Department of the Treasury
Internal Revenue Service
Publication 15
Cat. No. 10000W
(Circular E),
Employer's
Tax Guide
For use in 2021
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Contents
What's New
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Reminders
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Calendar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Introduction
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1. Employer Identification Number (EIN)
. . . . . . . 12
2. Who Are Employees? . . . . . . . . . . . . . . . . . . . . 12
3. Family Employees
. . . . . . . . . . . . . . . . . . . . . . 14
4. Employee's Social Security Number (SSN)
. . . 15
5. Wages and Other Compensation
. . . . . . . . . . . 16
6. Tips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7. Supplemental Wages
. . . . . . . . . . . . . . . . . . . . 20
8. Payroll Period . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9. Withholding From Employees' Wages
. . . . . . . 22
10. Required Notice to Employees About the
Earned Income Credit (EIC)
. . . . . . . . . . . . . . 27
11. Depositing Taxes
. . . . . . . . . . . . . . . . . . . . . . 27
12. Filing Form 941 or Form 944 . . . . . . . . . . . . . . 33
13. Reporting Adjustments to Form 941 or
Form 944
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
14. Federal Unemployment (FUTA) Tax
. . . . . . . . 38
15. Special Rules for Various Types of
Services and Payments
. . . . . . . . . . . . . . . . . 41
16. Third-Party Payer Arrangements
. . . . . . . . . . 46
How To Get Tax Help
. . . . . . . . . . . . . . . . . . . . . . 47
Index
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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.
At the time this publication went to print, Congress was
considering changes to coronavirus (COVID-19) tax relief.
If new legislation impacts this publication, updates will be
posted to IRS.gov/Pub15. You may also go to IRS.gov/
Coronavirus for the latest information about COVID-19 tax
relief. Also check for recent developments that impact
your employment tax return by going to the Recent
Developments section on IRS.gov/Form941 or IRS.gov/
Form944.
Feb 04, 2021
What's New
Coronavirus (COVID-19) related employment tax
credits and other tax relief.
• The Families First Coronavirus Response Act
(FFCRA), enacted on March 18, 2020, and amended
by the COVID-related Tax Relief Act of 2020, provides
certain employers with tax credits that reimburse them
for the cost of providing paid sick and family leave wa-
ges to their employees for leave related to COVID-19.
Qualified sick and family leave wages and the related
credits for qualified sick and family leave wages are
only reported on employment tax returns with respect
to wages paid for leave taken in quarters beginning af-
ter March 31, 2020, and before April 1, 2021, unless
extended by future legislation. If you paid qualified
sick and family leave wages in 2021 for 2020 leave,
you will claim the credit on your 2021 employment tax
return. Under the FFCRA, certain employers with
fewer than 500 employees provide paid sick and fam-
ily leave to employees unable to work or telework. The
FFCRA required such employers to provide leave to
such employees after March 31, 2020, and before
January 1, 2021. The COVID-related Tax Relief Act of
2020 extends the periods for which employers provid-
ing such leave that otherwise meets the requirements
of the FFCRA may continue to claim tax credits to wa-
ges paid for leave taken before April 1, 2021, although
the requirement that employers provide the leave still
expired on December 31, 2020. For more information
about the credit for qualified sick and family leave wa-
ges, including the changes to the credits made under
the COVID-related Tax Relief Act of 2020, and to see
if future legislation extends the dates that the credit
may be claimed, go to IRS.gov/PLC. Also check the
Recent Developments section on IRS.gov/Form941 or
IRS.gov/Form944.
• The Coronavirus Aid, Relief, and Economic Security
Act (CARES Act), enacted on March 27, 2020, and
amended by the Taxpayer Certainty and Disaster Tax
Relief Act of 2020, provides eligible employers with an
employee retention credit if they keep employees on
their payroll, despite experiencing economic hardship
related to COVID-19. The employee retention credit is
claimed on your employment tax return. The em-
ployee retention credit was extended to 2021 for quali-
fied wages paid to employees between January 1,
2021, and June 30, 2021. The employee retention
credit was previously available for qualified wages
paid to employees between March 13, 2020, and De-
cember 31, 2020. Different rules apply for qualified
wages paid after December 31, 2020. For more infor-
mation about the employee retention credit, and to
see if future legislation extends the dates that the
credit may be claimed, go to IRS.gov/ERC. Also
check the Recent Developments section on IRS.gov/
Form941 or IRS.gov/Form944.
• The CARES Act also allows employers to defer the
deposit and payment of the employer share of social
security taxes. The deferred amount is reported on
your 2020 employment tax return. The deferred
amount of the employer share of social security tax is
only available for deposits due on or after March 27,
2020, and before January 1, 2021, as well as deposits
and payments due after January 1, 2021, that are re-
quired for wages paid on or after March 27, 2020, and
before January 1, 2021. One-half of the deferred
amount of the employer share of social security tax is
due by December 31, 2021, and the remainder is due
by December 31, 2022. Any payments or deposits you
make before December 31, 2021, are first applied
against your payment due on December 31, 2021,
and then applied against your payment due on De-
cember 31, 2022. Because both December 31, 2021,
and December 31, 2022, are nonbusiness days, pay-
ments made on the next business day will be consid-
ered timely. For more information about the deferral of
employment tax deposits, go to IRS.gov/ETD and see
the Instructions for Form 941 or the Instructions for
Form 944, available at IRS.gov/Form941 and IRS.gov/
Form944, respectively.
• The Presidential Memorandum on Deferring Payroll
Tax Obligations in Light of the Ongoing COVID-19
Disaster, issued on August 8, 2020, directs the Secre-
tary of the Treasury to defer the withholding, deposit,
and payment of the employee share of social security
tax on wages paid during the period from September
1, 2020, through December 31, 2020. The deferral of
the withholding and payment of the employee share of
social security tax was available for employees whose
social security wages paid for a biweekly pay period
were less than $4,000, or the equivalent threshold
amount for other pay periods. The COVID-related Tax
Relief Act of 2020 defers the due date for the with-
holding and payment of the employee share of social
security tax until the period beginning on January 1,
2021, and ending on December 31, 2021. For more
information about the deferral of employee social se-
curity tax, see Notice 2020-65, 2020-38 I.R.B. 567,
available at IRS.gov/irb/2020-38_IRB#NOT-2020-65,
Notice 2021-11, and the Instructions for Form 941 or
the Instructions for Form 944. For information about
how to report the deferred amount of the employee
share of social security tax on Form W-2 and Form W-
2c for 2020, see IRS.gov/FormW2 and the 2021 Gen-
eral Instructions for Forms W-2 and W-3 (available in
early 2021).
Notice 2021-11 modifies Notice 2020-65. No-
tice 2020-65 provides that the due date for the de-
ferred amount of the employee share of social se-
curity tax is April 30, 2021. However, the COVID-related
Tax Relief Act of 2020, enacted on December 27, 2020,
defers the due date for the deferred amount of the em-
ployee share of social security tax to December 31, 2021.
Therefore, Notice 2020-65 was modified by Notice
2021-11 to reflect the new due date. Substitute "Decem-
ber 31, 2021" for the due date of "April 30, 2021" provided
TIP
Page 2
Publication 15 (2021)
in previously published instructions. Notice 2021-11 is ex-
pected to be published in Internal Revenue Bulletin
2021-06.
Social security and Medicare tax for 2021. The rate of
social security tax on taxable wages, except for qualified
sick leave wages and qualified family leave wages, is
6.2% each for the employer and employee or 12.4% for
both. Qualified sick leave wages and qualified family leave
wages aren't subject to the employer share of social se-
curity tax; therefore, the tax rate on these wages is 6.2%.
The social security wage base limit is $142,800.
The Medicare tax rate is 1.45% each for the employee
and employer, unchanged from 2020. There is no wage
base limit for Medicare tax.
Social security and Medicare taxes apply to the wages
of household workers you pay $2,300 or more in cash wa-
ges for 2021. Social security and Medicare taxes apply to
election workers who are paid $2,000 or more in cash or
an equivalent form of compensation in 2021.
New Form 1099-NEC. There is a new Form 1099-NEC
to report nonemployee compensation paid in 2020. The
2020 Form 1099-NEC is due February 1, 2021.
Disaster tax relief. Disaster tax relief is available for
those impacted by disasters. For more information about
disaster relief, go to IRS.gov/DisasterTaxRelief.
New payroll tax credit for certain tax-exempt organi-
zations affected by qualified disasters. Section 303(d)
of the Taxpayer Certainty and Disaster Tax Relief Act of
2020 allows for a new payroll tax credit for certain tax-ex-
empt organizations affected by certain qualified disasters.
At the time this publication went to print, it was anticipated
that the credit will be claimed on new Form 5884-D.
Check IRS.gov to see if additional guidance is provided
related to claiming this credit.
Reminders
2021 withholding tables. The Percentage Method and
Wage Bracket Method withholding tables, the employer
instructions on how to figure employee withholding, and
the amount to add to a nonresident alien employee's wa-
ges for figuring income tax withholding are included in
Pub. 15-T, Federal Income Tax Withholding Methods,
available at IRS.gov/Pub15T. You may also use the In-
come Tax Withholding Assistant for Employers at
IRS.gov/ITWA to help you figure federal income tax with-
holding.
