(Supplement to Publication 15
Employer's Tax Guide)
This publication reflects changes included in the recently enacted American Recovery and Reinvestment Act of 2009 (ARRA).taxmap/pubs/p15a-000.htm#en_us_publink1000141417
New tables for alternative methods for figuring withholding.(p1)
New tables for alternative methods for figuring withholding have been developed due to changes made to the tax law by ARRA.
The Publication 15-T also includes the new tables for wage withholding and advance earned income credit (EIC) payments as found in Publication 15 (Circular E), Employer's Tax Guide, and Publication 51 (Circular A), Agricultural Employer's Tax Guide.
The new withholding tables in Publication 15-T also apply for figuring income tax withholding on pension payments.
Employers should begin using these tables as soon as possible after February 17, 2009, but no later than April 1, 2009.taxmap/pubs/p15a-000.htm#en_us_publink1000142341
New employment tax adjustment process in 2009.(p1)
If you discover an error on a previously filed employment tax return after December 31, 2008, make the correction by filing the form that corresponds to the return being corrected. For example, on March 1, 2009, you discover an error on your 2007 fourth quarter Form 941, Employer's QUARTERLY Federal Tax Return. You would file Form 941-X, Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund, to correct the error. Do not
use Form 941c, Supporting Statement to Correct Information. For more information about the new employment tax adjustment process, see Publication 15 (Circular E), Employer's Tax Guide, get the Instructions for Form 941-X, or visit the IRS website at www.irs.gov
Additional employment tax information.(p2)taxmap/pubs/p15a-000.htm#en_us_publink100052169
You can call the IRS Business and Specialty Tax Line with your employment tax questions at 1-800-829-4933.taxmap/pubs/p15a-000.htm#en_us_publink100052170
Help for people with disabilities.(p2)
Telephone help is available using TTY/TDD equipment. You can call 1-800-829-4059 with your tax question or to order forms and publications. You may also use this number for problem resolution assistance.taxmap/pubs/p15a-000.htm#en_us_publink100052171
Annual employment tax filing for small employers.(p2)
Certain small employers must file Form 944, Employer's ANNUAL Federal Tax Return, rather than Form 941, Employer's QUARTERLY Federal Tax Return, to report their employment taxes. For more information, see the Instructions for Form 944.taxmap/pubs/p15a-000.htm#en_us_publink100052172
Furnishing Form W-2 to employees electronically.(p2)
You may set up a system to furnish Forms W-2 electronically to employees who choose to receive them in that format. Each employee participating must consent electronically (or receive confirmation of any consent made using a paper document), and you must notify the employees of all hardware and software requirements to receive the forms. You may not send a Form W-2 electronically to any employee who does not consent or who has revoked consent previously provided.
To furnish Forms W-2 electronically, you must meet the following disclosure requirements
and provide a clear and conspicuous statement of each of them to your employees.
- The employee must be informed that he or she may receive a paper Form W-2 if consent is not given to receive it electronically.
- The employee must be informed of the scope and duration of the consent.
- The employee must be informed of any procedure for obtaining a paper copy of any Form W-2 (and whether or not the request for a paper statement is treated as a withdrawal of his or her consent) after giving consent.
- The employee must be notified about how to withdraw a consent and the effective date and manner by which the employer will confirm the withdrawn consent. The employee must also be notified that the withdrawn consent does not apply to the previously issued Forms W-2.
- The employee must be informed about any conditions under which electronic Forms W-2 will no longer be furnished (for example, termination of employment).
- The employee must be informed of any procedures for updating his or her contact information that enables the employer to provide electronic Forms W-2.
- The employer must notify the employee of any changes to the employer's contact information.
You must furnish electronic Forms W-2 by the same due date as the paper Forms W-2. For more information on furnishing Form W-2 to employees electronically, see Regulations section 31.6051-1(j).
