Medicare taxes. See also Invalid Forms W-4, later in this If you maintain an electronic Form W-4 system, you
section. should provide a field for nonresident aliens to enter non-
A Form W-4 claiming exemption from withholding is ef- resident alien status instead of writing “Nonresident Alien”
fective when it is given to the employer and only for that or “NRA” in the space below Step 4(c) of Form W-4. You
calendar year. To continue to be exempt from withholding, should instruct nonresident aliens to see Notice 1392,
an employee must give you a new Form W-4 by February Supplemental Form W-4 Instructions for Nonresident Ali-
15. If the employee doesn't give you a new Form W-4 by ens, before completing Form W-4.
February 15, begin withholding as if he or she had
checked the box for Single or Married filing separately in Form 8233. If a nonresident alien employee claims a
tax treaty exemption from withholding, the employee must

Page 22 Publication 15 (2020)

submit Form 8233 with respect to the income exempt un- you’re still required to furnish the employee copy to the
der the treaty, instead of Form W-4. For more information, employee and withhold based on the notice if any of the
see Pay for Personal Services Performed in the Withhold- following apply.
ing on Specific Income section of Pub. 515 and the In-
• You’re paying wages for the employee's prior services
structions for Form 8233. and the wages are subject to income tax withholding
IRS review of requested Forms W-4. When requested on or after the date specified in the notice.
by the IRS, you must make original Forms W-4 available • You reasonably expect the employee to resume serv-
for inspection by an IRS employee. You may also be di- ices within 12 months of the date of the notice.
rected to send certain Forms W-4 to the IRS. You may re-
ceive a notice from the IRS requiring you to submit a copy
• The employee is on a leave of absence that doesn't
exceed 12 months or the employee has a right to re-
of Form W-4 for one or more of your named employees.
employment after the leave of absence.
Send the requested copy or copies of Form W-4 to the
IRS at the address provided and in the manner directed Termination and rehire of employees. If you must
by the notice. The IRS may also require you to submit furnish and withhold based on the notice and the employ-
copies of Form W-4 to the IRS as directed by a revenue ment relationship is terminated after the date of the notice,
procedure or notice published in the Internal Revenue you must continue to withhold based on the notice if you
Bulletin. When we refer to Form W-4, the same rules ap- continue to pay any wages subject to income tax withhold-
ply to Formulario W-4(SP), its Spanish translation. ing. You must also withhold based on the notice or modifi-
After submitting a copy of a requested Form W-4 to the cation notice (explained next) if the employee resumes
IRS, continue to withhold federal income tax based on the employment relationship with you within 12 months af-
that Form W-4 if it is valid (see Invalid Forms W-4, later in ter the termination of the employment relationship.
this section). However, if the IRS later notifies you in writ-
Modification notice. After issuing the notice specify-
ing that the employee isn't entitled to claim exemption
ing the permitted filing status and providing withholding in-
from withholding or a claimed amount of deductions or
structions, the IRS may issue a subsequent notice (modifi-
credits, withhold federal income tax based on the effective
cation notice) that modifies the original notice. The
date, employee's permitted filing status, and withholding
modification notice may change the permitted filing status
instructions specified in the IRS notice (commonly refer-
and withholding instructions. You must withhold federal in-
red to as a “lock-in letter”).
come tax based on the effective date specified in the
Initial lock-in letter. The IRS uses information repor- modification notice.
ted on Form W-2 to identify employees with withholding
New Form W-4 after IRS notice. After the IRS is-
compliance problems. In some cases, if a serious under-
sues a notice or modification notice, if the employee pro-
withholding problem is found to exist for a particular em-
vides you with a new Form W-4 claiming complete ex-
ployee, the IRS may issue a lock-in letter to the employer
emption from withholding or a completed Form W-4 that
specifying the employee's permitted filing status and pro-
results in less withholding than would result under the IRS
viding withholding instructions for the specific employee.
notice or modification notice, disregard the new Form
You’ll also receive a copy for the employee that identifies
W-4. You must withhold based on the notice or modifica-
the permitted filing status and provides a description of
tion notice unless the IRS notifies you to withhold based
the withholding instructions you’re required to follow and
on the new Form W-4. If the employee wants to put a new
the process by which the employee can provide additional
Form W-4 into effect that results in less withholding than
information to the IRS for purposes of determining the ap-
required, the employee must contact the IRS.
propriate withholding and/or modifying the specified filing
If, after you receive an IRS notice or modification no-
status. You must furnish the employee copy to the em-
tice, your employee gives you a new completed Form W-4
ployee within 10 business days of receipt if the employee
that results in more withholding than would result under
is employed by you as of the date of the notice. You may
the notice or modification notice, you must withhold tax
follow any reasonable business practice to furnish the em-
based on the new Form W-4. Otherwise, disregard any
ployee copy to the employee. Begin withholding based on
subsequent Forms W-4 provided by the employee and
the notice on the date specified in the notice.
withhold based on the IRS notice or modification notice.
Implementation of lock-in letter. When you receive
If, in a year before 2020, you received a lock-in
the notice specifying the permitted filing status and provid-
! letter for an employee, then for 2020 you should
ing withholding instructions, you may not withhold immedi- CAUTION continue to follow the instructions in the lock-in
ately on the basis of the notice. You must begin withhold-
letter. You will use the withholding methods described in
ing tax on the basis of the notice for any wages paid after
Pub. 15-T for an employee with a Form W-4 from 2019 or
the date specified in the notice. The delay between your
earlier. You should continue following the instructions in
receipt of the notice and the date to begin the withholding
the pre-2020 lock-in letter until you receive a letter releas-
on the basis of the notice permits the employee time to
ing your employee from the lock-in procedures, you re-
contact the IRS.
ceive a modification notice, or your employee gives you a
Seasonal employees and employees not currently new Form W-4 that results in more withholding than would
performing services. If you receive a notice for an em- result under the notice.
ployee who isn't currently performing services for you,

Publication 15 (2020) Page 23

 For additional information about employer withholding hospital insurance part is financed by the Medicare tax.
compliance, see IRS.gov/WHC. Each of these taxes is reported separately.

Substitute Forms W-4. You’re encouraged to have your Generally, you’re required to withhold social security
employees use the official version of Form W-4. You may and Medicare taxes from your employees' wages and pay
use a substitute version of Form W-4 to meet your busi- the employer's share of these taxes. Certain types of wa-
ness needs. However, your substitute Form W-4 must ges and compensation aren't subject to social security
contain language that is identical to the official Form W-4 and Medicare taxes. See section 5 and section 15 for de-
and your form must meet all current IRS rules for substi- tails. Generally, employee wages are subject to social se-
tute forms. At the time you provide your substitute form to curity and Medicare taxes regardless of the employee's
the employee, you must provide him or her with all tables, age or whether he or she is receiving social security bene-
instructions, and worksheets from the current Form W-4. fits. If the employee reported tips, see section 6.
You can't accept substitute Forms W-4 developed by Tax rates and the social security wage base limit.
employees. An employee who submits an employee-de- Social security and Medicare taxes have different rates
veloped substitute Form W-4 after October 10, 2007, will and only the social security tax has a wage base limit. The
be treated as failing to furnish a Form W-4. However, con- wage base limit is the maximum wage subject to the tax
tinue to honor any valid employee-developed Forms W-4 for the year. Determine the amount of withholding for so-
you accepted before October 11, 2007. cial security and Medicare taxes by multiplying each pay-
Invalid Forms W-4. Any unauthorized change or addi- ment by the employee tax rate.
tion to Form W-4 makes it invalid. This includes taking out For 2020, the social security tax rate is 6.2% (amount
any language by which the employee certifies the form is withheld) each for the employer and employee (12.4% to-
correct. A Form W-4 is also invalid if, by the date an em- tal). The social security wage base limit is $137,700. The
ployee gives it to you, he or she clearly indicates it is false. tax rate for Medicare is 1.45% (amount withheld) each for
An employee who submits a false Form W-4 may be sub- the employee and employer (2.9% total). There is no
ject to a $500 penalty. You may treat a Form W-4 as inva- wage base limit for Medicare tax; all covered wages are
lid if the employee wrote “exempt” below Step 4(c) and subject to Medicare tax.
checked the box in Step 2(c) or entered numbers for Additional Medicare Tax withholding. In addition to
Steps 3 and 4. withholding Medicare tax at 1.45%, you must withhold a
When you get an invalid Form W-4, don't use it to figure 0.9% Additional Medicare Tax from wages you pay to an
federal income tax withholding. Tell the employee it is in- employee in excess of $200,000 in a calendar year.
valid and ask for another one. If the employee doesn't give You’re required to begin withholding Additional Medicare
you a valid one, then how you will treat the employee de- Tax in the pay period in which you pay wages in excess of
pends on when you first paid wages to the employee. An $200,000 to an employee and continue to withhold it each
employee who was paid wages in 2019 should be treated pay period until the end of the calendar year. Additional
as single and claiming zero allowances on a 2019 Form Medicare Tax is only imposed on the employee. There is
W-4. However, if you have an earlier Form W-4 for this no employer share of Additional Medicare Tax. All wages
employee that is valid, withhold as you did before. An em- that are subject to Medicare tax are subject to Additional
ployee who is first paid wages in 2020, including an em- Medicare Tax withholding if paid in excess of the
ployee who previously worked for you and was rehired in $200,000 withholding threshold.
2020, should be treated as if the employee had checked For more information on what wages are subject to
the box for Single or Married filing separately in Step 1(c) Medicare tax, see section 15. For more information on Ad-
and made no entries in Step 2, Step 3, or Step 4 of the ditional Medicare Tax, go to IRS.gov/ADMT.
2020 Form W-4.
Successor employer. When corporate acquisitions
Amounts exempt from levy on wages, salary, and
meet certain requirements, wages paid by the predeces-
other income. If you receive a Notice of Levy on Wages,
sor are treated as if paid by the successor for purposes of
Salary, and Other Income (Forms 668-W(ACS), 668-W(c)
applying the social security wage base and for applying
(DO), or 668-W(ICS)), you must withhold amounts as de-
the Additional Medicare Tax withholding threshold (that is,
scribed in the instructions for these forms. Pub. 1494 has
$200,000 in a calendar year). You should determine
tables to figure the amount exempt from levy. If a levy is-
whether or not you should file Schedule D (Form 941), Re-
sued in a prior year is still in effect and the taxpayer sub-
port of Discrepancies Caused by Acquisitions, Statutory
mits a new Statement of Exemptions and Filing Status,
Mergers, or Consolidations, by reviewing the Instructions
use the current year Pub. 1494 to figure the exempt
for Schedule D (Form 941). See Regulations section
amount.
31.3121(a)(1)-1(b) for more information. Also see Reve-
nue Procedure 2004-53, 2004-34 I.R.B. 320, available at
Social Security and Medicare Taxes IRS.gov/irb/2004-34_IRB#RP-2004-53.

The Federal Insurance Contributions Act (FICA) provides Example. Early in 2020, you bought all of the assets of
for a federal system of old-age, survivors, disability, and a plumbing business from Mr. Martin. Mr. Brown, who had
hospital insurance. The old-age, survivors, and disability been employed by Mr. Martin and received $2,000 in
insurance part is financed by the social security tax. The wages before the date of purchase, continued to work for

Page 24 Publication 15 (2020)

you. The wages you paid to Mr. Brown are subject to so- Part-Time Workers
cial security taxes on the first $135,700 ($137,700 minus
$2,000). Medicare tax is due on all of the wages you pay Part-time workers and workers hired for short periods of
him during the calendar year. You should include the time are treated the same as full-time employees for fed-
$2,000 Mr. Brown received while employed by Mr. Martin eral income tax withholding and social security, Medicare,
in determining whether Mr. Brown's wages exceed the and FUTA tax purposes.
$200,000 for Additional Medicare Tax withholding thresh-
old. Generally, it doesn't matter whether the part-time
worker or worker hired for a short period of time has an-
Motion picture project employers. All wages paid by a other job or has the maximum amount of social security
motion picture project employer to a motion picture project tax withheld by another employer. See Successor em-
worker during a calendar year are subject to a single so- ployer, earlier, for an exception to this rule.
cial security tax wage base ($137,700 for 2020) and a sin-
gle FUTA tax wage base ($7,000 for 2020) regardless of Income tax withholding may be figured the same way
the worker's status as a common law employee of multiple as for full-time workers or it may be figured by the
clients of the motion picture project employer. For more part-year employment method explained in section 6 of
information, including the definition of a motion picture Pub. 15-T.
project employer and motion picture project worker, see
section 3512.

Withholding social security and Medicare taxes on 10. Required Notice to

nonresident alien employees. In general, if you pay
wages to nonresident alien employees, you must withhold
Employees About the Earned
social security and Medicare taxes as you would for a
U.S. citizen or resident alien. However, see Pub. 515 for
Income Credit (EIC)
exceptions to this general rule. You must notify employees who have no federal income
International social security agreements. The United tax withheld that they may be able to claim a tax refund
States has social security agreements, also known as to- because of the EIC. Although you don't have to notify em-
talization agreements, with many countries that eliminate ployees who claim exemption from withholding on Form
dual taxation and dual coverage. Compensation subject to W-4 about the EIC, you’re encouraged to notify any em-
social security and Medicare taxes may be exempt under ployees whose wages for 2019 were less than $50,162
one of these agreements. You can get more information ($55,952 if married filing jointly) that they may be eligible
and a list of agreement countries from the SSA at to claim the credit for 2019. This is because eligible em-
SSA.gov/international. Also see Pub. 519, U.S. Tax Guide ployees may get a refund of the amount of the EIC that is
for Aliens. more than the tax they owe.