Moving expense reimbursement. P.L. 115-97 sus-
pends the exclusion for qualified moving expense reim-
bursements from your employee's income for tax years
beginning after 2017 and before 2026. However, the ex-
clusion is still available in the case of a member of the
U.S. Armed Forces on active duty who moves because of
a permanent change of station due to a military order. The
exclusion applies only to reimbursement of moving expen-
ses that the member could deduct if he or she had paid or
incurred them without reimbursement. See Moving Ex-
penses in Pub. 3, Armed Forces' Tax Guide, for the
definition of what constitutes a permanent change of sta-
tion and to learn which moving expenses are deductible.
Withholding on supplemental wages. P.L. 115-97
lowered the withholding rates on supplemental wages for
tax years beginning after 2017 and before 2026. See sec-
tion 7 for the withholding rates.
Backup withholding. P.L. 115-97 lowered the backup
withholding rate to 24% for tax years beginning after 2017
and before 2026. For more information on backup with-
holding, see Backup withholding, later.
Qualified small business payroll tax credit for in-
creasing research activities. For tax years beginning
after 2015, a qualified small business may elect to claim
up to $250,000 of its credit for increasing research activi-
ties as a payroll tax credit against the employer share of
social security tax. The payroll tax credit election must be
made on or before the due date of the originally filed in-
come tax return (including extensions). The portion of the
credit used against the employer share of social security
tax is allowed in the first calendar quarter beginning after
the date that the qualified small business filed its income
tax return. The election and determination of the credit
amount that will be used against the employer share of so-
cial security tax are made on Form 6765, Credit for In-
creasing Research Activities. The amount from Form
6765, line 44, must then be reported on Form 8974, Quali-
fied Small Business Payroll Tax Credit for Increasing Re-
search Activities. Form 8974 is used to determine the
amount of the credit that can be used in the current quar-
ter. The amount from Form 8974, line 12, is reported on
Form 941 or Form 944. For more information about the
payroll tax credit, see Notice 2017-23, 2017-16 I.R.B.
1100,
available
at
IRS.gov/irb/
2017-16_IRB#NOT-2017-23,
and
IRS.gov/
ResearchPayrollTC. Also see the line 16 instructions in
the Instructions for Form 941 (line 13 instructions in the In-
structions for Form 944).
Certification program for professional employer or-
ganizations (PEOs). The Stephen Beck, Jr., Achieving a
Better Life Experience Act of 2014 required the IRS to es-
tablish a voluntary certification program for PEOs. PEOs
handle various payroll administration and tax reporting re-
sponsibilities for their business clients and are typically
paid a fee based on payroll costs. To become and remain
certified under the certification program, certified profes-
sional employer organizations (CPEOs) must meet vari-
ous requirements described in sections 3511 and 7705
and related published guidance. Certification as a CPEO
may affect the employment tax liabilities of both the CPEO
and its customers. A CPEO is generally treated for em-
ployment tax purposes as the employer of any individual
who performs services for a customer of the CPEO and is
covered by a contract described in section 7705(e)(2) be-
tween the CPEO and the customer (CPEO contract), but
only for wages and other compensation paid to the indi-
vidual by the CPEO. To become a CPEO, the organization
must apply through the IRS Online Registration System.
For more information or to apply to become a CPEO, go to
IRS.gov/CPEO. Also see Revenue Procedure 2017-14,
2017-3
I.R.B.
426,
available
at
IRS.gov/irb/
2017-03_IRB#RP-2017-14.
Publication 15 (2021)

Page 3
Outsourcing payroll duties. Generally, as an employer,
you’re responsible to ensure that tax returns are filed and
deposits and payments are made, even if you contract
with a third party to perform these acts. You remain re-
sponsible if the third party fails to perform any required ac-
tion. Before you choose to outsource any of your payroll
and related tax duties (that is, withholding, reporting, and
paying over social security, Medicare, FUTA, and income
taxes) to a third-party payer, such as a payroll service pro-
vider
or
reporting
agent,
go
to
IRS.gov/
OutsourcingPayrollDuties for helpful information on this
topic. If a CPEO pays wages and other compensation to
an individual performing services for you, and the services
are covered by a contract described in section 7705(e)(2)
between you and the CPEO (CPEO contract), then the
CPEO is generally treated as the employer, but only for
wages and other compensation paid to the individual by
the CPEO. However, with respect to certain employees
covered by a CPEO contract, you may also be treated as
an employer of the employees and, consequently, may
also be liable for federal employment taxes imposed on
wages and other compensation paid by the CPEO to such
employees. For more information on the different types of
third-party payer arrangements, see section 16.
Aggregate Form 941 filers. Approved section 3504
agents and CPEOs must complete Schedule R (Form
941), Allocation Schedule for Aggregate Form 941 Filers,
when filing an aggregate Form 941. Aggregate Forms 941
are filed by agents approved by the IRS under section
3504 of the Internal Revenue Code. To request approval
to act as an agent for an employer, the agent files Form
2678 with the IRS. Aggregate Forms 941 are also filed by
CPEOs approved by the IRS under section 7705. CPEOs
file Form 8973, Certified Professional Employer Organiza-
tion/Customer Reporting Agreement, to notify the IRS that
they’ve started or ended a service contract with a client or
customer.
Other third-party payers that file aggregate Forms 941,
such as non-certified PEOs, must complete and file
Schedule R (Form 941) if they have clients that are claim-
ing the qualified small business payroll tax credit for in-
creasing research activities, the credit for qualified sick
and family leave wages, or the employee retention credit,
or clients that deferred the employer or employee share of
social security tax.
Aggregate Form 940 filers. Approved section 3504
agents and CPEOs must complete Schedule R (Form
940), Allocation Schedule for Aggregate Form 940 Filers,
when filing an aggregate Form 940, Employer's Annual
Federal Unemployment (FUTA) Tax Return. Aggregate
Forms 940 can be filed by agents acting on behalf of
home care service recipients who receive home care
services through a program administered by a federal,
state, or local government. To request approval to act as
an agent on behalf of home care service recipients, the
agent files Form 2678 with the IRS. Aggregate Forms 940
are also filed by CPEOs approved by the IRS under sec-
tion 7705. CPEOs file Form 8973 to notify the IRS that
they’ve started or ended a service contract with a client or
customer.
Work opportunity tax credit for qualified tax-exempt
organizations hiring qualified veterans. Qualified
tax-exempt organizations that hire eligible unemployed
veterans may be able to claim the work opportunity tax
credit against their payroll tax liability using Form 5884-C.
For more information, go to IRS.gov/WOTC.
Medicaid waiver payments. Notice 2014-7 provides
that certain Medicaid waiver payments are excludable
from income for federal income tax purposes. See Notice
2014-7, 2014-4 I.R.B. 445, available at IRS.gov/irb/
2014-04_IRB#NOT-2014-7. For more information, includ-
ing questions and answers related to Notice 2014-7, go to
IRS.gov/MedicaidWaiverPayments.
No federal income tax withholding on disability pay-
ments for injuries incurred as a direct result of a ter-
rorist attack directed against the United States. Disa-
bility payments for injuries incurred as a direct result of a
terrorist attack directed against the United States (or its al-
lies) aren't included in income. Because federal income
tax withholding is only required when a payment is includi-
ble in income, no federal income tax should be withheld
from these payments. See Pub. 907, Tax Highlights for
Persons With Disabilities.
Voluntary withholding on dividends and other distri-
butions by an Alaska Native Corporation (ANC). A
shareholder of an ANC may request voluntary income tax
withholding on dividends and other distributions paid by
an ANC. A shareholder may request voluntary withholding
by giving the ANC a completed Form W-4V. For more in-
formation, see Notice 2013-77, 2013-50 I.R.B. 632, avail-
able at IRS.gov/irb/2013-50_IRB#NOT-2013-77.
Definition of marriage. A marriage of two individuals is
recognized for federal tax purposes if the marriage is rec-
ognized by the state, possession, or territory of the United
States in which the marriage is entered into, regardless of
legal residence. Two individuals who enter into a relation-
ship that is denominated as marriage under the laws of a
foreign jurisdiction are recognized as married for federal
tax purposes if the relationship would be recognized as
marriage under the laws of at least one state, possession,
or territory of the United States, regardless of legal resi-
dence. Individuals who have entered into a registered do-
mestic partnership, civil union, or other similar relationship
that isn't denominated as a marriage under the law of the
state, possession, or territory of the United States where
such relationship was entered into aren't lawfully married
for federal tax purposes, regardless of legal residence.
Severance payments. Severance payments are wages
subject to social security and Medicare taxes, income tax
withholding, and FUTA tax.