Electronic filing and payment.(p2)
Now, more than ever before, businesses can enjoy the benefits of filing and paying their federal taxes electronically. Whether you rely on a tax professional or handle your own taxes, the IRS offers you convenient programs to make filing and payment easier.
Spend less time and worry on taxes and more time running your business. Use e-file
and the Electronic Federal Tax Payment System (EFTPS) to your benefit.
- For e-file, visit www.irs.gov for additional information.
- For EFTPS, visit www.eftps.gov or call EFTPS Customer Service at 1-800-555-4477.
Electronic submission of Forms W-4, W-4P, W-4S, W-4V, and W-5.(p2)
You may set up a system to electronically receive any or all of the following forms (and their Spanish versions, if available) from an employee or payee.
- Form W-4, Employee's Withholding Allowance Certificate.
- Form W-4P, Withholding Certificate for Pension or Annuity Payments.
- Form W-4S, Request for Federal Income Tax Withholding From Sick Pay.
- Form W-4V, Voluntary Withholding Request.
- Form W-5, Earned Income Credit Advance Payment Certificate.
If you establish an electronic system to receive any of these forms, you do not need to process that form in a paper version.
For each form that you establish an electronic submission system for, you must meet each of the following five requirements.
- The electronic system must ensure that the information received by the payer is the information sent by the payee. The system must document all occasions of user access that result in a submission. In addition, the design and operation of the electronic system, including access procedures, must make it reasonably certain that the person accessing the system and submitting the form is the person identified on the form.
- The electronic system must provide exactly the same information as the paper form.
- The electronic submission must be signed with an electronic signature by the payee whose name is on the form. The electronic signature must be the final entry in the submission.
- Upon request, you must furnish a hard copy of any completed electronic form to the IRS and a statement that, to the best of the payer's knowledge, the electronic form was submitted by the named payee. The hard copy of the electronic form must provide exactly the same information as, but need not be a facsimile of, the paper form. For Forms W-4 and W-5, the signature must be under penalty of perjury, and must contain the same language that appears on the paper version of the form. The electronic system must inform the employee that he or she must make a declaration contained in the perjury statement and that the declaration is made by signing the Form W-4 or W-5.
- You must also meet all recordkeeping requirements that apply to the paper forms.
For more information, see:
Photographs of missing children.(p3)
The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.
This publication supplements Publication 15 (Circular E), Employer's Tax Guide. It contains specialized and detailed employment tax information supplementing the basic information provided in Publication 15 (Circular E). This publication also contains tables for withholding on distributions of Indian gaming profits to tribal members. Publication 15-B, Employer's Tax Guide to Fringe Benefits, contains information about the employment tax treatment of various types of noncash compensation.taxmap/pubs/p15a-000.htm#en_us_publink100052178
See page 26 for information on how to obtain forms and publications.taxmap/pubs/p15a-000.htm#TXMP6a0284ce
You may want to see:
Publication 51 (Circular A), Agricultural Employer's Tax Guide 505 Tax Withholding and Estimated Tax 509 Tax Calendars for 2009 225 Farmer's Tax Guide 515 Withholding of Tax on Nonresident Aliens and Foreign Entities 535 Business Expenses 553 Highlights of 2008 Tax Changes 583 Starting a Business and Keeping Records 1635 Understanding Your EINtaxmap/pubs/p15a-000.htm#en_us_publink100052179
We welcome your comments about this publication and your suggestions for future editions.
You can write to us at the following address:
Internal Revenue Service
Tax Products Coordinating Committee
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224
We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.
You can email us at *firstname.lastname@example.org
. (The asterisk must be included in the address.) Please put "Publications Comment" on the subject line. Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products.
Before you can know how to treat payments that you make to workers for services, you must first know the business relationship that exists between you and the person performing the services. The person performing the services may be:
- An independent contractor,
- A common-law employee,
- A statutory employee, or
- A statutory nonemployee.
This discussion explains these four categories. A later discussion, Employee or Independent Contractor?
(section 2), points out the differences between an independent contractor and an employee and gives examples from various types of occupations.