Religious exemption. An exemption from social secur- You’ll meet this notification requirement if you issue the
ity and Medicare taxes is available to members of a recog- employee Form W-2 with the EIC notice on the back of
nized religious sect opposed to insurance. This exemption Copy B, or a substitute Form W-2 with the same state-
is available only if both the employee and the employer ment. You’ll also meet the requirement by providing No-
are members of the sect. For more information, see Pub. tice 797, Possible Federal Tax Refund Due to the Earned
517. Income Credit (EIC), or your own statement that contains
the same wording.
Foreign persons treated as American employers.
Under section 3121(z), a foreign person who meets both If a substitute for Form W-2 is given to the employee on
of the following conditions is generally treated as an time but doesn't have the required statement, you must
American employer for purposes of paying FICA taxes on notify the employee within 1 week of the date the substi-
wages paid to an employee who is a U.S. citizen or resi- tute for Form W-2 is given. If Form W-2 is required but isn't
dent. given on time, you must give the employee Notice 797 or
your written statement by the date Form W-2 is required to
1. The foreign person is a member of a domestically be given. If Form W-2 isn't required, you must notify the
controlled group of entities. employee by February 7, 2020.
2. The employee of the foreign person performs serv-
ices in connection with a contract between the U.S.
Government (or an instrumentality of the U.S. Govern- 11. Depositing Taxes
ment) and any member of the domestically controlled
group of entities. Ownership of more than 50% consti- Generally, you must deposit federal income tax withheld
tutes control. and both the employer and employee social security and
Medicare taxes. You must use EFT to make all federal tax
deposits. See How To Deposit, later in this section, for in-
formation on electronic deposit requirements.

Publication 15 (2020) Page 25

 The credit against employment taxes for COBRA rules for Forms 944 and 945, later. Also see Application of
TIP assistance payments is treated as a deposit of Monthly and Semiweekly Schedules, later in this section.
taxes on the first day of your return period. See
These rules don't apply to FUTA tax. See section
COBRA premium assistance credit under Introduction,
! 14 for information on depositing FUTA tax.
earlier, for more information. CAUTION

Payment with return. You may make a payment with a Lookback period. If you’re a Form 941 filer, your de-
timely filed Form 941 or Form 944 instead of depositing, posit schedule for a calendar year is determined from the
without incurring a penalty, if one of the following applies. total taxes reported on Forms 941, line 12, in a 4-quarter
• You’re a monthly schedule depositor (defined later) lookback period. The lookback period begins July 1 and
and make a payment in accordance with the Accuracy ends June 30 as shown next in Table 1. If you reported
of Deposits Rule, discussed later in this section. This $50,000 or less of taxes for the lookback period, you’re a
payment may be $2,500 or more. monthly schedule depositor; if you reported more than
$50,000, you’re a semiweekly schedule depositor.
• Your Form 941 total tax liability for either the current
quarter or the prior quarter is less than $2,500, and Table 1. Lookback Period for Calendar Year
you didn't incur a $100,000 next-day deposit obliga- 2020
tion during the current quarter. If you aren't sure your
total tax liability for the current quarter will be less than July 1, 2018, Oct. 1, 2018, Jan. 1, 2019, Apr. 1, 2019,
$2,500 (and your liability for the prior quarter wasn't through through through through
less than $2,500), make deposits using the semi- Sept. 30, 2018 Dec. 31, 2018 Mar. 31, 2019 June 30, 2019
weekly or monthly rules so you won't be subject to an
FTD penalty. The lookback period for a 2020 Form 941 filer
! who filed Form 944 in either 2018 or 2019 is cal-
• Your Form 944 net tax liability for the year is less than CAUTION endar year 2018.
$2,500.
If you’re a Form 944 filer for the current year or either of
• Your Form 944 net tax liability for the year is $2,500 or the preceding 2 years, your deposit schedule for a calen-
more and you already deposited the taxes you owed dar year is determined from the total taxes reported during
for the first, second, and third quarters of the year; the second preceding calendar year (either on your Form
your net tax for the fourth quarter is less than $2,500; 941 for all 4 quarters of that year or your Form 944 for that
and you're paying, in full, the tax you owe for the fourth year). The lookback period for 2020 for a Form 944 filer is
quarter with a timely filed return. calendar year 2018. If you reported $50,000 or less of
taxes for the lookback period, you’re a monthly schedule
Separate deposit requirements for nonpayroll (Form
depositor; if you reported more than $50,000, you’re a
945) tax liabilities. Separate deposits are required for
semiweekly schedule depositor.
nonpayroll and payroll income tax withholding. Don't com-
If you’re a Form 945 filer, your deposit schedule for a
bine deposits for Forms 941 (or Form 944) and Form 945
calendar year is determined from the total taxes reported
tax liabilities. Generally, the deposit rules for nonpayroll li-
on line 3 of your Form 945 for the second preceding cal-
abilities are the same as discussed next, except the rules
endar year. The lookback period for 2020 for a Form 945
apply to an annual rather than a quarterly return period. If
filer is calendar year 2018.
the total amount of tax for the year reported on Form 945
is less than $2,500, you're not required to make deposits Adjustments and the lookback rule. Adjustments
during the year. See the separate Instructions for Form made on Form 941-X, Form 944-X, and Form 945-X don't
945 for more information. affect the amount of tax liability for previous periods for
purposes of the lookback rule.
When To Deposit Example. An employer originally reported a tax liabil-
There are two deposit schedules—monthly and semi- ity of $45,000 for the lookback period. The employer dis-
weekly—for determining when you deposit social security, covered, during January 2020, that the tax reported for
Medicare, and withheld federal income taxes. These one of the lookback period quarters was understated by
schedules tell you when a deposit is due after a tax liability $10,000 and corrected this error by filing Form 941-X.
arises. Your tax liability is based on the dates payments This employer is a monthly schedule depositor for 2020
were made or wages were paid. For taxable noncash because the lookback period tax liabilities are based on
fringe benefits, see When taxable fringe benefits are trea- the amounts originally reported, and they were $50,000 or
ted as paid in section 5. Before the beginning of each cal- less. The $10,000 adjustment is also not treated as part of
endar year, you must determine which of the two deposit the 2020 taxes.
schedules you’re required to use. The deposit schedule Deposit period. The term “deposit period” refers to the
you must use is based on the total tax liability you repor- period during which tax liabilities are accumulated for
ted on Form 941 during a lookback period, discussed each required deposit due date. For monthly schedule de-
next. Your deposit schedule isn't determined by how often positors, the deposit period is a calendar month. The de-
you pay your employees or make deposits. See special posit periods for semiweekly schedule depositors are

Page 26 Publication 15 (2020)

Wednesday through Friday and Saturday through Tues- Semiweekly deposit period spanning two quarters
day. (Form 941 filers). If you have more than one pay date
during a semiweekly period and the pay dates fall in differ-
If you're an agent with an approved Form 2678,
ent calendar quarters, you’ll need to make separate de-
TIP the deposit rules apply to you based on the total
posits for the separate liabilities.
employment taxes accumulated by you for your
own employees and on behalf of all employers for whom Example. If you have a pay date on Wednesday,
you're authorized to act. For more information on an agent September 30, 2020 (third quarter), and another pay date
with an approved Form 2678, see Revenue Procedure on Thursday, October 1, 2020 (fourth quarter), two sepa-
2013-39, 2013-52 I.R.B. 830, available at IRS.gov/irb/ rate deposits would be required even though the pay
2013-52_IRB#RP-2013-39. dates fall within the same semiweekly period. Both depos-
its would be due Wednesday, October 7, 2020.
Monthly Deposit Schedule Semiweekly deposit period spanning two return peri-
ods (Form 944 or Form 945 filers). The period covered
You’re a monthly schedule depositor for a calendar year if
by a return is the return period. The return period for an-
the total taxes on Form 941, line 12, for the 4 quarters in
nual Forms 944 and 945 is a calendar year. If you have
your lookback period were $50,000 or less. Under the
more than one pay date during a semiweekly period and
monthly deposit schedule, deposit employment taxes on
the pay dates fall in different return periods, you'll need to
payments made during a month by the 15th day of the fol-
make separate deposits for the separate liabilities. For ex-
lowing month. See also Deposits Due on Business Days
ample, if you have a pay date on Wednesday, December
Only and the $100,000 Next-Day Deposit Rule, later in
30, 2020, and another pay date on Friday, January 1,
this section. Monthly schedule depositors shouldn't file
2021, two separate deposits will be required even though
Form 941 or Form 944 on a monthly basis.
the pay dates fall within the same semiweekly period.
New employers. Your tax liability for any quarter in the Both deposits will be due Wednesday, January 6, 2021 (3
lookback period before you started or acquired your busi- business days from the end of the semiweekly deposit pe-
ness is considered to be zero. Therefore, you’re a monthly riod).
schedule depositor for the first calendar year of your busi-
ness. However, see the $100,000 Next-Day Deposit Rule, Summary of Steps to Determine Your Deposit Schedule
later in this section. 1. Identify your lookback period (see Lookback period, earlier in
this section).
2. Add the total taxes you reported on Form 941, line 12, during
Semiweekly Deposit Schedule the lookback period.
3. Determine if you’re a monthly or semiweekly schedule
You’re a semiweekly schedule depositor for a calendar depositor:
year if the total taxes on Form 941, line 12, during your
lookback period were more than $50,000. Under the semi- IF the total taxes you THEN you’re a . . . . . . . . .
reported in the lookback
weekly deposit schedule, deposit employment taxes for
period were . . . . . . . . . . .
payments made on Wednesday, Thursday, and/or Friday
by the following Wednesday. Deposit taxes for payments $50,000 or less monthly schedule depositor.
made on Saturday, Sunday, Monday, and/or Tuesday by more than $50,000 semiweekly schedule
the following Friday. See also Deposits Due on Business depositor.
Days Only, later in this section.
Semiweekly schedule depositors must complete
Schedule B (Form 941), Report of Tax Liability for Example of Monthly and Semiweekly
!
CAUTION Semiweekly Schedule Depositors, and submit it Schedules
with Form 941. If you file Form 944 or Form 945 and are a
semiweekly schedule depositor, complete Form 945-A, Rose Co. reported Form 941 taxes as follows:
Annual Record of Federal Tax Liability, and submit it with
2019 Lookback Period 2020 Lookback Period
your return (instead of Schedule B).
3rd Quarter 2017 $12,000 3rd Quarter 2018 $12,000
4th Quarter 2017 12,000 4th Quarter 2018 12,000
Table 2. Semiweekly Deposit Schedule 1st Quarter 2018 12,000 1st Quarter 2019 12,000
2nd Quarter 2018 12,000 2nd Quarter 2019 15,000
IF the payday falls on a . . . THEN deposit taxes by the $48,000 $51,000
following . . .
Wednesday, Thursday, and/or Wednesday. Rose Co. is a monthly schedule depositor for 2019 be-
Friday
cause its tax liability for the 4 quarters in its lookback pe-
Saturday, Sunday, Monday, Friday. riod (third quarter 2017 through second quarter 2018)
and/or Tuesday wasn't more than $50,000. However, for 2020, Rose Co.
is a semiweekly schedule depositor because the total