You must receive written notice from the IRS to file
Form 944. If you’ve been filing Forms 941 (or Forms
941-SS, Employer's QUARTERLY Federal Tax Re-
turn—American Samoa, Guam, the Commonwealth of the
Northern Mariana Islands, and the U.S. Virgin Islands, or
Formularios 941-PR, Planilla para la Declaración Federal
TRIMESTRAL del Patrono), and believe your employment
taxes for the calendar year will be $1,000 or less, and you
would like to file Form 944 instead of Forms 941, you must
contact the IRS during the first calendar quarter of the tax
Page 4
Publication 15 (2021)
year to request to file Form 944. You must receive written
notice from the IRS to file Form 944 instead of Forms 941
before you may file this form. For more information on re-
questing to file Form 944, including the methods and
deadlines for making a request, see the Instructions for
Form 944.
Employers can request to file Forms 941 instead of
Form 944. If you received notice from the IRS to file
Form 944 but would like to file Forms 941 instead, you
must contact the IRS during the first calendar quarter of
the tax year to request to file Forms 941. You must receive
written notice from the IRS to file Forms 941 instead of
Form 944 before you may file these forms. For more infor-
mation on requesting to file Forms 941, including the
methods and deadlines for making a request, see the In-
structions for Form 944.
Correcting Form 941 or 944. If you discover an error on
a previously filed Form 941, make the correction using
Form 941-X. If you discover an error on a previously filed
Form 944, make the correction using Form 944-X. Forms
941-X and 944-X are filed separately from Forms 941 and
944. Forms 941-X and 944-X are used by employers to
claim refunds or abatements of employment taxes, rather
than Form 843. See section 13 for more information.
Zero wage return. If you haven't filed a “final” Form 940
and "final" Form 941 or 944, or aren't a “seasonal” em-
ployer (Form 941 only), you must continue to file a Form
940 and Form 941 or 944, even for periods during which
you paid no wages. The IRS encourages you to file your
“zero wage” Form 940 and Form 941 or 944 electronically.
Go to IRS.gov/EmploymentEfile for more information on
electronic filing.
Federal tax deposits must be made by electronic
funds transfer (EFT). You must use EFT to make all
federal tax deposits. Generally, an EFT is made using the
Electronic Federal Tax Payment System (EFTPS). If you
don't want to use EFTPS, you can arrange for your tax
professional, financial institution, payroll service, or other
trusted third party to make electronic deposits on your be-
half. Also, you may arrange for your financial institution to
initiate a same-day wire payment on your behalf. EFTPS
is a free service provided by the Department of the Treas-
ury. Services provided by your tax professional, financial
institution, payroll service, or other third party may have a
fee.
For more information on making federal tax deposits,
see How To Deposit in section 11. To get more informa-
tion about EFTPS or to enroll in EFTPS, go to EFTPS.gov,
or call 800-555-4477 or 800-733-4829 (TDD). Additional
information about EFTPS is also available in Pub. 966.
Pub. 5146 explains employment tax examinations
and appeal rights. Pub. 5146 provides employers with
information on how the IRS selects employment tax re-
turns to be examined, what happens during an exam, and
what options an employer has in responding to the results
of an exam, including how to appeal the results. Pub.
5146 also includes information on worker classification is-
sues and tip exams.
Electronic Filing and Payment
Businesses can enjoy the benefits of filing and paying
their federal taxes electronically. Whether you rely on a
tax professional or handle your own taxes, the IRS offers
you convenient programs to make filing and payment
easier.
Spend less time worrying about taxes and more time
running your business. Use e-file and EFTPS to your
benefit.
• For e-file, go to IRS.gov/EmploymentEfile for
additional information. A fee may be charged to file
electronically.
• For EFTPS, go to EFTPS.gov or call EFTPS Customer
Service at 800-555-4477 or 800-733-4829 (TDD).
• For electronic filing of Forms W-2, Wage and Tax
Statement, go to SSA.gov/employer. You may be
required to file Forms W-2 electronically. For details,
see the General Instructions for Forms W-2 and W-3.
If you’re filing your tax return or paying your fed-
eral taxes electronically, a valid EIN is required at
the time the return is filed or the payment is made.
If a valid EIN isn't provided, the return or payment won't be
processed. This may result in penalties. See section 1 for
information about applying for an EIN.
Electronic funds withdrawal (EFW). If you file your em-
ployment tax return electronically, you can e-file and use
EFW to pay the balance due in a single step using tax
preparation software or through a tax professional. How-
ever, don't use EFW to make federal tax deposits. For
more information on paying your taxes using EFW, go to
IRS.gov/EFW.
Credit or debit card payments. You can pay the bal-
ance due shown on your employment tax return by credit
or debit card. Your payment will be processed by a pay-
ment processor who will charge a processing fee. Don't
use a credit or debit card to make federal tax deposits. For
more information on paying your taxes with a credit or
debit card, go to IRS.gov/PayByCard.
Online payment agreement. You may be eligible to ap-
ply for an installment agreement online if you can’t pay the
full amount of tax you owe when you file your employment
tax return. For more information, see the instructions for
your employment tax return or go to IRS.gov/OPA.
Forms in Spanish
You can provide Formulario W-4(SP), Certificado de
Retenciones del Empleado, in place of Form W-4,
Employee's
Withholding
Certificate,
to
your
Spanish-speaking employees. For more information, see
Pub. 17(SP), El Impuesto Federal sobre los Ingresos
(Para Personas Físicas). For nonemployees, such as
independent contractors, Formulario W-9(SP), Solicitud y
Certificación
del Número
de
Identificación
del
Contribuyente, may be used in place of Form W-9,
CAUTION
!
Publication 15 (2021)

Page 5
Request
for Taxpayer
Identification Number and
Certification.
Hiring New Employees
Eligibility for employment. You must verify that each
new employee is legally eligible to work in the United
States. This includes completing the U.S. Citizenship and
Immigration Services (USCIS) Form I-9, Employment Eli-
gibility Verification. You can get Form I-9 at USCIS.gov/
Forms. For more information, visit the USCIS website at
USCIS.gov/I-9-Central
or
call
800-375-5283
or
800-767-1833 (TTY).
You may use the Social Security Number Verification
Service (SSNVS) at SSA.gov/employer/ssnv.htm to verify
that an employee name matches an SSN. A person may
have a valid SSN but not be authorized to work in the 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
employee is an employee who hasn't previously been em-
ployed by you or was previously employed by you but has
been separated from such prior employment for at least
60 consecutive days.
Many states accept a copy of Form W-4 with employer
information added. Visit the Office of Child Support En-
forcement
website
at
acf.hhs.gov/programs/css/
employers for more information.
W-4 request. Ask each new employee to complete the
2021 Form W-4. See section 9.
Name and social security number (SSN). Record
each new employee's name and SSN from his or her so-
cial security card. Any employee without a social security
card should apply for one. See section 4.
Information Returns
You must file Forms W-2 to report wages paid to
employees. You may also be required to file information
returns to report certain types of payments made during
the year. For example, you must file Form 1099-NEC,
Nonemployee Compensation, to report payments of $600
or more to persons not treated as employees (for
example, independent contractors) for services performed
for your trade or business. For details about filing Forms
1099 and for information about required electronic filing,
see the General Instructions for Certain Information
Returns for general information, and the separate, specific
instructions for each information return you file (for
example, the Instructions for Forms 1099-MISC and
1099-NEC). Generally, don't use Forms 1099 to report
wages and other compensation you paid to employees;
report these on Form W-2. See the General Instructions
for Forms W-2 and W-3 for details about filing Form W-2
and for information about required electronic filing.
Information reporting customer service site. The IRS
operates an information return customer service site to
answer questions about reporting on Forms W-2, W-3,
1099, and other information returns. If you have questions
related
to
reporting on
information
returns, call
866-455-7438 (toll free), 304-263-8700 (toll call), or
304-579-4827 (TDD/TTY for persons who are deaf, hard
of hearing, or have a speech disability). The center can
also be reached by email at mccirp@irs.gov. Don't include
tax identification numbers (TINs) or attachments in email
correspondence because electronic mail isn't secure.
Federal Income Tax
Withholding
Withhold federal income tax from each wage payment or
supplemental unemployment compensation plan benefit
payment according to the employee's Form W-4 and the
correct withholding table in Pub. 15-T. If you're paying
supplemental wages to an employee, see section 7. If you
have nonresident alien employees, see Withholding
income taxes on the wages of nonresident alien
employees in section 9.
See section 8 of Pub. 15-A, Employer’s Supplemental
Tax Guide, for information about withholding on pensions
(including distributions from tax-favored retirement plans),
annuities, and individual retirement arrangements (IRAs).
Page 6
Publication 15 (2021)
Nonpayroll Income Tax
Withholding
Nonpayroll federal income tax withholding (reported on
Forms 1099 and Form W-2G, Certain Gambling
Winnings) must be reported on Form 945, Annual Return
of Withheld Federal Income Tax. Separate deposits are
required for payroll (Form 941 or Form 944) and
nonpayroll (Form 945) withholding. Nonpayroll items
include the following.
• Pensions (including distributions from tax-favored
retirement plans, for example, section 401(k), section
403(b), and governmental section 457(b) plans),
annuities, and IRA distributions.
• Military retirement.
• Gambling winnings.
•
Indian gaming profits.
• Certain government payments on which the recipient
elected voluntary income tax withholding.
• Dividends and other distributions by an ANC on which
the recipient elected voluntary income tax withholding.
• Payments subject to backup withholding.