If an individual who works for you is not an employee under the common-law rules (see section 2
), you generally do not have to withhold federal income tax from that individual's pay. However, in some cases you may be required to withhold under the backup withholding requirements on these payments. See Publication 15 (Circular E) for information on backup withholding.
People such as lawyers, contractors, subcontractors, and auctioneers who follow an independent trade, business, or profession in which they offer their services to the public, are generally not employees. However, whether such people are employees or independent contractors depends on the facts in each case. The general rule is that an individual is an independent contractor if you, the person for whom the services are performed, have the right to control or direct only the result of the work and not the means and methods of accomplishing the result.taxmap/pubs/p15a-000.htm#en_us_publink100052182
Under common-law rules, anyone who performs services for you is your employee if you have the right to control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed. For a discussion of facts that indicate whether an individual providing services is an independent contractor or employee, see section 2
If you have an employer-employee relationship, it makes no difference how it is labeled. The substance of the relationship, not the label, governs the worker's status. It does not matter whether the individual is employed full time or part time.
For employment tax purposes, no distinction is made between classes of employees. Superintendents, managers, and other supervisory personnel are all employees. An officer of a corporation is generally an employee; however, an officer who performs no services or only minor services, and neither receives nor is entitled to receive any pay, is not considered an employee. A director of a corporation is not an employee with respect to services performed as a director.
You generally have to withhold and pay income, social security, and Medicare taxes on wages that you pay to common-law employees. However, the wages of certain employees may be exempt from one or more of these taxes. See Employees of Exempt Organizations
(section 3) and Religious Exemptions
Under certain circumstances, a corporation furnishing workers to various professional people and firms is the employer of those workers for employment tax purposes. For example, a professional service corporation may provide the services of secretaries, nurses, and other similarly trained workers to its subscribers.
The service corporation enters into contracts with the subscribers under which the subscribers specify the services to be provided and a fee is paid to the service corporation for each individual furnished. The service corporation has the right to control and direct the worker's services for the subscriber, including the right to discharge or reassign the worker. The service corporation hires the workers, controls the payment of their wages, provides them with unemployment insurance and other benefits, and is the employer for employment tax purposes. For information on employee leasing as it relates to pension plan qualification requirements, see Leased employee in Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans). taxmap/pubs/p15a-000.htm#en_us_publink100052184
For more information about the treatment of special types of employment, the treatment of special types of payments, and similar subjects, refer to Publication 15 (Circular E) or Publication 51 (Circular A).taxmap/pubs/p15a-000.htm#en_us_publink100052185
If workers are independent contractors under the common law rules, such workers may nevertheless be treated as employees by statute, "statutory employees," for certain employment tax purposes. This would happen if they fall within any one of the following four categories and meet the three conditions described under Social security and Medicare taxes
- A driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning, if the driver is your agent or is paid on commission.
- A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company.
- An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done.
- A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. The goods sold must be merchandise for resale or supplies for use in the buyer's business operation. The work performed for you must be the salesperson's principal business activity. See Salesperson in section 2.
Withhold social security and Medicare taxes from the wages of statutory employees if all three of the following conditions apply.
- The service contract states or implies that substantially all the services are to be performed personally by them.
- They do not have a substantial investment in the equipment and property used to perform the services (other than an investment in transportation facilities).
- The services are performed on a continuing basis for the same payer.