Publication 15 (2020) Page 27

taxes exceeded $50,000 for the 4 quarters in its lookback ges each Friday during May but didn't pay any wages dur-
period (third quarter 2018 through second quarter 2019). ing June. Under the monthly deposit schedule, Spruce
Co. must deposit the combined tax liabilities for the May
Deposits Due on Business Days Only paydays by June 15. Spruce Co. doesn't have a deposit
requirement for June (due by July 15) because no wages
If a deposit is required to be made on a day that isn't a were paid and, therefore, it didn't have a tax liability for
business day, the deposit is considered timely if it is made June.
by the close of the next business day. A business day is
any day other than a Saturday, Sunday, or legal holiday. Semiweekly schedule example. Green, Inc., is a semi-
For example, if a deposit is required to be made on a Fri- weekly schedule depositor and pays wages once each
day and Friday is a legal holiday, the deposit will be con- month on the last Friday of the month. Although Green,
sidered timely if it is made by the following Monday (if that Inc., has a semiweekly deposit schedule, it will deposit
Monday is a business day). just once a month because it pays wages only once a
month. The deposit, however, will be made under the
Semiweekly schedule depositors have at least 3 semiweekly deposit schedule as follows: Green, Inc.'s tax
business days following the close of the semiweekly pe- liability for the April 24, 2020 (Friday), payday must be de-
riod to make a deposit. If any of the 3 weekdays after the posited by April 29, 2020 (Wednesday). Under the semi-
end of a semiweekly period is a legal holiday, you’ll have weekly deposit schedule, liabilities for wages paid on
an additional day for each day that is a legal holiday to Wednesday through Friday must be deposited by the fol-
make the required deposit. For example, if a semiweekly lowing Wednesday.
schedule depositor accumulated taxes for payments
made on Friday and the following Monday is a legal holi- $100,000 Next-Day Deposit Rule
day, the deposit normally due on Wednesday may be
made on Thursday (this allows 3 business days to make If you accumulate $100,000 or more in taxes on any day
the deposit). during a monthly or semiweekly deposit period (see De-
posit period, earlier in this section), you must deposit the
Legal holiday. The term “legal holiday” means any legal tax by the next business day, whether you’re a monthly or
holiday in the District of Columbia. For purposes of the de- semiweekly schedule depositor.
posit rules, the term “legal holiday” doesn't include other
statewide legal holidays. Legal holidays for 2020 are listed For purposes of the $100,000 rule, don't continue accu-
next. mulating a tax liability after the end of a deposit period.
For example, if a semiweekly schedule depositor has ac-
• January 1—New Year's Day
cumulated a liability of $95,000 on a Tuesday (of a Satur-
• January 20—Birthday of Martin Luther King, Jr. day-through-Tuesday deposit period) and accumulated a
• February 17—Washington's Birthday $10,000 liability on Wednesday, the $100,000 next-day
deposit rule doesn't apply because the $10,000 is accu-
• April 16—District of Columbia Emancipation Day mulated in the next deposit period. Thus, $95,000 must be
• May 25—Memorial Day deposited by Friday and $10,000 must be deposited by
the following Wednesday.
• July 3—Independence Day (observed)
• September 7—Labor Day However, once you accumulate at least $100,000 in a
deposit period, stop accumulating at the end of that day
• October 12—Columbus Day
and begin to accumulate anew on the next day. For exam-
• November 11—Veterans Day ple, Fir Co. is a semiweekly schedule depositor. On Mon-
• November 26—Thanksgiving Day day, Fir Co. accumulates taxes of $110,000 and must de-
posit this amount on Tuesday, the next business day. On
• December 25—Christmas Day Tuesday, Fir Co. accumulates additional taxes of
$30,000. Because the $30,000 isn't added to the previous
Application of Monthly and Semiweekly $110,000 and is less than $100,000, Fir Co. must deposit
Schedules the $30,000 by Friday (following the semiweekly deposit
schedule).
The terms “monthly schedule depositor” and “semiweekly
schedule depositor” don't refer to how often your business If you’re a monthly schedule depositor and accu-
pays its employees or even how often you’re required to ! mulate a $100,000 tax liability on any day during
CAUTION the deposit period, you become a semiweekly
make deposits. The terms identify which set of deposit
rules you must follow when an employment tax liability ari- schedule depositor on the next day and remain so for at
ses. The deposit rules are based on the dates when wa- least the rest of the calendar year and for the following
ges are paid (cash basis), not on when tax liabilities are calendar year.
accrued for accounting purposes.
Example. Elm, Inc., started its business on May 4,
Monthly schedule example. Spruce Co. is a monthly 2020. On Wednesday, May 6, it paid wages for the first
schedule depositor with seasonal employees. It paid wa- time and accumulated a tax liability of $40,000. On Friday,

Page 28 Publication 15 (2020)

May 8, Elm, Inc., paid wages and accumulated a liability range for your tax professional, financial institution, payroll
of $60,000, bringing its total accumulated tax liability to service, or other trusted third party to make electronic de-
$100,000. Because this was the first year of its business, posits on your behalf. EFTPS is a free service provided by
the tax liability for its lookback period is considered to be the Department of the Treasury. To get more information
zero, and it would be a monthly schedule depositor based about EFTPS or to enroll in EFTPS, visit EFTPS.gov, or
on the lookback rules. However, since Elm, Inc., accumu- call 800-555-4477 or 800-733-4829 (TDD). Additional in-
lated a $100,000 liability on May 8, it became a semi- formation about EFTPS is also available in Pub. 966.
weekly schedule depositor on May 9. It will be a semi-
When you receive your EIN. If you’re a new em-
weekly schedule depositor for the remainder of 2020 and
ployer that indicated a federal tax obligation when re-
for 2021. Elm, Inc., is required to deposit the $100,000 by
questing an EIN, you’ll be pre-enrolled in EFTPS. You’ll
Monday, May 11, the next business day.
receive information about Express Enrollment in your Em-
ployer Identification Number (EIN) Package and an addi-
Accuracy of Deposits Rule tional mailing containing your EFTPS personal identifica-
tion number (PIN) and instructions for activating your PIN.
You’re required to deposit 100% of your tax liability on or
Call the toll-free number located in your “How to Activate
before the deposit due date. However, penalties won't be
Your Enrollment” brochure to activate your enrollment and
applied for depositing less than 100% if both of the follow-
begin making your payroll tax deposits. If you outsource
ing conditions are met.
any of your payroll and related tax duties to a third-party
• Any deposit shortfall doesn't exceed the greater of payer, such as a payroll service provider (PSP) or report-
$100 or 2% of the amount of taxes otherwise required ing agent, be sure to tell them about your EFTPS enroll-
to be deposited. ment.
• The deposit shortfall is paid or deposited by the short- Deposit record. For your records, an EFT Trace
fall makeup date as described next. Number will be provided with each successful payment.
The number can be used as a receipt or to trace the pay-
Makeup Date for Deposit Shortfall: ment.
1. Monthly schedule depositor. Deposit the shortfall Depositing on time. For deposits made by EFTPS to
or pay it with your return by the due date of your return be on time, you must submit the deposit by 8 p.m. Eastern
for the return period in which the shortfall occurred. time the day before the date the deposit is due. If you use
You may pay the shortfall with your return even if the a third party to make a deposit on your behalf, they may
amount is $2,500 or more. have different cutoff times.
2. Semiweekly schedule depositor. Deposit by the Same-day wire payment option. If you fail to submit
earlier of: a deposit transaction on EFTPS by 8 p.m. Eastern time
a. The first Wednesday or Friday (whichever comes the day before the date a deposit is due, you can still
first) that falls on or after the 15th day of the month make your deposit on time by using the Federal Tax Col-
following the month in which the shortfall occur- lection Service (FTCS) to make a same-day wire pay-
red, or ment. To use the same-day wire payment method, you’ll
need to make arrangements with your financial institution
b. The due date of your return (for the return period ahead of time. Please check with your financial institution
of the tax liability). regarding availability, deadlines, and costs. Your financial
For example, if a semiweekly schedule depositor has a institution may charge you a fee for payments made this
deposit shortfall during June 2020, the shortfall makeup way. To learn more about the information you’ll need to
date is July 15, 2020 (Wednesday). However, if the short- give to your financial institution to make a same-day wire
fall occurred on the required April 1, 2020 (Wednesday), payment, go to IRS.gov/SameDayWire.
deposit due date for a March 27, 2020 (Friday), pay date,
the return due date for the March 27, 2020, pay date (April How to claim credit for overpayments. If you depos-
30, 2020) would come before the May 15, 2020 (Friday), ited more than the right amount of taxes for a quarter, you
shortfall makeup date. In this case, the shortfall must be can choose on Form 941 for that quarter (or on Form 944
deposited by April 30, 2020. for that year) to have the overpayment refunded or applied
as a credit to your next return. Don't ask EFTPS to request
a refund from the IRS for you.
How To Deposit
You must deposit employment taxes, including Form 945
Deposit Penalties
taxes, by EFT. See Payment with return, earlier in this Although the deposit penalties information provi-
section, for exceptions explaining when taxes may be TIP ded next refers specifically to Form 941, these
paid with the tax return instead of being deposited. rules also apply to Form 945 and Form 944. The
penalties won't apply if the employer qualifies for the ex-
Electronic deposit requirement. You must use EFT to ceptions to the deposit requirements discussed under
make all federal tax deposits. Generally, an EFT is made Payment with return, earlier in this section).
using EFTPS. If you don't want to use EFTPS, you can ar-

Publication 15 (2020) Page 29

Penalties may apply if you don't make required deposits make the deposit on May 15. On June 15, Cedar, Inc., de-
on time or if you make deposits for less than the required posits $2,000. Under the deposits rule, which applies de-
amount. The penalties don't apply if any failure to make a posits to the most recent tax liability, $1,500 of the deposit
proper and timely deposit was due to reasonable cause is applied to the June 15 deposit and the remaining $500
and not to willful neglect. If you receive a penalty notice, is applied to the May deposit. Accordingly, $500 of the
you can provide an explanation of why you believe rea- May 15 liability remains undeposited. The penalty on this
sonable cause exists. underdeposit will apply as explained earlier.
If you timely filed your employment tax return, the IRS Trust fund recovery penalty. If federal income, social
may also waive deposit penalties if you inadvertently security, or Medicare taxes that must be withheld (that is,
failed to deposit and it was the first quarter that you were trust fund taxes) aren't withheld or aren't deposited or paid
required to deposit any employment tax, or if you inadver- to the U.S. Treasury, the trust fund recovery penalty may
tently failed to deposit the first time after your deposit fre- apply. The penalty is 100% of the unpaid trust fund tax. If
quency changed. You must also meet the net worth and these unpaid taxes can't be immediately collected from
size limitations applicable to awards of administrative and the employer or business, the trust fund recovery penalty
litigation costs under section 7430; for individuals, this may be imposed on all persons who are determined by
means that your net worth can't exceed $2 million, and for the IRS to be responsible for collecting, accounting for, or
businesses, your net worth can't exceed $7 million and paying over these taxes, and who acted willfully in not do-
you also can't have more than 500 employees. ing so.
The IRS may also waive the deposit penalty the first A responsible person can be an officer or employee
time you're required to make a deposit if you inadvertently of a corporation, a partner or employee of a partnership,
send the payment to the IRS rather than deposit it by EFT. an accountant, a volunteer director/trustee, or an em-
ployee of a sole proprietorship, or any other person or en-
For amounts not properly or timely deposited, the pen- tity that is responsible for collecting, accounting for, or
alty rates are as follows. paying over trust fund taxes. A responsible person also
may include one who signs checks for the business or
Penalty Charged for... otherwise has authority to cause the spending of business
2% Deposits made 1 to 5 days late. funds.
5% Deposits made 6 to 15 days late.
Willfully means voluntarily, consciously, and intention-
ally. A responsible person acts willfully if the person
10% Deposits made 16 or more days late, but before 10 days from knows the required actions of collecting, accounting for, or
the date of the first notice the IRS sent asking for the tax due.
paying over trust fund taxes aren't taking place, or reck-
10% Amounts that should have been deposited, but instead were lessly disregards obvious and known risks to the govern-
paid directly to the IRS, or paid with your tax return. But see ment's right to receive trust fund taxes.
Payment with return, earlier in this section, for exceptions.
15% Amounts still unpaid more than 10 days after the date of the Separate accounting when deposits aren't made or
first notice the IRS sent asking for the tax due or the day on withheld taxes aren't paid. Separate accounting may
which you received notice and demand for immediate be required if you don't pay over withheld employee social
payment, whichever is earlier. security, Medicare, or income taxes; deposit required
taxes; make required payments; or file tax returns. In this
Late deposit penalty amounts are determined using case, you would receive written notice from the IRS re-
calendar days, starting from the due date of the liability. quiring you to deposit taxes into a special trust account for
the U.S. Government.
Special rule for former Form 944 filers. If you filed
Form 944 for the prior year and file Forms 941 for the cur- You may be charged with criminal penalties if you
rent year, the FTD penalty won't apply to a late deposit of ! don't comply with the special bank deposit re-
employment taxes for January of the current year if the CAUTION quirements for the special trust account for the

taxes are deposited in full by March 15 of the current year. U.S. Government.