For details on depositing and reporting nonpayroll
income tax withholding, see the Instructions for Form 945.
Distributions from nonqualified pension plans and
deferred compensation plans. Because distributions to
participants from some nonqualified pension plans and
deferred compensation plans (including section 457(b)
plans of tax-exempt organizations) are treated as wages
and are reported on Form W-2, income tax withheld must
be reported on Form 941 or Form 944, not on Form 945.
However, distributions from such plans to a beneficiary or
estate of a deceased employee aren't wages and are re-
ported on Forms 1099-R, Distributions From Pensions,
Annuities, Retirement or Profit-Sharing Plans, IRAs, Insur-
ance Contracts, etc.; income tax withheld must be repor-
ted on Form 945.
Backup withholding. You must generally withhold 24%
of certain taxable payments if the payee fails to furnish
you with his or her correct taxpayer identification number
(TIN). This withholding is referred to as “backup withhold-
ing.”
Payments subject to backup withholding include inter-
est, dividends, patronage dividends, rents, royalties, com-
missions, nonemployee compensation, payments made in
settlement of payment card or third-party network transac-
tions, and certain other payments you make in the course
of your trade or business. In addition, transactions by
brokers and barter exchanges and certain payments
made by fishing boat operators are subject to backup
withholding.
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 . . . . . . .
6
File Form 944 if required (pay tax with return if
Record employees' names and SSNs from
not required to deposit) . . . . . . . . . . . . . . . . . . . . .
33
social security cards . . . . . . . . . . . . . . . . . . . .
6
Remind employees to submit a new Form W-4
Ask employees for Form W-4 . . . . . . . . . . . . . .
6
if they need to change their withholding . . . . . . . . . .
22
Each Payday:
Ask for a new Form W-4 from employees
Withhold federal income tax based on each
claiming exemption from income tax
employee's Form W-4 . . . . . . . . . . . . . . . . . . .
22
withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23
Withhold employee's share of social security
Reconcile Forms 941 (or Form 944) with Forms
and Medicare taxes . . . . . . . . . . . . . . . . . . . .
25
W-2 and W-3 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35
Deposit:
Furnish each employee a Form W-2 . . . . . . . . . . . .
10
• Withheld income tax
File Copy A of Forms W-2 and the transmittal
• Withheld and employer social security taxes
Form W-3 with the SSA . . . . . . . . . . . . . . . . . . . . .
10
• Withheld and employer Medicare taxes . . . . .
27
Furnish each other payee a Form 1099 (for example,
Note: Due date of deposit generally depends
Form 1099-NEC) . . . . . . . . . . . . . . . . . . . . . . . . .
10
on your deposit schedule (monthly or
File Forms 1099 and the transmittal Form
semiweekly).
1096 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
Quarterly (By April 30, July 31, October 31,
File Form 940 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
and January 31):
File Form 945 for any nonpayroll income tax
Deposit FUTA tax if undeposited amount
withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
is over $500 . . . . . . . . . . . . . . . . . . . . . . . . . .
39
File Form 941 (pay tax with return if not
required to deposit) . . . . . . . . . . . . . . . . . . . . .
33
Publication 15 (2021)

Page 7
Backup withholding doesn't apply to wages, pen-
sions, annuities, IRAs (including simplified em-
ployee pension (SEP) and SIMPLE retirement
plans), section 404(k) distributions from an employee
stock ownership plan (ESOP), medical savings accounts
(MSAs), health savings accounts (HSAs), long-term-care
benefits, or real estate transactions.
You can use Form W-9 or Formulario W-9(SP) to re-
quest payees to furnish a TIN. Form W-9 or Formulario
W-9(SP) must be used when payees must certify that the
number furnished is correct, or when payees must certify
that they’re not subject to backup withholding or are ex-
empt from backup withholding. The Instructions for the
Requester of Form W-9 or Formulario W-9(SP) includes a
list of types of payees who are exempt from backup with-
holding. For more information, see Pub. 1281, Backup
Withholding for Missing and Incorrect Name/TIN(s).
Recordkeeping
Keep all records of employment taxes for at least 4 years.
These should be available for IRS review. Your records
should include the following information.
• Your EIN.
• Amounts and dates of all wage, annuity, and pension
payments.
• Amounts of tips reported to you by your employees.
• Records of allocated tips.
• The fair market value of in-kind wages paid.
• Names, addresses, SSNs, and occupations of
employees and recipients.
• Any employee copies of Forms W-2 and W-2c
returned to you as undeliverable.
• Dates of employment for each employee.
• Periods for which employees and recipients were paid
while absent due to sickness or injury and the amount
and weekly rate of payments you or third-party payers
made to them.
• Copies of employees' and recipients' income tax
withholding certificates (Forms W-4, W-4P, W-4(SP),
W-4S, and W-4V).
• Dates and amounts of tax deposits you made and
acknowledgment numbers for deposits made by
EFTPS.
• Copies of returns filed and confirmation numbers.
• Records of fringe benefits and expense
reimbursements provided to your employees,
including substantiation.
• Documentation to substantiate any credits claimed.
For more information on substantiation requirements,
go to IRS.gov/PLC and IRS.gov/ERC.
CAUTION
!
• Documentation to substantiate the amount of any
employer or employee share of social security tax that
you deferred and paid.
Change of Business Name
Notify the IRS immediately if you change your business
name. Write to the IRS office where you file your returns,
using the Without a payment address provided in the
instructions for your employment tax return, to notify the
IRS of any business name change. See Pub. 1635 to see
if you need to apply for a new EIN.
Change of Business Address
or Responsible Party
Notify the IRS immediately if you change your business
address or responsible party. Complete and mail Form
8822-B to notify the IRS of a business address or
responsible party change. For a definition of “responsible
party,” see the Instructions for Form SS-4.
Filing Addresses
Generally, your filing address for Form 940, 941, 943,
944, 945, or CT-1 depends on the location of your
residence or principal place of business and whether or
not you’re including a payment with your return. There are
separate filing addresses for these returns if you’re a
tax-exempt organization or government entity. See the
separate instructions for Form 940, 941, 943, 944, 945, or
CT-1 for the filing addresses.
Private Delivery Services
You can use certain private delivery services (PDSs)
designated by the IRS to meet the “timely mailing as
timely filing” rule for tax returns. Go to IRS.gov/PDS for the
current list of PDSs.
The PDS can tell you how to get written proof of the
mailing date.
For the IRS mailing address to use if you're using a
PDS, go to IRS.gov/PDSstreetAddresses. Select the
mailing address listed on the webpage that is in the same
state as the address to which you would mail returns filed
without a payment, as shown in the instructions for your
employment tax return.
PDSs can't deliver items to P.O. boxes. You must
use the U.S. Postal Service to mail any item to an
IRS P.O. box address.
CAUTION
!
Page 8
Publication 15 (2021)
Dishonored Payments
Any form of payment that is dishonored and returned from
a financial institution is subject to a penalty. The penalty is
$25 or 2% of the payment, whichever is more. However,
the penalty on dishonored payments of $24.99 or less is
an amount equal to the payment. For example, a
dishonored payment of $18 is charged a penalty of $18.
E-News for Payroll
Professionals
The IRS has a subscription-based email service for
payroll professionals. Subscribers will receive periodic
updates from the IRS. The updates may include
information regarding recent legislative changes affecting
federal payroll reporting, IRS news releases and special
announcements pertaining to the payroll industry, new
employment tax procedures, and other
information
specifically affecting federal payroll tax returns. To
subscribe, go to IRS.gov/ENewsPayroll.
Telephone Help
Tax questions. You can call the IRS Business and Spe-
cialty Tax Line with your employment tax questions at
800-829-4933.
Help for people with disabilities. You may call
800-829-4059 (TDD/TTY for persons who are deaf, hard
of hearing, or have a speech disability) with any employ-
ment tax questions. You may also use this number for as-
sistance with unresolved tax problems.
Additional
information. Go
to
IRS.gov/
EmploymentTaxes for additional employment tax informa-
tion. For information about employer responsibilities under
the Affordable Care Act, go to IRS.gov/ACA. For informa-
tion about COVID-19
tax
relief, go
to
IRS.gov/
Coronavirus.
Ordering Employer Tax Forms,
Instructions, and Publications
You can view, download, or print most of the forms,
instructions, and publications you may need at IRS.gov/
Forms. Otherwise, you can go to IRS.gov/OrderForms to
place an order and have them mailed to you. The IRS will
process your order as soon as possible. Don't resubmit
requests you've already sent us. You can get forms,
instructions, and publications faster online.
Instead of ordering paper Forms W-2 and W-3,
consider filing them electronically using the SSA's free
e-file service. Visit the SSA's Employer W-2 Filing
Instructions & Information webpage at SSA.gov/employer
to register for Business Services Online. You’ll be able to
create Forms W-2 online and submit them to the SSA by
typing your wage information into easy-to-use fill-in fields.
In addition, you can print out completed copies of Forms
W-2 to file with state or local governments, distribute to
your employees, and keep for your records. Form W-3 will
be created for you based on your Forms W-2.
Photographs of Missing
Children
The IRS is a proud partner with the National Center for
Missing & Exploited Children® (NCMEC). Photographs of
missing children selected by the Center may appear in
this publication on pages that would otherwise be blank.