For FUTA tax, the term "employee" means the same as it does for social security and Medicare taxes, except that it does not include statutory employees in categories 2 and 3 earlier. Thus, any individual who is an employee under category 1 or 4 is also an employee for FUTA tax purposes and subject to FUTA tax. taxmap/pubs/p15a-000.htm#en_us_publink100052188
Do not withhold federal income tax from the wages of statutory employees. taxmap/pubs/p15a-000.htm#en_us_publink100052189
Furnish Form W-2 to a statutory employee, and check "Statutory employee" in box 13. Show your payments to the employee as "other compensation" in box 1. Also, show social security wages in box 3, social security tax withheld in taxmap/pubs/p15a-000.htm#en_us_publink100052190
box 4, Medicare wages in box 5, and Medicare tax withheld in box 6. The statutory employee can deduct his or her trade or business expenses from the payments shown on Form W-2. He or she reports earnings as a statutory employee on line 1 of Schedule C or C-EZ (Form 1040). A statutory employee's business expenses are deductible on Schedule C or C-EZ (Form 1040) and are not subject to the reduction by 2% of his or her adjusted gross income that applies to common-law employees.
There are three categories of statutory nonemployees: direct sellers, licensed real estate agents, and certain companion sitters. Direct sellers and licensed real estate agents are treated as self-employed for all federal tax purposes, including income and employment taxes, if:
- Substantially all payments for their services as direct sellers or real estate agents are directly related to sales or other output, rather than to the number of hours worked and
- Their services are performed under a written contract providing that they will not be treated as employees for federal tax purposes.
Direct sellers include persons falling within any of the following three groups.
- Persons engaged in selling (or soliciting the sale of) consumer products in the home or place of business other than in a permanent retail establishment.
- Persons engaged in selling (or soliciting the sale of) consumer products to any buyer on a buy-sell basis, a deposit-commission basis, or any similar basis prescribed by regulations, for resale in the home or at a place of business other than in a permanent retail establishment.
- Persons engaged in the trade or business of delivering or distributing newspapers or shopping news (including any services directly related to such delivery or distribution).
Direct selling includes activities of individuals who attempt to increase direct sales activities of their direct sellers and who earn income based on the productivity of their direct sellers. Such activities include providing motivation and encouragement; imparting skills, knowledge, or experience; and recruiting.taxmap/pubs/p15a-000.htm#en_us_publink100052192
This category includes individuals engaged in appraisal activities for real estate sales if they earn income based on sales or other output. taxmap/pubs/p15a-000.htm#en_us_publink100052193
Companion sitters are individuals who furnish personal attendance, companionship, or household care services to children or to individuals who are elderly or disabled. A person engaged in the trade or business of putting the sitters in touch with individuals who wish to employ them (that is, a companion sitting placement service) will not be treated as the employer of the sitters if that person does not receive or pay the salary or wages of the sitters and is compensated by the sitters or the persons who employ them on a fee basis. Companion sitters who are not employees of a companion sitting placement service are generally treated as self-employed for all federal tax purposes.taxmap/pubs/p15a-000.htm#en_us_publink100052194taxmap/pubs/p15a-000.htm#en_us_publink100052195
If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker (the relief provisions, discussed below, will not apply). See section 2 in Publication 15 (Circular E) for more information. taxmap/pubs/p15a-000.htm#en_us_publink100052196
If you have a reasonable basis for not treating a worker as an employee, you may be relieved from having to pay employment taxes for that worker. To get this relief, you must file all required federal information returns on a basis consistent with your treatment of the worker. You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977.taxmap/pubs/p15a-000.htm#en_us_publink100052197
This relief provision does not apply for a technical services specialist you provide to another business under an arrangement between you and the other business. A technical service specialist is an engineer, designer, drafter, computer programmer, systems analyst, or other similarly skilled worker engaged in a similar line of work.
This limit on the application of the rule does not affect the determination of whether such workers are employees under the common-law rules. The common-law rules control whether the specialist is treated as an employee or an independent contractor. However, if you directly contract with a technical service specialist to provide services for your business and not for another business, you may still be entitled to the relief provision.taxmap/pubs/p15a-000.htm#en_us_publink100052198
The consistent treatment requirement does not apply to services performed after December 31, 2006, by an individual as a test proctor or room supervisor assisting in the administration of college entrance or placement examinations if the individual:
- Is performing the services for a section 501(c) organization exempt from tax under section 501(a) of the code, and
- Is not otherwise treated as an employee of the organization for employment taxes.