Order in which deposits are applied. Deposits gener- “Averaged” FTD penalty. The IRS may assess an
ally are applied to the most recent tax liability within the "averaged" FTD penalty of 2% to 10% if you’re a monthly
quarter. If you receive an FTD penalty notice, you may schedule depositor and didn't properly complete Form
designate how your deposits are to be applied in order to 941, line 16, when your tax liability shown on Form 941,
minimize the amount of the penalty if you do so within 90 line 12, equaled or exceeded $2,500.
days of the date of the notice. Follow the instructions on The IRS may also assess an "averaged" FTD penalty of
the penalty notice you received. For more information on 2% to 10% if you’re a semiweekly schedule depositor and
designating deposits, see Revenue Procedure 2001-58. your tax liability shown on Form 941, line 12, equaled or
You can find Revenue Procedure 2001-58 on page 579 of exceeded $2,500 and you:
Internal Revenue Bulletin 2001-50 at IRS.gov/pub/irs-irbs/
irb01-50.pdf. • Completed Form 941, line 16, instead of Schedule B
(Form 941);
Example. Cedar, Inc., is required to make a deposit
of $1,000 on May 15 and $1,500 on June 15. It doesn't

Page 30 Publication 15 (2020)

 • Failed to attach a properly completed Schedule B
(Form 941); or
12. Filing Form 941 or Form
• Improperly completed Schedule B (Form 941) by, for
example, entering tax deposits instead of tax liabilities 944
in the numbered spaces.
The FTD penalty is figured by distributing your total tax Form 941. If you paid wages subject to income tax with-
liability shown on Form 941, line 12, equally throughout holding (including withholding on sick pay and supple-
the tax period. Then we apply your deposits and pay- mental unemployment benefits) or social security and
ments to the averaged liabilities in the date order we re- Medicare taxes, you must file Form 941 quarterly even if
ceived your deposits. We figure the penalty on any tax not you have no taxes to report, unless you filed a final return,
deposited, deposited late, or not deposited in the correct you receive an IRS notification that you’re eligible to file
amounts. Your deposits and payments may not be coun- Form 944, or the exceptions discussed later apply. Also, if
ted as timely because the actual dates of your tax liabili- you’re required to file Forms 941 but believe your employ-
ties can't be accurately determined. ment taxes for the calendar year will be $1,000 or less,
You can avoid an "averaged" FTD penalty by reviewing and you would like to file Form 944 instead of Forms 941,
your return before you file it. Follow these steps before you must contact the IRS during the first calendar quarter
submitting your Form 941. of the tax year to request to file Form 944. You must re-
ceive written notice from the IRS to file Form 944 instead
• If you’re a monthly schedule depositor, report your tax of Forms 941 before you may file this form. For more infor-
liabilities (not your deposits) in the monthly entry mation on requesting to file Form 944, including the meth-
spaces on Form 941, line 16. ods and deadlines for making a request, see the Instruc-
• If you’re a semiweekly schedule depositor, report your tions for Form 944. Form 941 must be filed by the last day
tax liabilities (not your deposits) on Schedule B (Form of the month that follows the end of the quarter. See the
941) in the lines that represent the dates your employ- Calendar, earlier.
ees were paid.
Form 944. If you receive written notification that you
• Verify your total liability shown on Form 941, line 16, qualify for the Form 944 program, you must file Form 944
or the bottom of Schedule B (Form 941) equals your instead of Form 941. You must file Form 944 even if you
tax liability shown on Form 941, line 12. have no taxes to report (or you have taxes in excess of
• Don't show negative amounts on Form 941, line 16, or $1,000 to report) unless you filed a final return for the prior
Schedule B (Form 941). year. If you received notification to file Form 944, but pre-
fer to file Form 941, you can request to have your filing re-
• For prior period errors, don't adjust your tax liabilities quirement changed to Form 941 during the first calendar
reported on Form 941, line 16, or on Schedule B quarter of the tax year. For more information on request-
(Form 941). Instead, file an adjusted return (Form ing to file Forms 941, including the methods and dead-
941-X, 944-X, or 945-X) if you’re also adjusting your lines for making a request, see the Instructions for Form
tax liability. If you’re only adjusting your deposits in re- 944. File your 2019 Form 944 by January 31, 2020. How-
sponse to an FTD penalty notice, see the Instructions ever, if you timely deposited all taxes when due, you may
for Schedule B (Form 941) or the Instructions for Form file by February 10, 2020.
945-A (for Forms 944 and 945).
In addition to civil penalties, you may be subject Exceptions. The following exceptions apply to the filing
to criminal prosecution (brought to trial) for will- requirements for Forms 941 and 944.
!
CAUTION fully: • Seasonal employers who don't have to file a
• Evading tax; Form 941 for quarters when they have no tax lia-
bility because they have paid no wages. To alert
• Failing to collect or truthfully account for and pay over the IRS you won't have to file a return for one or more
tax; quarters during the year, check the “Seasonal em-
• Failing to file a return, supply information, or pay any ployer” box on Form 941, line 18. When you fill out
tax due; Form 941, be sure to check the box on the top of the
form that corresponds to the quarter reported. Gener-
• Furnishing a false or fraudulent Form W-2 to employ- ally, the IRS won't inquire about unfiled returns if at
ees or failing to furnish Form W-2; least one taxable return is filed each year. However,
• Committing fraud and providing false statements; you must check the “Seasonal employer” box on ev-
ery Form 941 you file. Otherwise, the IRS will expect a
• Preparing and filing a fraudulent return; or return to be filed for each quarter.
• Committing identity theft. • Household employers reporting social security
and Medicare taxes and/or withheld income tax. If
you file Form 941 or Form 944 for business employ-
ees, you may include taxes for household employees

Publication 15 (2020) Page 31

 on your Form 941 or Form 944. Otherwise, report so- duced from 0.5% per month to 0.25% per month if an in-
cial security and Medicare taxes and income tax with- stallment agreement is in effect. You must have filed your
holding for household employees on Schedule H return on or before the due date of the return to qualify for
(Form 1040 or 1040-SR). See Pub. 926 for more infor- the reduced penalty. The maximum amount of the FTP
mation. penalty is also 25% of the tax due. If both penalties apply
in any month, the FTF penalty is reduced by the amount of
• Employers reporting wages for employees in
the FTP penalty. The penalties won't be charged if you
American Samoa, Guam, the Commonwealth of
have a reasonable cause for failing to file or pay. If you re-
the Northern Mariana Islands, the U.S. Virgin Is-
ceive a penalty notice, you can provide an explanation of
lands, or Puerto Rico. If your employees aren't sub-
why you believe reasonable cause exists.
ject to U.S. income tax withholding, use Forms
941-SS, 944, or Formulario 944(SP). Employers in Pu- Note. In addition to any penalties, interest accrues
erto Rico use Formularios 941-PR, 944(SP), or Form from the due date of the tax on any unpaid balance.
944. If you have both employees who are subject to If income, social security, or Medicare taxes that must
U.S. income tax withholding and employees who be withheld aren't withheld or aren't paid, you may be per-
aren't subject to U.S. income tax withholding, you sonally liable for the trust fund recovery penalty. See Trust
must file only Form 941 (or Form 944 or Formulario fund recovery penalty in section 11.
944(SP)) and include all of your employees' wages on Generally, the use of a third-party payer, such as a PSP
that form. For more information, see Pub. 80, Federal or reporting agent, doesn't relieve an employer of the re-
Tax Guide for Employers in U.S. Virgin Islands, Guam, sponsibility to ensure tax returns are filed and all taxes are
American Samoa, and the Commonwealth of the paid or deposited correctly and on time. However, see
Northern Mariana Islands, or Pub. 179, Guía Contribu- Certified professional employer organization (CPEO),
tiva Federal para Patronos Puertorriqueños. later, for an exception.
• Agricultural employers reporting social security,
Medicare, and withheld income taxes. Report Don't file more than one Form 941 per quarter or
these taxes on Form 943. For more information, see more than one Form 944 per year. Employers with
Pub. 51. multiple locations or divisions must file only one Form 941
per quarter or one Form 944 per year. Filing more than
E-file. The IRS e-file program allows a taxpayer to elec- one return may result in processing delays and may re-
tronically file Form 941 or Form 944 using a computer with quire correspondence between you and the IRS. For infor-
an Internet connection and commercial tax preparation mation on making adjustments to previously filed returns,
software. For more information, go to IRS.gov/ see section 13.
EmploymentEfile, or call 866-255-0654.
Reminders about filing.
Electronic filing by reporting agents. Reporting • Don't report more than 1 calendar quarter on a Form
agents filing Form 940, 941, or 944 for groups of taxpay- 941.
ers can file them electronically. For details, see Pub.
3112, IRS e-file Application and Participation. For informa- • If you need Form 941 or Form 944, go to IRS.gov/
tion on electronic filing of Forms 940, 941, and 944, see Forms. Also see Ordering Employer Tax Forms, In-
Revenue Procedure 2007-40, 2007-26 I.R.B. 1488, avail- structions, and Publications, earlier.
able at IRS.gov/irb/2007-26_IRB#RP-2007-40. For infor- • Enter your name and EIN on Form 941 or Form 944.
mation on the different types of third-party payer arrange- Be sure they’re exactly as they appeared on earlier re-
ments, see section 16. turns.
Electronic filing by CPEOs. With the exception of the • See the Instructions for Form 941 or the Instructions
first quarter for which a CPEO is certified, CPEOs are re- for Form 944 for information on preparing the form.
quired to electronically file Form 941. Under certain cir-
cumstances, the IRS may waive the electronic filing re- Final return. If you go out of business, you must file a fi-
quirement. To request a waiver, the CPEO must file a nal return for the last quarter (last year for Form 944) in
written request using the IRS Online Registration System which wages are paid. If you continue to pay wages or
for Professional Employer Organizations at least 45 days other compensation for periods following termination of
before the due date of the return for which the CPEO is your business, you must file returns for those periods. See
unable to electronically file. For more information on filing the Instructions for Form 941 or the Instructions for Form
a waiver request electronically, go to IRS.gov/CPEO. 944 for details on how to file a final return.
If you’re required to file a final return, you’re also re-
Penalties. For each whole or part month a return isn't quired to furnish Forms W-2 to your employees and file
filed when required, there is a failure-to-file (FTF) penalty Forms W-2 and W-3 with the SSA by the due date of your
of 5% of the unpaid tax due with that return. The maximum final return. Don't send an original or copy of your Form
penalty is generally 25% of the tax due. Also, for each 941 or Form 944 to the SSA. See the General Instructions
whole or part month the tax is paid late, there is a fail- for Forms W-2 and W-3 for more information.
ure-to-pay (FTP) penalty of 0.5% per month of the amount
of tax. For individual filers only, the FTP penalty is re-

Page 32 Publication 15 (2020)

Filing late returns for previous years. If possible, get a. Federal income tax withheld.
a copy of Form 941 or Form 944 (and separate instruc-
b. Social security and Medicare wages.
tions) with a revision date showing the year for which your
delinquent return is being filed. See Ordering Employer c. Social security and Medicare taxes. Generally, the
Tax Forms, Instructions, and Publications, earlier. Contact amounts shown on Forms 941 or annual Form
the IRS at 800-829-4933 if you have any questions about 944, including current year adjustments, should
filing late returns. be approximately twice the amounts shown on
Form W-3 because Form 941 and Form 944 re-
Table 3. Social Security and Medicare Tax port both the employer and employee social se-
Rates (for 3 Prior Years) curity and Medicare taxes while Form W-3 reports
only the employee taxes.
Tax Rate on Don't report backup withholding or withholding on non-
Wage Base Limit Taxable Wages
payroll payments, such as pensions, annuities, and gam-
Calendar Year (each employee) and Tips
bling winnings, on Form 941 or Form 944. Withholding on
2019—Social Security $132,900 12.4% nonpayroll payments is reported on Forms 1099 or W-2G
2019—Medicare All Wages 2.9% and must be reported on Form 945. Only taxes and with-
holding reported on Form W-2 should be reported on
2018—Social Security $128,400 12.4%
Form 941 or Form 944.
2018—Medicare All Wages 2.9% Amounts reported on Forms W-2, W-3, and Forms 941
2017—Social Security $127,200 12.4% or Form 944 may not match for valid reasons. For exam-
ple, if you withheld any Additional Medicare Tax from your
2017—Medicare All Wages 2.9%
employee’s wages, the amount of Medicare tax that is re-
ported on Forms 941, line 5c, column 2, or Form 944,
Reconciling Forms W-2, W-3, and 941 or 944. When line 4c, column 2, won’t be twice the amount of the Medi-
there are discrepancies between Forms 941 or Form 944 care tax withheld that is reported in box 6 of Form W-3 be-
filed with the IRS and Forms W-2 and W-3 filed with the cause the Additional Medicare Tax is only imposed on the
SSA, the IRS or the SSA may contact you to resolve the employee; there is no employer share of Additional Medi-
discrepancies. care Tax. Make sure there are valid reasons for any mis-
Take the following steps to help reduce discrepancies. match. Keep your reconciliation so you’ll have a record of
1. Report bonuses as wages and as social security and why amounts didn't match in case there are inquiries from
Medicare wages on Forms W-2 and on Form 941 or the IRS or the SSA. See the Instructions for Schedule D
Form 944. (Form 941) if you need to explain any discrepancies that
were caused by an acquisition, statutory merger, or con-
2. Report both social security and Medicare wages and
solidation.
taxes separately on Forms W-2 and W-3, and on
Form 941 or Form 944.
3. Report the employee share of social security taxes on
Form W-2 in the box for social security tax withheld
13. Reporting Adjustments to
(box 4), not as social security wages. Form 941 or Form 944
4. Report the employee share of Medicare taxes on
Form W-2 in the box for Medicare tax withheld Current Period Adjustments
(box 6), not as Medicare wages.
In certain cases, amounts reported as social security and
5. Make sure the social security wage amount for each
Medicare taxes on Form 941, lines 5a–5d, column 2
employee doesn't exceed the annual social security
(Form 944, lines 4a–4d, column 2), must be adjusted to
wage base limit ($137,700 for 2020).
arrive at your correct tax liability (for example, excluding
6. Don't report noncash wages that aren't subject to so- amounts withheld by a third-party payer or amounts you
cial security or Medicare taxes, as discussed earlier in weren't required to withhold). Current period adjustments
Wages not paid in money in section 5, as social se- are reported on Form 941, lines 7–9, or Form 944, line 6,
curity or Medicare wages. and include the following types of adjustments.
7. If you used an EIN on any Form 941 or Form 944 for Fractions-of-cents adjustment. If there is a small dif-
the year that is different from the EIN reported on ference between total taxes after adjustments and credits
Form W-3, enter the other EIN on Form W-3 in the (Form 941, line 12; Form 944, line 9) and total deposits
box for “Other EIN used this year” (box h). (Form 941, line 13; Form 944, line 10), it may have been
8. Be sure the amounts on Form W-3 are the total of caused, all or in part, by rounding to the nearest cent each
amounts from Forms W-2. time you figured payroll. This rounding occurs when you
figure the amount of social security and Medicare tax to
9. Reconcile Form W-3 with your four quarterly Forms be withheld and deposited from each employee's wages.
941 or annual Form 944 by comparing amounts The IRS refers to rounding differences relating to
reported for the following items.