You can help bring these children home by looking at the
photographs
and
calling
1-800-THE-LOST
(1-800-843-5678) if you recognize a child.
Calendar
The
following
is a
list of
important dates and
responsibilities. The dates listed here haven’t been
adjusted for Saturdays, Sundays, and legal holidays (see
the TIP next). Pub. 509, Tax Calendars (for use in 2021),
adjusts the dates for Saturdays, Sundays, and legal
holidays. See section 11 for information about depositing
taxes reported on Forms 941, 944, and 945. See section
14 for information about depositing FUTA tax. Due dates
for forms required for health coverage reporting aren't
listed here. For these dates, see Pub. 509.
If any date shown next for filing a return, furnish-
ing a form, or depositing taxes falls on a Saturday,
Sunday, or legal holiday, the due date is the next
business day. The term "legal holiday" means any legal
holiday in the District of Columbia. A statewide legal holi-
day delays a filing due date only if the IRS office where
you’re required to file is located in that state. However, a
statewide legal holiday doesn't delay the due date of fed-
eral tax deposits. See Deposits Due on Business Days
Only in section 11. For any filing due date, you’ll meet the
“file” or “furnish” requirement if the envelope containing
the return or form is properly addressed, contains suffi-
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
Services under Reminders, earlier, for more information.
Fiscal year taxpayers. The due dates listed next apply
whether you use a calendar or a fiscal year.
By January 31
File Form 941 or Form 944.
File Form 941 for the
fourth quarter of the previous calendar year and deposit
any undeposited income, social security, and Medicare
taxes. You may pay these taxes with Form 941 if your
total tax liability for the quarter (Form 941, line 12) is less
than $2,500. File Form 944 for the previous calendar
TIP
Publication 15 (2021)

Page 9
year instead of Form 941 if the IRS has notified you in
writing to file Form 944. Pay any undeposited income,
social security, and Medicare taxes with your Form 944.
You may pay these taxes with Form 944 if your total tax
liability for the year (Form 944, line 9) is less than
$2,500. For additional rules on when you can pay your
taxes with your return, see Payment with return in sec-
tion 11. If you timely deposited all taxes when due, you
may file by February 10.
File Form 940.
File Form 940 to report any FUTA tax.
However, if you deposited all of the FUTA tax when due,
you may file by February 10. See section 14 for more in-
formation on FUTA tax.
Furnish Forms 1099 and W-2.
Furnish each em-
ployee a completed 2020 Form W-2. Furnish a 2020
Form 1099-NEC to payees for nonemployee compensa-
tion. Most Forms 1099 must be furnished to payees by
January 31, but some can be furnished by February 15.
For more information, see the Guide to Information Re-
turns chart in the General Instructions for Certain Infor-
mation Returns.
File Form W-2.
File with the SSA Copy A of all 2020
paper and electronic Forms W-2 with Form W-3, Trans-
mittal of Wage and Tax Statements. For more informa-
tion on reporting Form W-2 information to the SSA elec-
tronically, visit
the SSA’s Employer W-2 Filing
Instructions &
Information webpage at SSA.gov/
employer. If filing electronically, via the SSA's Form W-2
Online service, the SSA will generate Form W-3 data
from the electronic submission of Form(s) W-2.
File Form 1099-NEC reporting nonemployee compen-
sation.
File with the IRS Copy A of all 2020 paper
and electronic Forms 1099-NEC with Form 1096, An-
nual Summary and Transmittal of U.S. Information Re-
turns. For information on filing information returns elec-
tronically with the IRS, see Pub. 1220, Specifications for
Electronic Filing of Forms 1097, 1098, 1099, 3921,
3922, 5498, and W-2G.
File Form 945.
File Form 945 to report any nonpayroll
federal income tax withheld. If you deposited all taxes
when due, you may file by February 10. See Nonpayroll
Income Tax Withholding under Reminders, earlier, for
more information.
By February 15
Request a new Form W-4 from exempt employees.
Ask for a new Form W-4 from each employee who
claimed exemption from income tax withholding last
year.
On February 16
Forms W-4 claiming exemption from withholding ex-
pire.
Any Form W-4 claiming exemption from with-
holding for the previous year has now expired. Begin
withholding for any employee who previously claimed
exemption from withholding but hasn't given you a new
Form W-4 for the current year. If the employee doesn't
give you a new Form W-4, withhold tax as if he or she
had checked the box for Single or Married filing sepa-
rately in Step 1(c) and made no entries in Step 2, Step
3, or Step 4 of the 2021 Form W-4. See section 9 for
more information. If the employee gives you a new Form
W-4 claiming exemption from withholding after February
15, you may apply the exemption to future wages, but
don't refund taxes withheld while the exempt status
wasn't in place.
By February 28
File paper 2020 Forms 1099 and 1096.
File Copy A
of all paper 2020 Forms 1099, except Forms 1099-NEC,
with Form 1096 with the IRS. For electronically filed re-
turns, see By March 31, later.
File paper Form 8027.
File paper Form 8027, Em-
ployer's Annual Information Return of Tip Income and
Allocated Tips, with the IRS. See section 6. For elec-
tronically filed returns, see By March 31 next.
By March 31
File electronic 2020 Forms 1099 and 8027.
File
electronic 2020 Forms 1099, except Forms 1099-NEC,
with the IRS. Also file electronic Form 8027 with the IRS.
For information on filing information returns electroni-
cally with the IRS, see Pub. 1220 and Pub. 1239, Speci-
fications for Electronic Filing of Form 8027, Employer's
Annual Information Return of Tip Income and Allocated
Tips.
By April 30, July 31, October 31, and
January 31
Deposit FUTA taxes.
Deposit FUTA tax for the quar-
ter (including any amount carried over from other quar-
ters) if over $500. If $500 or less, carry it over to the next
quarter. See section 14 for more information.
File Form 941.
File Form 941 and deposit any unde-
posited income, social security, and Medicare taxes.
You may pay these taxes with Form 941 if your total tax
liability for the quarter (Form 941, line 12) is less than
$2,500. If you timely deposited all taxes when due, you
may file by May 10, August 10, November 10, or Febru-
ary 10, respectively. Don't file Form 941 for these quar-
ters if you have been notified to file Form 944 and you
didn't request and receive written notice from the IRS to
file quarterly Forms 941.
Before December 1
New Forms W-4.
Remind employees to submit a new
Form W-4 if their filing status, other income, deductions,
or credits have changed or will change for the next year.
If you deferred the employer share of social se-
curity tax under the CARES Act, one-half is due
by December 31, 2021, and the remainder is due
TIP
Page 10
Publication 15 (2021)
by December 31, 2022. Any payments or deposits you
make before December 31, 2021, are first applied against
your payment due on December 31, 2021, and then ap-
plied against your payment due on December 31, 2022. If
you deferred the employee share of social security taxes
under Notice 2020-65, you must withhold and pay the de-
ferred taxes ratably from wages paid between January 1,
2021, and December 31, 2021. Because both December
31, 2021, and December 31, 2022, are nonbusiness days,
payments made on the next business day will be consid-
ered timely. For more information and payment instruc-
tions, see the Instructions for Form 941, or the Instructions
for Form 944, IRS.gov/ETD, Notice 2020-65, and Notice
2021-11. For information about how to report the deferred
amount of the employee share of social security tax on
Form W-2 and Form W-2c for 2020, see IRS.gov/FormW2
and the 2021 General Instructions for Forms W-2 and W-3
(available in early 2021).
Introduction
This publication explains your tax responsibilities as an
employer. It explains the requirements for withholding, de-
positing, reporting, paying, and correcting employment
taxes. It explains the forms you must give to your employ-
ees, those your employees must give to you, and those
you must send to the IRS and the SSA. References to “in-
come tax” in this guide apply only to “federal” income tax.
Contact your state or local tax department to determine
their rules.
When you pay your employees, you don't pay them all
the money they earned. As their employer, you have the
added responsibility of withholding taxes from their pay-
checks. The federal income tax and employees' share of
social security and Medicare taxes that you withhold from
your employees' paychecks are part of their wages that
you pay to the U.S. Treasury instead of to your employ-
ees. Your employees trust that you pay the withheld taxes
to the U.S. Treasury by making federal tax deposits. This
is the reason that these withheld taxes are called trust
fund taxes. If federal income, social security, or Medicare
taxes that must be withheld aren't withheld or aren't de-
posited or paid to the U.S. Treasury, the trust fund recov-
ery penalty may apply. See section 11 for more informa-
tion.
Additional employment tax information is available in
Pubs. 15-A, 15-B, and 15-T. Pub. 15-A includes special-
ized information supplementing the basic employment tax
information provided in this publication. Pub. 15-B, Em-
ployer's Tax Guide to Fringe Benefits, contains informa-
tion about the employment tax treatment and valuation of
various types of noncash compensation. Pub. 15-T in-
cludes the federal income tax withholding tables and in-
structions on how to use the tables.
Most employers must withhold (except FUTA), deposit,
report, and pay the following employment taxes.
•
Income tax.
• Social security tax.
• Medicare tax.
• FUTA tax.
There are exceptions to these requirements. See sec-
tion 15 for guidance. Railroad retirement taxes are ex-
plained in the Instructions for Form CT-1. Employment
taxes for agricultural employers are explained in Pub. 51.
If you have employees in the U.S. Virgin Islands, Guam,
American Samoa, or the Commonwealth of the Northern
Mariana Islands, see Pub. 80.
Comments and suggestions. We welcome your com-
ments about this publication and your suggestions for fu-
ture editions.
You can send us comments
through
IRS.gov/
FormComments.
Or you can write to:
Internal Revenue Service
Tax Forms and Publications
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224
Although we can’t respond individually to each com-
ment received, we do appreciate your feedback and will
consider your comments as we revise our tax forms, in-
structions, and publications. Do not send tax questions,
tax returns, or payments to this address.
Getting answers to your tax questions. If you have
a tax question not answered by this publication, check
IRS.gov and How To Get Tax Help at the end of this publi-
cation.
Federal government employers. The information in this
publication, including the rules for making federal tax de-
posits, applies to federal agencies.
State and local government employers. Payments to
employees for services in the employ of state and local
government employers are generally subject to federal in-
come tax withholding but not FUTA tax. Most elected and
appointed public officials of state or local governments are
employees under common law rules. See chapter 3 of
Pub. 963, Federal-State Reference Guide. In addition, wa-
ges, with certain exceptions, are subject to social security
and Medicare taxes. See section 15 for more information
on the exceptions.
If an election worker is employed in another capacity
with the same government entity, see Revenue Ruling
2000-6 on page 512 of Internal Revenue Bulletin 2000-6
at IRS.gov/pub/irs-irbs/irb00-06.pdf.
You can get information on reporting and social secur-
ity coverage from your local IRS office. If you have any
questions about coverage under a section 218 (Social Se-
curity Act) agreement, contact the appropriate state offi-
cial. To find your State Social Security Administrator, visit
the National Conference of State Social Security Adminis-
trators website at NCSSSA.org.
Indian tribal governments. See Pub. 4268 for employ-
ment tax information for Indian tribal governments.
Publication 15 (2021)

Page 11
Disregarded entities and qualified subchapter S sub-
sidiaries (QSubs). Eligible single-owner disregarded en-
tities and QSubs are treated as separate entities for em-
ployment tax purposes. Eligible single-member entities
must report and pay employment taxes on wages paid to
their employees using the entities' own names and EINs.
See
Regulations
sections
1.1361-4(a)(7)
and
301.7701-2(c)(2)(iv).
1. Employer Identification
Number (EIN)
If you’re required to report employment taxes or give tax
statements to employees or annuitants, you need an EIN.
The EIN is a nine-digit number the IRS issues. The dig-
its are arranged as follows: 00-0000000. It is used to iden-
tify the tax accounts of employers and certain others who
have no employees. Use your EIN on all of the items you
send to the IRS and the SSA. For more information, see
Pub. 1635.
If you don’t have an EIN, you may apply for one online
by visiting the IRS website at IRS.gov/EIN. You may also
apply for an EIN by faxing or mailing Form SS-4 to the
IRS. If the principal business was created or organized
outside of the United States or U.S. territories, you may
also apply for an EIN by calling 267-941-1099 (toll call).
Don't use an SSN in place of an EIN.
You should have only one EIN. If you have more than
one and aren't sure which one to use, call 800-829-4933
or 800-829-4059 (TDD/TTY for persons who are deaf,
hard of hearing, or have a speech disability). Give the
numbers you have, the name and address to which each
was assigned, and the address of your main place of busi-
ness. The IRS will tell you which number to use. For more
information, see Pub. 1635.
If you took over another employer's business (see Suc-
cessor employer in section 9), don't use that employer's
EIN. If you’ve applied for an EIN but don't have your EIN
by the time a return is due, file a paper return and write
“Applied For” and the date you applied for it in the space
shown for the number.
Always be sure the EIN on the form you file ex-
actly matches the EIN the IRS assigned to your
business. Don't use your SSN or individual tax-
payer identification number (ITIN) on forms that ask for an
EIN. If you used an EIN (including a prior owner's EIN) on
Form 941, or Form 944, that is different from the EIN re-
ported on Form W-3, see Box h—Other EIN used this year
in the General Instructions for Forms W-2 and W-3. The
name and EIN on Form 945 must match the name and
EIN on your information returns where federal income tax
withholding is reported (for example, backup withholding
reported on Form 1099-NEC). Filing a Form 945 with an
incorrect EIN or using another business's EIN may result
in penalties and delays in processing your return.
CAUTION
!
2. Who Are Employees?
Generally, employees are defined either under common
law or under statutes for certain situations. See Pub. 15-A
for details on statutory employees and nonemployees.
Employee status under common law. Generally, a
worker who performs services for you is your employee if
you have the right to control what will be done and how it
will be done. This is so even when you give the employee
freedom of action. What matters is that you have the right
to control the details of how the services are performed.
See Pub. 15-A for more information on how to determine
whether an individual providing services is an independ-
ent contractor or an employee.
Generally, people in business for themselves aren't
employees. For example, doctors, lawyers, veterinarians,
and others in an independent trade in which they offer
their services to the public are usually not employees. If
the business is incorporated, corporate officers who work
in the business are employees of the corporation.
If an employer-employee relationship exists, it doesn't
matter what it is called. The employee may be called an
agent or independent contractor. It also doesn't matter
how payments are measured or paid, what they’re called,
or if the employee works full or part time.
Statutory employees. If someone who works for you
isn't an employee under the common law rules discussed
earlier, don't withhold federal income tax from his or her
pay, unless backup withholding applies. Although the fol-
lowing persons may not be common law employees,
they’re considered employees by statute for social secur-
ity and Medicare tax purposes under certain conditions.
• An agent or commission driver who delivers meat,
vegetable, fruit, or bakery products; beverages (other
than milk); laundry; or dry cleaning for someone else.
• A full-time life insurance salesperson who sells primar-
ily for one company.
• A homeworker who works at home or off premises ac-
cording to guidelines of the person for whom the work
is done, with materials or goods furnished by and re-
turned to that person or to someone that person des-
ignates.
• A traveling or city salesperson (other than an agent or
commission driver) who works full time (except for
sideline sales activities) for one firm or person getting
orders from customers. The orders must be for mer-
chandise for resale or supplies for use in the custom-
er's business. The customers must be retailers,
wholesalers, contractors, or operators of hotels, res-
taurants, or other businesses dealing with food or
lodging.
For FUTA tax, an agent or commission driver and a
traveling or city salesperson are considered statutory em-
ployees; however, a full-time life insurance salesperson
and a homeworker aren't considered statutory employees.
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Publication 15 (2021)
Statutory nonemployees. Direct sellers, qualified real
estate agents, and certain companion sitters are, by law,
considered nonemployees. They’re generally treated as
self-employed for all federal tax purposes, including in-
come and employment taxes. See Pub. 15-A for more in-
formation.
H-2A agricultural workers. On Form W-2, don't check
box 13 (Statutory employee), as H-2A workers aren't stat-
utory employees.
Treating employees as nonemployees. You’ll gener-
ally be liable for social security and Medicare taxes and
withheld income tax if you don't deduct and withhold these
taxes because you treated an employee as a nonem-
ployee. You may be able to figure your liability using spe-
cial section 3509 rates for the employee share of social
security and Medicare taxes and federal income tax with-
holding. The applicable rates depend on whether you filed
required Forms 1099. You can't recover the employee
share of social security tax, Medicare tax, or income tax
withholding from the employee if the tax is paid under sec-
tion 3509. You’re liable for the income tax withholding re-
gardless of whether the employee paid income tax on the
wages. You continue to owe the full employer share of so-
cial security and Medicare taxes. The employee remains
liable for the employee share of social security and Medi-
care taxes. See section 3509 for details. Also see the In-
structions for Form 941-X or the Instructions for Form
944-X.
Section 3509 rates aren't available if you intentionally
disregard the requirement to withhold taxes from the em-
ployee or if you withheld income taxes but not social se-
curity or Medicare taxes. Section 3509 isn't available for
reclassifying statutory employees. See Statutory employ-
ees, earlier.
If the employer issued required information returns, the
section 3509 rates are the following.
• For social security taxes: employer rate of 6.2% plus
20% of the employee rate of 6.2%, for a total rate of
7.44% of wages.
• For Medicare taxes: employer rate of 1.45% plus 20%
of the employee rate of 1.45%, for a total rate of
1.74% of wages.
• For Additional Medicare Tax: 0.18% (20% of the em-
ployee rate of 0.9%) of wages subject to Additional
Medicare Tax.
• For federal income tax withholding, the rate is 1.5% of
wages.
If the employer didn't issue required information re-
turns, the section 3509 rates are the following.
• For social security taxes: employer rate of 6.2% plus
40% of the employee rate of 6.2%, for a total rate of
8.68% of wages.
• For Medicare taxes: employer rate of 1.45% plus 40%
of the employee rate of 1.45%, for a total rate of
2.03% of wages.