Publication 15 (2020) Page 33

employee withholding of social security and Medicare Adjustment of tax on group-term life insurance pre-
taxes as “fractions-of-cents” adjustments. If you pay your miums paid for former employees. The employee
taxes with Form 941 (or Form 944) instead of making de- share of social security and Medicare taxes for premiums
posits because your total taxes for the quarter (year for on group-term life insurance over $50,000 for a former
Form 944) are less than $2,500, you may also report a employee is paid by the former employee with his or her
fractions-of-cents adjustment. tax return and isn't collected by the employer. However,
To determine if you have a fractions-of-cents adjust- include all social security and Medicare taxes for such
ment for 2020, multiply the total wages and tips for the coverage on Form 941, lines 5a and 5c (Form 944, lines
quarter subject to: 4a and 4c). If the amount paid for an employee for premi-
ums on group-term life insurance combined with other wa-
• Social security tax reported on Form 941 or Form 944
ges exceeds $200,000 for the calendar year, report the
by 6.2% (0.062),
Additional Medicare Tax on Form 941, line 5d (Form 944,
• Medicare tax reported on Form 941 or Form 944 by line 4d). Back out the amount of the employee share of
1.45% (0.0145), and these taxes as a negative adjustment on Form 941, line 9
• Additional Medicare Tax reported on Form 941 or (Form 944, line 6). See Pub. 15-B for more information on
Form 944 by 0.9% (0.009). group-term life insurance.
Compare these amounts (the employee share of social Example. Cedar, Inc., filed Form 941 and was entitled
security and Medicare taxes) with the total social security to the following current period adjustments.
and Medicare taxes actually withheld from employees and
shown in your payroll records for the quarter (Form 941) • Fractions of cents. Cedar, Inc., determined the
amounts withheld and deposited for social security
or the year (Form 944). If there is a small difference, the
and Medicare taxes during the quarter were a net
amount, positive or negative, may be a fractions-of-cents
$1.44 more than the employee share of the amount
adjustment. Fractions-of-cents adjustments are reported
figured on Form 941, lines 5a–5d, column 2 (social se-
on Form 941, line 7, or Form 944, line 6. If the actual
curity and Medicare taxes). This difference was
amount withheld is less, report a negative adjustment us-
caused by adding or dropping fractions of cents when
ing a minus sign (if possible; otherwise, use parentheses)
figuring social security and Medicare taxes for each
in the entry space. If the actual amount is more, report a
wage payment. Cedar, Inc., must report a positive
positive adjustment.
$1.44 fractions-of-cents adjustment on Form 941,
For the above adjustments, prepare and retain a line 7.
TIP brief supporting statement explaining the nature
and amount of each. Don't attach the statement to • Third-party sick pay. Cedar, Inc., included taxes of
$2,000 for sick pay on Form 941, lines 5a and 5c, col-
Form 941 or Form 944.
umn 2, for social security and Medicare taxes. How-
ever, the third-party payer of the sick pay withheld and
Adjustment of tax on third-party sick pay. Report both paid the employee share ($1,000) of these taxes. Ce-
the employer and employee share of social security and dar, Inc., is entitled to a $1,000 sick pay adjustment
Medicare taxes for sick pay on Form 941, lines 5a and 5c (negative) on Form 941, line 8.
(Form 944, lines 4a and 4c). If the aggregate wages paid
for an employee by the employer and third-party payer ex- • Life insurance premiums. Cedar, Inc., paid
ceed $200,000 for the calendar year, report the Additional group-term life insurance premiums for policies in ex-
Medicare Tax on Form 941, line 5d (Form 944, line 4d). cess of $50,000 for former employees. The former
Show as a negative adjustment on Form 941, line 8 (Form employees must pay the employee share of the social
944, line 6), the social security and Medicare taxes with- security and Medicare taxes ($200) on the policies.
held on sick pay by a third-party payer. See section 6 of However, Cedar, Inc., must include the employee
Pub. 15-A for more information. share of these taxes with the social security and Medi-
care taxes reported on Form 941, lines 5a and 5c, col-
Adjustment of tax on tips. If, by the 10th of the month umn 2. Therefore, Cedar, Inc., is entitled to a negative
after the month you received an employee's report on tips, $200 adjustment on Form 941, line 9.
you don't have enough employee funds available to with-
hold the employee's share of social security and Medicare No change to record of federal tax liability. Don't
taxes, you no longer have to collect it. However, report the make any changes to your record of federal tax liability re-
entire amount of these tips on Form 941, lines 5b and 5c ported on Form 941, line 16, or Schedule B (Form 941)
(Form 944, lines 4b and 4c). If the aggregate wages and (for Form 944 filers, Form 944, line 13, or Form 945-A) for
tips paid for an employee exceed $200,000 for the calen- current period adjustments. The amounts reported on the
dar year, report the Additional Medicare Tax on Form 941, record reflect the actual amounts you withheld from em-
line 5d (Form 944, line 4d). Include as a negative adjust- ployees' wages for social security and Medicare taxes.
ment on Form 941, line 9 (Form 944, line 6), the total un- Because the current period adjustments make the
collected employee share of the social security and Medi- amounts reported on Form 941, lines 5a–5d, column 2
care taxes. (Form 944, lines 4a–4d, column 2), equal the actual

Page 34 Publication 15 (2020)

amounts you withheld (the amounts reported on the re- process or the claim process. See the Instructions for
cord), no additional changes to the record of federal tax li- Form 941-X or the Instructions for Form 944-X for details
ability are necessary for these adjustments. on how to make the adjustment or claim for refund or
abatement.
Prior Period Adjustments Income tax withholding adjustments. In a current cal-
Forms for prior period adjustments. Use Form 941-X endar year, correct prior quarter income tax withholding
or Form 944-X to make a correction after you discover an errors by making the correction on Form 941-X when you
error on a previously filed Form 941 or Form 944. There discover the error.
are also Forms 943-X, 945-X, and CT-1 X to report cor- You may make an adjustment only to correct income
rections on the corresponding returns. Use Form 843 tax withholding errors discovered during the same calen-
when requesting a refund or abatement of assessed inter- dar year in which you paid the wages. This is because the
est or penalties. employee uses the amount shown on Form W-2 or, if ap-
plicable, Form W-2c, as a credit when filing his or her in-
See Revenue Ruling 2009-39, 2009-52 I.R.B. come tax return (Form 1040, etc.).
TIP 951, for examples of how the interest-free adjust- You can't adjust amounts reported as income tax with-
ment and claim for refund rules apply in 10 differ- held in a prior calendar year unless it is to correct an ad-
ent situations. You can find Revenue Ruling 2009-39 at ministrative error or section 3509 applies. An administra-
IRS.gov/irb/2009-52_IRB#RR-2009-39. tive error occurs if the amount you entered on Form 941 or
Form 944 isn't the amount you actually withheld. For ex-
Background. Treasury Decision 9405 changed the ample, if the total income tax actually withheld was incor-
process for making interest-free adjustments to employ- rectly reported on Form 941 or Form 944 due to a mathe-
ment taxes reported on Form 941 and Form 944 and for matical or transposition error, this would be an
filing a claim for refund of employment taxes. Treasury administrative error. The administrative error adjustment
Decision 9405, 2008-32 I.R.B. 293, is available at corrects the amount reported on Form 941 or Form 944 to
IRS.gov/irb/2008-32_IRB#TD-9405. You’ll use the adjust- agree with the amount actually withheld from employees
ment process if you underreported employment taxes and and reported on their Forms W-2.
are making a payment, or if you overreported employment
taxes and will be applying the credit to the Form 941 or Additional Medicare Tax withholding adjustments.
Form 944 period during which you file Form 941-X or Generally, the rules discussed above under Income tax
Form 944-X. You’ll use the claim process if you overrepor- withholding adjustments apply to Additional Medicare Tax
ted employment taxes and are requesting a refund or withholding adjustments. That is, you may make an ad-
abatement of the overreported amount. We use the terms justment to correct Additional Medicare Tax withholding
“correct” and “corrections” to include interest-free adjust- errors discovered during the same calendar year in which
ments under sections 6205 and 6413, and claims for re- you paid wages. You can't adjust amounts reported in a
fund and abatement under sections 6402, 6414, and prior calendar year unless it is to correct an administrative
6404. error or section 3509 applies. If you have overpaid Addi-
tional Medicare Tax, you can't file a claim for refund for
Correcting employment taxes. When you discover an the amount of the overpayment unless the amount wasn't
error on a previously filed Form 941 or Form 944, you actually withheld from the employee's wages (which
must: would be an administrative error).
If a prior year error was a nonadministrative error, you
• Correct that error using Form 941-X or Form 944-X,
may correct only the wages and tips subject to Addi-
• File a separate Form 941-X or Form 944-X for each tional Medicare Tax withholding.
Form 941 or Form 944 you’re correcting, and
Collecting underwithheld taxes from employees. If
• File Form 941-X or Form 944-X separately. Don't file you withheld no income, social security, or Medicare
with Form 941 or Form 944.
taxes or less than the correct amount from an employee's
Report current quarter adjustments for fractions of wages, you can make it up from later pay to that em-
cents, third-party sick pay, tips, and group-term life insur- ployee. But you’re the one who owes the underpayment.
ance on Form 941 using lines 7–9, and on Form 944 using Reimbursement is a matter for settlement between you
line 6. See Current Period Adjustments, earlier and the employee. Underwithheld income tax and Addi-
Report the correction of underreported and overrepor- tional Medicare Tax must be recovered from the em-
ted amounts for the same tax period on a single Form ployee on or before the last day of the calendar year.
941-X or Form 944-X unless you’re requesting a refund. If There are special rules for tax on tips (see section 6) and
you’re requesting a refund and are correcting both under- fringe benefits (see section 5).
reported and overreported amounts, file one Form 941-X
or Form 944-X correcting the underreported amounts only Refunding amounts incorrectly withheld from em-
and a second Form 941-X or Form 944-X correcting the ployees. If you withheld more than the correct amount of
overreported amounts. income, social security, or Medicare taxes from wages
See the chart on the back of Form 941-X or Form paid, repay or reimburse the employee the excess. Any
944-X for help in choosing whether to use the adjustment excess income tax or Additional Medicare Tax withholding

Publication 15 (2020) Page 35

must be repaid or reimbursed to the employee before the Employee reporting of repayment. The wages paid
end of the calendar year in which it was withheld. Keep in in error in the prior year remain taxable to the employee
your records the employee's written receipt showing the for that year. This is because the employee received and
date and amount of the repayment or record of reimburse- had use of those funds during that year. The employee
ment. If you didn't repay or reimburse the employee, you isn't entitled to file an amended return (Form 1040-X) to
must report and pay each excess amount when you file recover the income tax on these wages. Instead, the em-
Form 941 for the quarter (or Form 944 for the year) in ployee may be entitled to a deduction or credit for the re-
which you withheld too much tax. paid wages on his or her income tax return for the year of
repayment. However, the employee should file an amen-
Correcting filed Forms W-2 and W-3. When adjust- ded return (Form 1040-X) to recover any Additional Medi-
ments are made to correct wages and social security and care Tax paid on the wages paid in error in the prior year.
Medicare taxes because of a change in the wage totals If an employee asks about reporting their wage repay-
reported for a previous year, you also need to file Form ment, you may tell the employee to see Repayments in
W-2c and Form W-3c with the SSA. Up to 25 Forms W-2c Pub. 525 for more information.
per Form W-3c may be filed per session over the Internet,
with no limit on the number of sessions. For more informa-
tion, visit the SSA's Employer W-2 Filing Instructions & In-
formation webpage at SSA.gov/employer.
14. Federal Unemployment
Exceptions to interest-free corrections of employ- (FUTA) Tax
ment taxes. A correction won't be eligible for inter-
est-free treatment if: The Federal Unemployment Tax Act (FUTA), with state
unemployment systems, provides for payments of unem-
• The failure to report relates to an issue raised in an ployment compensation to workers who have lost their
IRS examination of a prior return, or jobs. Most employers pay both a federal and a state un-
• The employer knowingly underreported its employ- employment tax. For a list of state unemployment agen-
ment tax liability. cies, visit the U.S. Department of Labor’s website at
oui.doleta.gov/unemploy/agencies.asp. Only the em-
A correction won't be eligible for interest-free treatment ployer pays FUTA tax; it isn't withheld from the employ-
after the earlier of the following. ee's wages. For more information, see the Instructions for
• Receipt of an IRS notice and demand for payment af- Form 940.
ter assessment. Services rendered to a federally recognized In-
• Receipt of an IRS notice of determination under sec- TIP dian tribal government (or any subdivision, sub-
tion 7436. sidiary, or business wholly owned by such an In-
dian tribe) are exempt from FUTA tax, subject to the
Wage Repayments tribe's compliance with state law. For more information,
see section 3309(d) and Pub. 4268.
If an employee repays you for wages received in error,
don't offset the repayments against current year wages Who must pay? Use the following three tests to deter-
unless the repayments are for amounts received in error in mine whether you must pay FUTA tax. Each test applies
the current year. to a different category of employee, and each is independ-
ent of the others. If a test describes your situation, you’re
Repayment of current year wages. If you receive re- subject to FUTA tax on the wages you pay to employees
payments for wages paid during a prior quarter in the cur- in that category during the current calendar year.
rent year, report adjustments on Form 941-X to recover in-
come tax withholding and social security and Medicare 1. General test.
taxes for the repaid wages. You’re subject to FUTA tax in 2020 on the wages
you pay employees who aren't farmworkers or house-
Repayment of prior year wages. If you receive repay- hold workers if:
ments for wages paid during a prior year, report an adjust- a. You paid wages of $1,500 or more in any calendar
ment on Form 941-X or Form 944-X to recover the social quarter in 2019 or 2020, or
security and Medicare taxes. You can't make an adjust-
ment for income tax withholding because the wages were b. You had one or more employees for at least some
income to the employee for the prior year. You can't make part of a day in any 20 or more different weeks in
an adjustment for Additional Medicare Tax withholding 2019 or 20 or more different weeks in 2020.
because the employee determines liability for Additional 2. Household employees test.
Medicare Tax on the employee's income tax return for the You’re subject to FUTA tax if you paid total cash
prior year. wages of $1,000 or more to household employees in
You must also file Forms W-2c and W-3c with the SSA any calendar quarter in 2019 or 2020. A household
to correct social security and Medicare wages and taxes. employee is an employee who performs household
Don't correct wages (box 1) on Form W-2c for the amount
paid in error. Give a copy of Form W-2c to the employee.

Page 36 Publication 15 (2020)

 work in a private home, local college club, or local fra- If your FUTA tax liability for any calendar quarter is
ternity or sorority chapter. $500 or less, you don't have to deposit the tax. Instead,
you may carry it forward and add it to the liability figured in
3. Farmworkers test.
the next quarter to see if you must make a deposit. If your
You’re subject to FUTA tax on the wages you pay
FUTA tax liability for any calendar quarter is over $500 (in-
to farmworkers if:
cluding any FUTA tax carried forward from an earlier quar-
a. You paid cash wages of $20,000 or more to farm- ter), you must deposit the tax by EFT. See section 11 for
workers during any calendar quarter in 2019 or more information on EFT.
2020, or
Household employees. You’re not required to de-
b. You employed 10 or more farmworkers during at posit FUTA taxes for household employees unless you re-
least some part of a day (whether or not at the port their wages on Form 941, 943, or 944. See Pub. 926
same time) during any 20 or more different weeks for more information.
in 2019 or 20 or more different weeks in 2020.
When to deposit. Deposit the FUTA tax by the last
Figuring FUTA tax. For 2020, the FUTA tax rate is day of the first month that follows the end of the quarter. If
6.0%. The tax applies to the first $7,000 you pay to each the due date for making your deposit falls on a Saturday,
employee as wages during the year. The $7,000 is the Sunday, or legal holiday, you may make your deposit on
federal wage base. Your state wage base may be differ- the next business day. See Legal holiday, earlier, for a list
ent. of the legal holidays for 2020.
Generally, you can take a credit against your FUTA tax If your liability for the fourth quarter (plus any undepos-
for amounts you paid into state unemployment funds. The ited amount from any earlier quarter) is over $500, deposit
credit may be as much as 5.4% of FUTA taxable wages. If the entire amount by the due date of Form 940 (January
you’re entitled to the maximum 5.4% credit, the FUTA tax 31). If it is $500 or less, you can make a deposit, pay the
rate after credit is 0.6%. You’re entitled to the maximum tax with a credit or debit card, or pay the tax with your
credit if you paid your state unemployment taxes in full, on 2019 Form 940 by January 31, 2020. If you file Form 940
time, and on all the same wages as are subject to FUTA electronically, you can e-file and use EFW to pay the bal-
tax, and as long as the state isn't determined to be a credit ance due. For more information on paying your taxes with
reduction state. See the Instructions for Form 940 to de- a credit or debit card or using EFW, go to IRS.gov/
termine the credit. Payments.
In some states, the wages subject to state unemploy-
ment tax are the same as the wages subject to FUTA tax. Table 4. When To Deposit FUTA Taxes
However, certain states exclude some types of wages
Quarter Ending Due Date
from state unemployment tax, even though they’re subject
to FUTA tax (for example, wages paid to corporate offi- Jan.–Feb.–Mar. Mar. 31 Apr. 30
cers, certain payments of sick pay by unions, and certain Apr.–May–June June 30 July 31
fringe benefits). In such a case, you may be required to July–Aug.–Sept. Sept. 30 Oct. 31
deposit more than 0.6% FUTA tax on those wages. See Oct.–Nov.–Dec. Dec. 31 Jan. 31
the Instructions for Form 940 for further guidance.
Reporting FUTA tax. Use Form 940 to report FUTA tax.
In years when there are credit reduction states,
File your 2019 Form 940 by January 31, 2020. However, if
TIP you must include liabilities owed for credit reduc- you deposited all FUTA tax when due, you may file on or
tion with your fourth quarter deposit. You may de-
before February 10, 2020.
posit the anticipated extra liability throughout the year, but
it isn't due until the due date for the deposit for the fourth Form 940 e-file. The Form 940 e-file program allows
quarter, and the associated liability should be recorded as a taxpayer to electronically file Form 940 using a com-
being incurred in the fourth quarter. See the Instructions puter with an Internet connection and commercial tax
for Form 940 for more information. preparation software. For more information, visit the IRS
website at IRS.gov/EmploymentEfile, or call
Successor employer. If you acquired a business 866-255-0654.
from an employer who was liable for FUTA tax, you may
be able to count the wages that employer paid to the em- Household employees. If you didn't report employ-
ployees who continue to work for you when you figure the ment taxes for household employees on Form 941, 943,
$7,000 FUTA tax wage base. See the Instructions for or 944, report FUTA tax for these employees on Sched-
Form 940. ule H (Form 1040 or 1040-SR). See Pub. 926 for more in-
formation. You must have an EIN to file Schedule H (Form
Depositing FUTA tax. For deposit purposes, figure 1040 or 1040-SR).
FUTA tax quarterly. Determine your FUTA tax liability by Electronic filing by reporting agents. Reporting
multiplying the amount of taxable wages paid during the agents filing Forms 940 for groups of taxpayers can file
quarter by 0.6%. Stop depositing FUTA tax on an employ- them electronically. See the Electronic filing by reporting
ee's wages when he or she reaches $7,000 in taxable wa- agents discussion in section 12.
ges for the calendar year.

Publication 15 (2020) Page 37

 Electronic filing by CPEOs. CPEOs are required to of the return for which the CPEO is unable to electronically
electronically file Form 940. Under certain circumstances, file. For more information on filing a waiver request elec-
the IRS may waive the electronic filing requirement. To re- tronically, go to IRS.gov/CPEO.
quest a waiver, the CPEO must file a written request using
the IRS Online Registration System for Professional Em-
ployer Organizations at least 45 days before the due date

Page 38 Publication 15 (2020)

15. Special Rules for Various Types of Services and Payments
Section references are to the Internal Revenue Code unless otherwise noted.
Special Classes of Employment and Treatment Under Employment Taxes
Special Types of Payments
Income Tax Withholding Social Security and FUTA
Medicare (including
Additional Medicare Tax
when wages are paid in
excess of $200,000)
Aliens, nonresident. See Pub. 515 and Pub. 519.
Aliens, resident:
1. Service performed in the U.S. Same as U.S. citizen. Same as U.S. citizen. Same as U.S. citizen.
(Exempt if any part of
service as crew member of
foreign vessel or aircraft is
performed outside U.S.)
2. Service performed outside the U.S. Withhold Taxable if (1) working for Exempt unless on or in
an American employer, or connection with an
(2) an American employer American vessel or aircraft
by agreement covers U.S. and either performed under
citizens and residents contract made in U.S., or
employed by its foreign alien is employed on such
affiliates. vessel or aircraft when it
touches U.S. port.
Cafeteria plan benefits under section 125. If employee chooses cash, subject to all employment taxes. If employee chooses another
benefit, the treatment is the same as if the benefit was provided outside the plan. See Pub.
15-B for more information.
Deceased worker:
1. Wages paid to beneficiary or estate in Exempt Taxable Taxable
same calendar year as worker's death.
See the Instructions for Forms W-2 and
W-3 for details.
2. Wages paid to beneficiary or estate Exempt Exempt Exempt
after calendar year of worker's death.
Dependent care assistance programs. Exempt to the extent it is reasonable to believe amounts are excludable from gross
income under section 129.
Disabled worker's wages paid after year in Withhold Exempt if worker didn't Taxable
which worker became entitled to disability perform any service for
insurance benefits under the Social Security employer during the period
Act. for which payment is made.
Employee business expense
reimbursement:
1. Accountable plan.
a. Amounts not exceeding specified Exempt Exempt Exempt
government rate for per diem or
standard mileage.
b. Amounts in excess of specified Withhold Taxable Taxable
government rate for per diem or
standard mileage.
2. Nonaccountable plan. See section 5 for Withhold Taxable Taxable
details.
Family employees:
1. Child employed by parent (or Withhold Exempt until age 18; age Exempt until age 21
partnership in which each partner is a 21 for domestic service.
parent of the child).
2. Parent employed by child. Withhold Taxable if in course of the Exempt
son's or daughter's
business. For domestic
services, see section 3.
3. Spouse employed by spouse. Withhold Taxable if in course of Exempt
spouse's business.
See section 3 for more information.
Fishing and related activities. See Pub. 334.
Foreign governments and international Exempt Exempt Exempt
organizations.

Publication 15 (2020) Page 39

 Special Classes of Employment and Treatment Under Employment Taxes
Special Types of Payments
Income Tax Withholding Social Security and FUTA
Medicare (including
Additional Medicare Tax
when wages are paid in
excess of $200,000)
Foreign service by U.S. citizens:
1. As U.S. government employees. Withhold Same as within U.S. Exempt
2. For foreign affiliates of American Exempt if at time of payment Exempt unless (1) an Exempt unless (1) on
employers and other private employers. (1) it is reasonable to believe American employer by American vessel or aircraft
employee is entitled to agreement covers U.S. and work is performed
exclusion from income under citizens employed by its under contract made in U.S.
section 911, or (2) the foreign affiliates, or (2) U.S. or worker is employed on
employer is required by law citizen works for American vessel when it touches U.S.
of the foreign country to employer. port, or (2) U.S. citizen
withhold income tax on such works for American
payment. employer (except in a
contiguous country with
which the U.S. has an
agreement for
unemployment
compensation) or in the U.S.
Virgin Islands.
Fringe benefits. Taxable on excess of fair market value of the benefit over the sum of an amount paid for it
by the employee and any amount excludable by law. However, special valuation rules may
apply. Benefits provided under cafeteria plans may qualify for exclusion from wages for
social security, Medicare, and FUTA taxes. See Pub. 15-B for details.
Government employment:
State/local governments and political
subdivisions, employees of:
1. Salaries and wages (includes payments Withhold Generally, taxable for (1) Exempt
to most elected and appointed officials). services performed by
See chapter 3 of Pub. 963. employees who are either
(a) covered under a
section 218 agreement, or
(b) not covered under a
section 218 agreement
and not a member of a
public retirement system
(mandatory social security
and Medicare coverage);
and (2) (for Medicare tax
only) for services
performed by employees
hired or rehired after March
31, 1986, who aren't
covered under a section
218 agreement or the
mandatory social security
provisions, unless
specifically excluded by
law. See Pub. 963.
2. Election workers. Election individuals Exempt Taxable if paid $1,900 or Exempt
are workers who are employed to more in 2020 (lesser
perform services for state or local amount if specified by a
governments at election booths in section 218 social security
connection with national, state, or local agreement). See Revenue
elections. Ruling 2000-6.
Note. File Form W-2 for payments of
$600 or more even if no social security
or Medicare taxes were withheld.
3. Emergency workers. Emergency Withhold Exempt if serving on a Exempt
workers who were hired on a temporary temporary basis in case of
basis in response to a specific fire, storm, snow,
unforeseen emergency and aren't earthquake, flood, or
intended to become permanent similar emergency.
employees.
U.S. federal government employees. Withhold Taxable for Medicare. Exempt
Taxable for social security
unless hired before 1984.
See section 3121(b)(5).