• For Additional Medicare Tax: 0.36% (40% of the em-
ployee rate of 0.9%) of wages subject to Additional
Medicare Tax.
• For federal income tax withholding, the rate is 3.0% of
wages.
Relief provisions. If you have a reasonable basis for
not treating a worker as an employee, you may be re-
lieved from having to pay employment taxes for that
worker. To get this relief, you must file all required federal
tax returns, including information returns, on a basis con-
sistent with your treatment of the worker. You (or your
predecessor) must not have treated any worker holding a
substantially similar position as an employee for any peri-
ods beginning after 1977. See Pub. 1976, Do You Qualify
for Relief Under Section 530.
IRS help. If you want the IRS to determine whether a
worker is an employee, file Form SS-8.
Voluntary Classification Settlement Program (VCSP).
Employers who are currently treating their workers (or a
class or group of workers) as independent contractors or
other nonemployees and want to voluntarily reclassify
their workers as employees for future tax periods may be
eligible to participate in the VCSP if certain requirements
are met. File Form 8952 to apply for the VCSP. For more
information, go to IRS.gov/VCSP.
Business Owned and Operated by
Spouses
If you and your spouse jointly own and operate a business
and share in the profits and losses, you may be partners
in a partnership, whether or not you have a formal partner-
ship agreement. See Pub. 541 for more details. The part-
nership is considered the employer of any employees,
and is liable for any employment taxes due on wages paid
to its employees.
Exception—Qualified joint venture. For tax years be-
ginning after 2006, the Small Business and Work Oppor-
tunity Tax Act of 2007 (Public Law 110-28) provides that a
“qualified joint venture,” whose only members are spou-
ses filing a joint income tax return, can elect not to be trea-
ted as a partnership for federal tax purposes. A qualified
joint venture conducts a trade or business where:
• The only members of the joint venture are spouses
who file a joint income tax return,
• Both spouses materially participate (see Material par-
ticipation in the instructions for Schedule C (Form
1040), line G) in the trade or business (mere joint own-
ership of property isn't enough),
• Both spouses elect to not be treated as a partnership,
and
• The business is co-owned by both spouses and isn't
held in the name of a state law entity such as a part-
nership or limited liability company (LLC).
Publication 15 (2021)

Page 13
To make the election, all items of income, gain, loss,
deduction, and credit must be divided between the spou-
ses, in accordance with each spouse's interest in the ven-
ture, and reported as sole proprietors on a separate
Schedule C (Form 1040) or Schedule F (Form 1040).
Each spouse must also file a separate Schedule SE (Form
1040) to pay self-employment taxes, as applicable.
Spouses using the qualified joint venture rules are trea-
ted as sole proprietors for federal tax purposes and gener-
ally don't need an EIN. If employment taxes are owed by
the qualified joint venture, either spouse may report and
pay the employment taxes due on the wages paid to the
employees using the EIN of that spouse's sole proprietor-
ship. Generally, filing as a qualified joint venture won't in-
crease the spouses' total tax owed on the joint income tax
return. However, it gives each spouse credit for social se-
curity earnings on which retirement benefits are based
and for Medicare coverage without filing a partnership re-
turn.
Note. If your spouse is your employee, not your part-
ner, see One spouse employed by another in section 3.
For more information on qualified joint ventures, go to
IRS.gov/QJV.
Exception—Community income. If you and your
spouse wholly own an unincorporated business as com-
munity property under the community property laws of a
state, foreign country, or U.S. possession, you can treat
the business either as a sole proprietorship (of the spouse
who carried on the business) or a partnership. You may
still make an election to be taxed as a qualified joint ven-
ture instead of a partnership. See Exception—Qualified
joint venture, earlier.
3. Family Employees
Child employed by parents. Payments for the services
of a child under age 18 who works for his or her parent in
a trade or business aren't subject to social security and
Medicare taxes if the trade or business is a sole proprie-
torship or a partnership in which each partner is a parent
of the child. If these payments are for work other than in a
trade or business, such as domestic work in the parent's
private home, they’re not subject to social security and
Medicare taxes until the child reaches age 21. However,
see Covered services of a child or spouse, later. Pay-
ments for the services of a child under age 21 who works
for his or her parent, whether or not in a trade or business,
aren't subject to FUTA tax. Payments for the services of a
child of any age who works for his or her parent are gener-
ally subject to income tax withholding unless the pay-
ments are for domestic work in the parent's home, or un-
less the payments are for work other than in a trade or
business and are less than $50 in the quarter or the child
isn't regularly employed to do such work.
One spouse employed by another. The wages for the
services of an individual who works for his or her spouse
in a trade or business are subject to income tax withhold-
ing and social security and Medicare taxes, but not to
FUTA tax. However, the payments for services of one
spouse employed by another in other than a trade or busi-
ness, such as domestic service in a private home, aren't
subject to social security, Medicare, and FUTA taxes.
Covered services of a child or spouse. The wages for
the services of a child or spouse are subject to income tax
withholding as well as social security, Medicare, and
FUTA taxes if he or she works for:
• A corporation, even if it is controlled by the child's pa-
rent or the individual's spouse;
• A partnership, even if the child's parent is a partner,
unless each partner is a parent of the child;
• A partnership, even if the individual's spouse is a part-
ner; or
• An estate, even if it is the estate of a deceased parent.
In these situations, the child or spouse is considered to
work for the corporation, partnership, or estate, not you.
Parent employed by son or daughter. When the em-
ployer is a son or daughter employing his or her parent,
the following rules apply.
• Payments for the services of a parent in the son’s or
daughter’s (the employer’s) trade or business are sub-
ject to income tax withholding and social security and
Medicare taxes.
• Payments for the services of a parent not in the son’s
or daughter’s (the employer’s) trade or business are
generally not subject to social security and Medicare
taxes.
Social security and Medicare taxes do apply to
payments made to a parent for domestic services
if all of the following apply.
• The parent is employed by his or her son or daughter.
• The son or daughter (the employer) has a child or
stepchild (including an adopted child) living in the
home.
• The son or daughter (the employer) is a widow or wid-
ower, divorced and not remarried, or living with a
spouse who, because of a mental or physical condi-
tion, can't care for the child or stepchild for at least 4
continuous weeks in the calendar quarter in which the
service is performed.
• The child or stepchild is either under age 18 or, due to
a mental or physical condition, requires the personal
care of an adult for at least 4 continuous weeks in the
calendar quarter in which the service is performed.
Payments made to a parent employed by his or her
child aren't subject to FUTA tax, regardless of the type of
services provided.
CAUTION
!
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Publication 15 (2021)
4. Employee's Social Security
Number (SSN)
You’re required to get each employee's name and SSN
and to enter them on Form W-2. This requirement also ap-
plies to resident and nonresident alien employees. You
should ask your employee to show you his or her social
security card. The employee may show the card if it is
available.
Don't accept a social security card that says “Not
valid for employment.” An SSN issued with this
legend doesn't permit employment.
You may, but aren't required to, photocopy the social
security card if the employee provides it. If you don't pro-
vide the correct employee name and SSN on Form W-2,
you may owe a penalty unless you have reasonable
cause. See Pub. 1586, Reasonable Cause Regulations &
Requirements for Missing and Incorrect Name/TINs, for
information on the requirement to solicit the employee's
SSN.
Applying for a social security card. Any employee
who is legally eligible to work in the United States and
doesn't have a social security card can get one by com-
pleting Form SS-5, Application for a Social Security Card,
and submitting the necessary documentation. You can get
Form SS-5 from the SSA website at SSA.gov/forms/
ss-5.pdf, at SSA offices, or by calling 800-772-1213 or
800-325-0778 (TTY). The employee must complete and
sign Form SS-5; it can't be filed by the employer. You may
be asked to supply a letter to accompany Form SS-5 if the
employee has exceeded his or her yearly or lifetime limit
for the number of replacement cards allowed.
Applying for an SSN. If you file Form W-2 on paper and
your employee applied for an SSN but doesn't have one
when you must file Form W-2, enter “Applied For” on the
form. If you’re filing electronically, enter all zeros
(000-00-0000 if creating forms online or 000000000 if up-
loading a file) in the SSN field. When the employee re-
ceives the SSN, file Copy A of Form W-2c, Corrected
Wage and Tax Statement, with the SSA to show the em-
ployee's SSN. Furnish Copies B, C, and 2 of Form W-2c
to the employee. Up to 25 Forms W-2c for each Form
W-3c, Transmittal of Corrected Wage and Tax State-
ments, may be filed per session over the Internet, with no
limit on the number of sessions. For more information, visit
the SSA's Employer W-2 Filing Instructions & Information
webpage at SSA.gov/employer. Advise your employee to
correct the SSN on his or her original Form W-2.
Correctly record the employee's name and SSN. Re-
cord the name and SSN of each employee as they’re
shown on the employee's social security card. If the em-
ployee's name isn't correct as shown on the card (for ex-
ample, because of marriage or divorce), the employee
should request an updated card from the SSA. Continue
to report the employee's wages under the old name until
CAUTION
!
the employee shows you the updated social security card
with the corrected name.