Page 40 Publication 15 (2020)

 Special Classes of Employment and Treatment Under Employment Taxes
Special Types of Payments
Income Tax Withholding Social Security and FUTA
Medicare (including
Additional Medicare Tax
when wages are paid in
excess of $200,000)
Homeworkers (industrial, cottage
industry):
1. Common law employees. Withhold Taxable Taxable
2. Statutory employees. See section 2 for Exempt Taxable if paid $100 or Exempt
details. more in cash in a year.
Hospital employees:
1. Interns. Withhold Taxable Exempt
2. Patients. Withhold Taxable (Exempt for state Exempt
or local government
hospitals.)
Household employees:
1. Domestic service in private homes. Exempt (withhold if both Taxable if paid $2,200 or Taxable if employer paid
employer and employee more in cash in 2020. total cash wages of $1,000
agree). Exempt if performed by an or more in any quarter in the
individual under age 18 current or preceding
during any portion of the calendar year.
calendar year and isn't the
principal occupation of the
employee.
2. Domestic service in college clubs, Exempt (withhold if both Exempt if paid to regular Taxable if employer paid
fraternities, and sororities. employer and employee student; also exempt if total cash wages of $1,000
agree). employee is paid less than or more in any quarter in the
$100 in a year by an current or preceding
income-tax-exempt calendar year.
employer.
Insurance for employees:
1. Accident and health insurance Exempt (except 2% Exempt Exempt
premiums under a plan or system for shareholder-employees of S
employees and their dependents corporations).
generally or for a class or classes of
employees and their dependents.
2. Group-term life insurance costs. See Exempt Exempt, except for the Exempt
Pub. 15-B for details. cost of group-term life
insurance includible in the
employee's gross income.
Special rules apply for
former employees.
Insurance agents or solicitors:
1. Full-time life insurance salesperson. Withhold only if employee Taxable Taxable if (1) employee
under common law. See under common law, and (2)
section 2. not paid solely by
commissions.
2. Other salesperson of life, casualty, etc., Withhold only if employee Taxable only if employee Taxable if (1) employee
insurance. under common law. under common law. under common law, and (2)
not paid solely by
commissions.
Interest on loans with below-market See Pub. 15-A.
interest rates (foregone interest and deemed
original issue discount).
Leave-sharing plans: Amounts paid to an Withhold Taxable Taxable
employee under a leave-sharing plan.
Newspaper carriers and vendors: Exempt (withhold if both Exempt Exempt
Newspaper carriers under age 18; newspaper employer and employee
and magazine vendors buying at fixed prices voluntarily agree).
and retaining receipts from sales to
customers. See Pub. 15-A for information on
statutory nonemployee status.

Publication 15 (2020) Page 41

 Special Classes of Employment and Treatment Under Employment Taxes
Special Types of Payments
Income Tax Withholding Social Security and FUTA
Medicare (including
Additional Medicare Tax
when wages are paid in
excess of $200,000)
Noncash payments:
1. For household work, agricultural labor, Exempt (withhold if both Exempt Exempt
and service not in the course of the employer and employee
employer's trade or business. voluntarily agree).
2. To certain retail commission Optional with employer, Taxable Taxable
salespersons ordinarily paid solely on a except to the extent
cash commission basis. employee's supplemental
wages during the year
exceed $1 million.
Nonprofit organizations. See Pub. 15-A.
Officers or shareholders of an S Withhold Taxable Taxable
corporation: Distributions and other
payments by an S corporation to a corporate
officer or shareholder must be treated as
wages to the extent the amounts are
reasonable compensation for services to the
corporation by an employee. See the
Instructions for Form 1120-S.
Partners: Payments to general or limited Exempt Exempt Exempt
partners of a partnership. See Pub. 541 for
partner reporting rules.
Railroads: Payments subject to the Railroad Withhold Exempt Exempt
Retirement Act. See Pub. 915 for more details.
Religious exemptions. See Pub. 15-A and Pub. 517.
Retirement and pension plans:
1. Employer contributions to a qualified Exempt Exempt Exempt
plan.
2. Elective employee contributions and Generally exempt, but see Taxable Taxable
deferrals to a plan containing a qualified section 402(g) for limitation.
cash or deferred compensation
arrangement (401(k)).
3. Employer contributions to individual Generally exempt, but see Exempt, except for amounts contributed under a salary
retirement accounts under simplified section 402(g) for salary reduction SEP agreement.
employee pension (SEP) plan. reduction SEP limitation.
4. Employer contributions to section Generally exempt, but see Taxable if paid through a salary reduction agreement
403(b) annuities including salary section 402(g) for limitation. (written or otherwise).
reduction contributions.
5. Employee salary reduction contributions Exempt Taxable Taxable
to a SIMPLE retirement account.
6. Distributions from qualified retirement Withhold, but recipient may Exempt Exempt
and pension plans and section 403(b) elect exemption on Form
annuities. See Pub. 15-A for information W-4P in certain cases;
on pensions, annuities, and employer mandatory 20% withholding
contributions to nonqualified deferred applies to an eligible rollover
compensation arrangements. distribution that isn't a direct
rollover; exempt for direct
rollover. See Pub. 15-A.
7. Employer contributions to a section Generally exempt, but see Taxable Taxable
457(b) plan. section 402(g) limitation.
8. Employee salary reduction contributions Generally exempt, but see Taxable Taxable
to a section 457(b) plan. section 402(g) salary
reduction limitation.
Salespersons:
1. Common law employees. Withhold Taxable Taxable
2. Statutory employees. Exempt Taxable Taxable, except for full-time
life insurance sales agents.
3. Statutory nonemployees (qualified real Exempt Exempt Exempt
estate agents, direct sellers, and certain
companion sitters). See Pub. 15-A for
details.

Page 42 Publication 15 (2020)

 Special Classes of Employment and Treatment Under Employment Taxes
Special Types of Payments
Income Tax Withholding Social Security and FUTA
Medicare (including
Additional Medicare Tax
when wages are paid in
excess of $200,000)
Scholarships and fellowship grants Withhold Taxability depends on the nature of the employment and
(includible in income under section the status of the organization. See Students, scholars,
117(c)). trainees, teachers, etc. below.
Severance or dismissal pay. Withhold Taxable Taxable
Service not in the course of the Withhold only if employee Taxable if employee Taxable only if employee
employer's trade or business (other than earns $50 or more in cash in receives $100 or more in earns $50 or more in cash in
on a farm operated for profit or for a quarter and works on 24 or cash in a calendar year. a quarter and works on 24
household employment in private homes). more different days in that or more different days in
quarter or in the preceding that quarter or in the
quarter. preceding quarter.
Sick pay. See Pub. 15-A for more information. Withhold Exempt after end of 6 calendar months after the calendar
month employee last worked for employer.
Students, scholars, trainees, teachers,
etc.:
1. Student enrolled and regularly attending
classes, performing services for the
following.
a. Private school, college, or Withhold Exempt Exempt
university.
b. Auxiliary nonprofit organization Withhold Exempt unless services Exempt
operated for and controlled by are covered by a section
school, college, or university. 218 (Social Security Act)
agreement.
c. Public school, college, or Withhold Exempt unless services Exempt
university. are covered by a section
218 (Social Security Act)
agreement.
2. Full-time student performing service for Withhold Taxable Exempt unless program was
academic credit, combining instruction established for or on behalf
with work experience as an integral part of an employer or group of
of the program. employers.
3. Student nurse performing part-time Withhold Exempt Exempt
services for nominal earnings at hospital
as incidental part of training.
4. Student employed by organized camps. Withhold Taxable Exempt
5. Student, scholar, trainee, teacher, etc., Withhold unless excepted by Exempt if service is performed for purpose specified in
as nonimmigrant alien under section regulations. section 101(a)(15)(F), (J), (M), or (Q) of Immigration and
101(a)(15)(F), (J), (M), or (Q) of Nationality Act. However, these taxes may apply if the
Immigration and Nationality Act (that is, employee becomes a resident alien. See the special
aliens holding F-1, J-1, M-1, or Q-1 residency tests for exempt individuals in chapter 1 of Pub.
visas). 519.
Supplemental unemployment Withhold Exempt under certain conditions. See Pub. 15-A.
compensation plan benefits.
Tips:
1. If $20 or more in a month. Withhold Taxable Taxable for all tips reported
in writing to employer.
2. If less than $20 in a month. See section Exempt Exempt Exempt
6 for more information.
Worker's compensation. Exempt Exempt Exempt

Publication 15 (2020) Page 43

 or an agent of the employer for the employer’s employ-
16. Third-Party Payer ment taxes. If an employer is using a PSP to perform its
tax duties, the employer remains liable for its employment
Arrangements tax obligations, including liability for employment taxes.
An employer who uses a PSP should ensure the PSP is
An employer may outsource some or all of its federal em- using EFTPS to make federal tax deposits on behalf of the
ployment tax withholding, reporting, and payment obliga- employer so the employer can confirm that the payments
tions. An employer who outsources payroll and related tax are being made on its behalf.
duties (that is, withholding, reporting, and paying over so- Reporting agent. A reporting agent is a type of PSP. A
cial security, Medicare, FUTA, and income taxes) to a reporting agent helps administer payroll and payroll-rela-
third-party payer, generally will remain responsible for ted tax duties on behalf of the employer, including authori-
those duties, including liability for the taxes. However, see zation to electronically sign and file forms set forth on
Certified professional employer organization (CPEO), Form 8655. An employer uses Form 8655 to authorize a
later, for an exception. reporting agent to perform functions on behalf of the em-
If an employer outsources some or all of its payroll re- ployer. A reporting agent performs these functions using
sponsibilities, the employer should consider the following the EIN of the employer. A reporting agent isn't liable as
information. either an employer or an agent of the employer for the em-
ployer’s employment taxes. If an employer is using a re-
• The employer remains responsible for federal tax de- porting agent to perform its tax duties, the employer re-
posits and other federal tax payments even though the
mains liable for its employment obligations, including
employer may forward the tax amounts to the
liability for employment taxes.
third-party payer to make the deposits and payments.
A reporting agent must use EFTPS to make federal tax
If the third party fails to make the deposits and pay-
deposits on behalf of an employer. The employer has ac-
ments, the IRS may assess penalties and interest on
cess to EFTPS to confirm federal tax deposits were made
the employer’s account. As the employer, you may be
on its behalf.
liable for all taxes, penalties, and interest due. The
For more information on reporting agents, see Revenue
employer may also be held personally liable for certain
Procedure 2012-32, 2012-34 I.R.B. 267, at IRS.gov/irb/
unpaid federal taxes.
2012-34_IRB#RP-2012-32, and Pub. 1474, Technical
• If the employer’s account has any issues, the IRS will Specifications Guide for Reporting Agent Authorization
send correspondence to the employer at the address and Federal Tax Depositors.
of record. We strongly recommend that the employer
maintain its address as the address of record with the Agent with an approved Form 2678. An agent with an
IRS. Having correspondence sent to the address of approved Form 2678 helps administer payroll and related
the third-party payer may significantly limit the em- tax duties on behalf of the employer. An agent authorized
ployer’s ability to be informed about tax matters involv- under section 3504 may pay wages or compensation to
ing the employer’s business. Use Form 8822-B to up- some or all of the employees of an employer, prepare and
date your business address. file employment tax returns as set forth on Form 2678,
prepare Form W-2, and make federal tax deposits and
• When a third party enrolls an employer in EFTPS for other federal tax payments. An employer uses Form 2678
federal tax deposits, the employer will receive an In- to request authorization to appoint an agent to perform
quiry PIN. Employers should activate and use this In- functions on behalf of the employer. An agent with an ap-
quiry PIN to monitor their account and ensure the third proved Form 2678 is authorized to perform these func-
party is making the required tax deposits. tions using its own EIN. The agent files a Schedule R
The following are common third-party payers who an (Form 941) or, if applicable, Schedule R (Form 943) to al-
employer may contract with to perform payroll and related locate wages and taxes to the employers it represents as
tax duties. an agent.
If an employer is using an agent with an approved Form
• Payroll service provider (PSP).
2678 to perform its tax duties, the agent and the employer
• Reporting agent. are jointly liable for the employment taxes and related tax
• Agent with approved Form 2678. duties for which the agent is authorized to perform.
Form 2678 doesn't apply to FUTA taxes reportable on
• Payer designated under section 3504. Form 940 unless the employer is a home care service re-
• Certified professional employer organization (CPEO). cipient receiving home care services through a program
administered by a federal, state, or local government
Payroll service provider (PSP). A PSP helps adminis- agency.
ter payroll and payroll-related tax duties on behalf of the For more information on an agent with an approved
employer. A PSP may prepare paychecks for employees, Form 2678, see Revenue Procedure 2013-39, 2013-52
prepare and file employment tax returns, prepare Form I.R.B. 830, at IRS.gov/irb/2013-52_IRB#RP-2013-39.
W-2, and make federal tax deposits and other federal tax
payments. A PSP performs these functions using the EIN Payer designated under section 3504. In certain cir-
of the employer. A PSP isn't liable as either an employer cumstances, the IRS may designate a third-party payer to

Page 44 Publication 15 (2020)

perform the acts of an employer. The IRS will designate a wages each entity paid to the employee during the appli-
third-party payer on behalf of an employer if the third party cable quarter and issue Forms W-2 reporting the wages
has a service agreement with the employer. A service each entity paid to the employee during the year.
agreement is an agreement between the third-party payer
and an employer in which the third-party payer (1) asserts
it is the employer of individuals performing services for the
employer; (2) pays wages to the individuals that perform How To Get Tax Help
services for the employer; and (3) assumes responsibility
to withhold, report, and pay federal employment taxes for If you have questions about a tax issue, need help prepar-
the wages it pays to the individuals that perform services ing your tax return, or want to download free publications,
for the employer. forms, or instructions, go to IRS.gov and find resources
A payer designated under section 3504 performs tax that can help you right away.
duties under the service agreement using its own EIN. If
the IRS designates a third-party payer under section Preparing and filing your tax return. Go to IRS.gov/
3504, the designated payer and the employer are jointly li- EmploymentEfile for more information on filing your em-
able for the employment taxes and related tax duties for ployment tax returns electronically.
which the third-party payer is designated. Employers can register to use Business Services On-
For more information on a payer designated under sec- line. The SSA offers online service for fast, free, and se-
tion 3504, see Regulations section 31.3504-2. cure online Form W-2 filing options to CPAs, accountants,
Certified professional employer organization enrolled agents, and individuals who process Forms W-2,
(CPEO). The Stephen Beck, Jr., Achieving a Better Life Wage and Tax Statement, and Forms W-2c, Corrected
Experience Act of 2014 required the IRS to establish a Wage and Tax Statement. Employers can go to SSA.gov/
voluntary certification program for professional employer employer for more information.
organizations (PEOs). PEOs handle various payroll ad- Getting answers to your tax questions. On
ministration and tax reporting responsibilities for their IRS.gov, get answers to your tax questions any-
business clients and are typically paid a fee based on time, anywhere.
payroll costs. To become and remain certified under the
certification program, certified professional employer or-
• Go to IRS.gov/Help for a variety of tools that will help
you get answers to some of the most common tax
ganizations (CPEOs) must meet various requirements de-
questions.
scribed in sections 3511 and 7705 and related published
guidance. Certification as a CPEO may affect the employ- • Go to IRS.gov/Forms to search for our forms, instruc-
ment tax liabilities of both the CPEO and its customers. A tions, and publications. You will find details on 2019
CPEO is generally treated for employment tax purposes tax changes and hundreds of interactive links to help
as the employer of any individual who performs services you find answers to your questions.
for a customer of the CPEO and is covered by a contract • You may also be able to access tax law information in
described in section 7705(e)(2) between the CPEO and your electronic filing software.
the customer (CPEO contract), but only for wages and
other compensation paid to the individual by the CPEO.
However, with respect to certain employees covered by a Tax reform. Tax reform legislation affects individuals,
CPEO contract, you may also be treated as an employer businesses, and tax-exempt and government entities. Go
of the employees and, consequently, may also be liable to IRS.gov/TaxReform for information and updates on
for federal employment taxes imposed on wages and how this legislation affects your taxes.
other compensation paid by the CPEO to such employ-
ees. IRS social media. Go to IRS.gov/SocialMedia to see the
CPEOs must complete Schedule R (Form 940), Sched- various social media tools the IRS uses to share the latest
ule R (Form 941), or Schedule R (Form 943) when filing information on tax changes, scam alerts, initiatives, prod-
an aggregate Form 940, 941, or 943. CPEOs file Form ucts, and services. At the IRS, privacy and security are
8973 to notify the IRS that they started or ended a service paramount. We use these tools to share public informa-
contract with a customer. To become a CPEO, the organi- tion with you. Don’t post your social security number or
zation must apply through the IRS Online Registration other confidential information on social media sites. Al-
System. For more information or to apply to become a ways protect your identity when using any social network-
CPEO, go to IRS.gov/CPEO. Also see Revenue Proce- ing site.
dure 2017-14, 2017-3 I.R.B. 426, available at IRS.gov/irb/ The following IRS YouTube channels provide short, in-
2017-03_IRB#RP-2017-14. formative videos on various tax-related topics in English,
Spanish, and ASL.
If both an employer and a section 3504 author-
TIP ized agent paid wages to an employee during a • Youtube.com/irsvideos.
quarter, or if both an employer and a CPEO paid • Youtube.com/irsvideosmultilingua.
wages to an employee during a quarter, both the em-
ployer and the section 3504 authorized agent (or the • Youtube.com/irsvideosASL.
CPEO, if applicable) should file Form 941 reporting the

Publication 15 (2020) Page 45

Watching IRS videos. The IRS Video portal • Electronic Federal Tax Payment System: Best option
(IRSVideos.gov) contains video and audio presentations for businesses. Enrollment is required.
for individuals, small businesses, and tax professionals.
• Check or Money Order: Mail your payment to the ad-
Getting tax information in other languages. For tax- dress listed on the notice or instructions.
payers whose native language isn’t English, we have the • Cash: You may be able to pay your taxes with cash at
following resources available. Taxpayers can find informa- a participating retail store.
tion on IRS.gov in the following languages.
• Same-Day Wire: You may be able to do same-day
• Spanish (IRS.gov/Spanish). wire from your financial institution. Contact your finan-
• Chinese (IRS.gov/Chinese). cial institution for availability, cost, and cut-off times.

• Korean (IRS.gov/Korean). What if I can’t pay now? Go to IRS.gov/Payments for

more information about your options.
• Russian (IRS.gov/Russian).
• Vietnamese (IRS.gov/Vietnamese). • Apply for an online payment agreement (IRS.gov/
OPA) to meet your tax obligation in monthly install-
The IRS Taxpayer Assistance Centers (TACs) provide ments if you can’t pay your taxes in full today. Once
over-the-phone interpreter service in over 170 languages, you complete the online process, you will receive im-
and the service is available free to taxpayers. mediate notification of whether your agreement has
been approved.
Getting tax forms and publications. Go to IRS.gov/
Forms to view, download, or print most of the forms, in- • Use the Offer in Compromise Pre-Qualifier to see if
structions, and publications you may need. You can also you can settle your tax debt for less than the full
download and view popular tax publications and instruc- amount you owe. For more information on the Offer in
tions (including Pub. 15) on mobile devices as an eBook Compromise program, go to IRS.gov/OIC.
at no charge at IRS.gov/eBooks. Or you can go to
IRS.gov/OrderForms to place an order and have them Understanding an IRS notice or letter. Go to IRS.gov/
mailed to you within 10 business days. Notices to find additional information about responding to
an IRS notice or letter.
Getting a transcript or copy of a return. You can get a
copy of your tax transcript or a copy of your return by call- Contacting your local IRS office. Keep in mind, many
ing 800-829-4933 or by mailing Form 4506-T (transcript questions can be answered on IRS.gov without visiting an
request) or Form 4506 (copy of return) to the IRS. IRS Taxpayer Assistance Center (TAC). Go to IRS.gov/
LetUsHelp for the topics people ask about most. If you still
Resolving tax-related identity theft issues. need help, IRS TACs provide tax help when a tax issue
can’t be handled online or by phone. All TACs now pro-
• The IRS doesn’t initiate contact with taxpayers by vide service by appointment so you’ll know in advance
email or telephone to request personal or financial in- that you can get the service you need without long wait
formation. This includes any type of electronic com- times. Before you visit, go to IRS.gov/TACLocator to find
munication, such as text messages and social media the nearest TAC, check hours, available services, and ap-
channels. pointment options. Or, on the IRS2Go app, under the Stay
• Go to IRS.gov/IDProtection for information. Connected tab, choose the Contact Us option and click on
“Local Offices.”
• If your EIN has been lost or stolen or you suspect
you’re a victim of tax-related identity theft, visit
IRS.gov/IdentityTheft to learn what steps you should The Taxpayer Advocate Service (TAS)
take. Is Here To Help You
Making a tax payment. The IRS uses the latest encryp- What Is TAS?
tion technology to ensure your electronic payments are
safe and secure. You can make electronic payments on- TAS is an independent organization within the IRS that
line, by phone, and from a mobile device using the helps taxpayers and protects taxpayer rights. Their job is
IRS2Go app. Paying electronically is quick, easy, and to ensure that every taxpayer is treated fairly and that you
faster than mailing in a check or money order. Go to know and understand your rights under the Taxpayer Bill
IRS.gov/Payments to make a payment using any of the of Rights.
following options.
How Can You Learn About Your Taxpayer
• Debit or Credit Card: Choose an approved payment
processor to pay online, by phone, and by mobile de- Rights?
vice.
The Taxpayer Bill of Rights describes 10 basic rights that
• Electronic Funds Withdrawal: Offered only when filing all taxpayers have when dealing with the IRS. Go to
your federal taxes using tax return preparation soft- TaxpayerAdvocate.IRS.gov to help you understand what
ware or through a tax professional.

Page 46 Publication 15 (2020)

these rights mean to you and how they apply. These are local directory and at TaxpayerAdvocate.IRS.gov/
your rights. Know them. Use them. Contact-Us. You can also call them at 877-777-4778.

What Can TAS Do For You? How Else Does TAS Help Taxpayers?
TAS can help you resolve problems that you can’t resolve TAS works to resolve large-scale problems that affect
with the IRS. And their service is free. If you qualify for many taxpayers. If you know of one of these broad issues,
their assistance, you will be assigned to one advocate please report it to them at IRS.gov/SAMS.
who will work with you throughout the process and will do
everything possible to resolve your issue. TAS can help TAS also has a website, Tax Reform Changes, which
you if: shows you how the new tax law may change your future
tax filings and helps you plan for these changes. The in-
• Your problem is causing financial difficulty for you, formation is categorized by tax topic in the order of the
your family, or your business; IRS Form 1040 or 1040-SR. Go to TaxChanges.us for
• You face (or your business is facing) an immediate more information.
threat of adverse action; or
• You’ve tried repeatedly to contact the IRS but no one TAS for Tax Professionals
has responded, or the IRS hasn’t responded by the
TAS can provide a variety of information for tax professio-
date promised.
nals, including tax law updates and guidance, TAS pro-
grams, and ways to let TAS know about systemic prob-
How Can You Reach TAS? lems you’ve seen in your practice.
TAS has offices in every state, the District of Columbia,
and Puerto Rico. Your local advocate’s number is in your

Publication 15 (2020) Page 47

 To help us develop a more useful index, please let us know if you have ideas for index entries.
Index See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.

Recordkeeping 7
Reimbursements 15
A H Repayments, wages 36
Accuracy of deposits rule 29 Health insurance plans 17 Reporting agent 44
Additional Medicare Tax 24, 35 Health savings accounts (HSAs) 17
Adjustments 33 Hiring new employees 5
Aliens, nonresident 22, 25 Household employees 31
Allocated tips 19 S
Archer MSAs 17 Seasonal employers 31
Assistance (See Tax help) Semiweekly deposit schedule 27
I Severance payments 4
Identity protection services 18 Sick pay 18
Identity theft 46 Social security and Medicare taxes 24
B Income tax withholding 21 Social security number, employee 14
Backup withholding 7 Information returns 5 Spouse 13
Business expenses, employee 15 International social security Standard mileage rate 16
agreements 25 Statutory employees 12
Statutory nonemployees 12
Successor employer 24, 37
C Supplemental wages 19
Calendar 8 L
Certified professional employer Long-term care insurance 17
organizations (CPEOs) 3, 45 Lookback period 26
Change of business address or T
responsible party 7 Tax help 45
COBRA premium assistance credit 10 Telephone help 8
Correcting employment taxes 35 M Third-party payer arrangements 44
Correcting errors (prior period Meals and lodging 16 Third-party sick pay tax adjustment 34
adjustments) 35 Medicaid waiver payments 3 Tip rate determination agreement 19
Criminal prosecution 31 Medical care 17 Tip rate determination and education
Medical savings accounts (MSAs) 17 program 19
Medicare tax 24 Tips 18, 21
Mileage 16 Trust fund recovery penalty 30
D Monthly deposit schedule 27
Delivery services, private 7 Motion picture project employers 25
Depositing taxes: Moving expense reimbursement 2
Penalties 29 U
Rules 25 Unemployment tax, federal 36
Differential wage payments 17
Disaster tax relief 2 N
New employees 5
Noncash wages 16 V
Nonemployee compensation 7 Vacation pay 21
E
E-file 32
Election worker 10
Electronic deposit requirement 29 O W
Electronic Federal Tax Payment System Outsourcing payroll duties 3 Wage repayments 36
(EFTPS) 29 Wages defined 15
Electronic filing 4, 32 Wages not paid in money 16
Withholding:
Eligibility for employment 5
Employees defined 11
P Backup 7
Employer identification number (EIN) 11 Part-time workers 25 Certificate 21
Employer responsibilities 6 Payroll period 21 Exemption 22
E-news for payroll professionals 8 Payroll service provider (PSP) 44 Fringe benefits 18
Penalties 29, 32 Income tax 21
Private delivery services (PDSs) 7 Levies 24
Publications (See Tax help) Nonresident aliens 25
F Pensions and annuities 6
Family employees 13 Social security and Medicare taxes 24
Final return 32
Foreign persons treated as American
Q Tips 21
employers 25 Qualified small business payroll tax
Form 944 31 credit for increasing research
Fringe benefits 17 activities 2 Z
FUTA tax 36 Zero wage return 4

R
G Reconciling Forms W-2 and Forms 941 or
Form 944 33
Government employers 10

Page 48 Publication 15 (2020)