If the SSA issues the employee an updated card after a
name change, or a new card with a different SSN after a
change in alien work status, file a Form W-2c to correct
the name/SSN reported for the most recently filed Form
W-2. It isn't necessary to correct other years if the previ-
ous name and number were used for years before the
most recent Form W-2.
IRS
individual
taxpayer
identification numbers
(ITINs) for aliens. Don't accept an ITIN in place of an
SSN for employee identification or for work. An ITIN is
only available to resident and nonresident aliens who
aren't eligible for U.S. employment and need identification
for other tax purposes. You can identify an ITIN because it
is a nine-digit number, formatted like an SSN, that starts
with the number "9" and has a range of numbers from “50–
65,” “70–88,” “90–92,” and “94–99” for the fourth and fifth
digits (for example, 9NN-7N-NNNN). For more informa-
tion about ITINs, see the Instructions for Form W-7 or go
to IRS.gov/ITIN.
An individual with an ITIN who later becomes eli-
gible to work in the United States must obtain an
SSN. If the individual is currently eligible to work
in the United States, instruct the individual to apply for an
SSN and follow the instructions under Applying for an
SSN, earlier. Don't use an ITIN in place of an SSN on
Form W-2.
Verification of SSNs. Employers and authorized report-
ing agents can use the Social Security Number Verifica-
tion Service (SSNVS) to instantly verify that an employee
name matches an SSN for up to 10 names and SSNs (per
screen) at a time, or submit an electronic file of up to
250,000 names and SSNs and usually receive the results
the next business day. Go to SSA.gov/employer/ssnv.htm
for more information. A person may have a valid SSN but
not be authorized to work in the United States. Employers
may use E-Verify at e-verify.gov to confirm the employ-
ment eligibility of newly hired employees.
Registering for SSNVS. You must register online to
use SSNVS. To register, visit the SSA's website at
SSA.gov/bso and click on the Register link under Busi-
ness Services Online. Follow the registration instructions
to obtain a user identification (ID) and password. You’ll
need to provide the following information about yourself
and your company.
• Name.
• SSN.
• Date of birth.
• Type of employer.
• EIN.
• Company name, address, and telephone number.
• Email address.
When you have completed the online registration proc-
ess, the SSA will mail a one-time activation code to you.
CAUTION
!
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Page 15
You must enter the activation code online to use SSNVS.
Your employees must receive authorization from you to
use SSNVS. If your employees register, the one-time acti-
vation code will be mailed to you.
5. Wages and Other
Compensation
Wages subject to federal employment taxes generally in-
clude all pay you give to an employee for services per-
formed. The pay may be in cash or in other forms. It in-
cludes
salaries,
vacation
allowances,
bonuses,
commissions, and taxable fringe benefits. It doesn't matter
how you measure or make the payments. Amounts an
employer pays as a bonus for signing or ratifying a con-
tract in connection with the establishment of an em-
ployer-employee relationship and an amount paid to an
employee for cancellation of an employment contract and
relinquishment of contract rights are wages subject to so-
cial security, Medicare, and FUTA taxes and income tax
withholding. Also, compensation paid to a former em-
ployee for services performed while still employed is wa-
ges subject to employment taxes.
More information. See section 6 for a discussion of tips
and section 7 for a discussion of supplemental wages.
Also, see section 15 for exceptions to the general rules for
wages. Pub. 15-A provides additional information on wa-
ges, including nonqualified deferred compensation, and
other compensation. Pub. 15-B provides information on
other forms of compensation, including:
• Accident and health benefits,
• Achievement awards,
• Adoption assistance,
• Athletic facilities,
• De minimis (minimal) benefits,
• Dependent care assistance,
• Educational assistance,
• Employee discounts,
• Employee stock options,
• Employer-provided cell phones,
• Group-term life insurance coverage,
• Health savings accounts,
• Lodging on your business premises,
• Meals,
• No-additional-cost services,
• Retirement planning services,
• Transportation (commuting) benefits,
• Tuition reduction, and
• Working condition benefits.
Employee business expense reimbursements. A re-
imbursement or allowance arrangement is a system by
which you pay the advances, reimbursements, and
charges for your employees' business expenses. How you
report a reimbursement or allowance amount depends on
whether you have an accountable or a nonaccountable
plan. If a single payment includes both wages and an ex-
pense reimbursement, you must specify the amount of the
reimbursement.
These rules apply to all allowable ordinary and neces-
sary employee business expenses.
Accountable plan. To be an accountable plan, your
reimbursement or allowance arrangement must require
your employees to meet all three of the following rules.
1. They must have paid or incurred allowable expenses
while performing services as your employees. The re-
imbursement or advance must be payment for the ex-
penses and must not be an amount that would have
otherwise been paid to the employee as wages.
2. They must substantiate these expenses to you within
a reasonable period of time.
3. They must return any amounts in excess of substanti-
ated expenses within a reasonable period of time.
Amounts paid under an accountable plan aren't wages
and aren't subject to income, social security, Medicare,
and FUTA taxes.
If the expenses covered by this arrangement aren't
substantiated (or amounts in excess of substantiated ex-
penses aren't returned within a reasonable period of time),
the amount paid under the arrangement in excess of the
substantiated expenses is treated as paid under a nonac-
countable plan. This amount is subject to income, social
security, Medicare, and FUTA taxes for the first payroll pe-
riod following the end of the reasonable period of time.
A reasonable period of time depends on the facts and
circumstances. Generally, it is considered reasonable if
your employees receive their advance within 30 days of
the time they pay or incur the expenses, adequately ac-
count for the expenses within 60 days after the expenses
were paid or incurred, and return any amounts in excess
of expenses within 120 days after the expenses were paid
or incurred. Alternatively, it is considered reasonable if
you give your employees a periodic statement (at least
quarterly) that asks them to either return or adequately ac-
count for outstanding amounts and they do so within 120
days.
Nonaccountable plan. Payments to your employee
for travel and other necessary expenses of your business
under a nonaccountable plan are wages and are treated
as supplemental wages and subject to income, social se-
curity, Medicare, and FUTA taxes. Your payments are
treated as paid under a nonaccountable plan if:
• Your employee isn't required to or doesn't substanti-
ate timely those expenses to you with receipts or other
documentation,
• You advance an amount to your employee for busi-
ness expenses and your employee isn't required to or
Page 16
Publication 15 (2021)
doesn't return timely any amount he or she doesn't
use for business expenses,
• You advance or pay an amount to your employee re-
gardless of whether you reasonably expect the em-
ployee to have business expenses related to your
business, or
• You pay an amount as a reimbursement you would
have otherwise paid as wages.
See section 7 for more information on supplemental
wages.
Per diem or other fixed allowance. You may reim-
burse your employees by travel days, miles, or some
other fixed allowance under the applicable revenue proce-
dure. In these cases, your employee is considered to have
accounted to you if your reimbursement doesn't exceed
rates established by the federal government. The stand-
ard mileage rate for auto expenses is provided in Pub.
15-B.
The government per diem rates for meals and lodging
in the continental United States can be found by visiting
the U.S. General Services Administration website at
GSA.gov/PerDiemRates. Other than the amount of these
expenses, your employees' business expenses must be
substantiated (for example, the business purpose of the
travel or the number of business miles driven). For infor-
mation on substantiation methods, see Pub. 463.
If the per diem or allowance paid exceeds the amounts
substantiated, you must report the excess amount as wa-
ges. This excess amount is subject to income tax with-
holding and payment of social security, Medicare, and
FUTA taxes. Show the amount equal to the substantiated
amount (that is, the nontaxable portion) in box 12 of Form
W-2 using code “L.”
Wages not paid in money. If in the course of your trade
or business you pay your employees in a medium that is
neither cash nor a readily negotiable instrument, such as
a check, you’re said to pay them “in kind.” Payments in
kind may be in the form of goods, lodging, food, clothing,
or services. Generally, the fair market value of such pay-
ments at the time they’re provided is subject to federal in-
come tax withholding and social security, Medicare, and
FUTA taxes.
However, noncash payments for household work, agri-
cultural labor, and service not in the employer's trade or
business are exempt from social security, Medicare, and
FUTA taxes. Withhold income tax on these payments only
if you and the employee agree to do so. Nonetheless,
noncash payments for agricultural labor, such as com-
modity wages, are treated as cash payments subject to
employment taxes if the substance of the transaction is a
cash payment.
Meals and lodging. The value of meals isn't taxable in-
come and isn't subject to federal income tax withholding
and social security, Medicare, and FUTA taxes if the
meals are furnished for the employer's convenience and
on the employer's premises. The value of lodging isn't
subject to federal income tax withholding and social se-
curity, Medicare, and FUTA taxes if the lodging is fur-
nished for the employer's convenience, on the employer's
premises, and as a condition of employment.
“For the convenience of the employer” means you have
a substantial business reason for providing the meals and
lodging other than to provide additional compensation to
the employee. For example, meals you provide at the
place of work so that an employee is available for emer-
gencies during his or her lunch period are generally con-
sidered to be for your convenience. You must be able to
show these emergency calls have occurred or can rea-
sonably be expected to occur, and that the calls have re-
sulted, or will result, in you calling on your employees to
perform their jobs during their meal period.
Whether meals or lodging are provided for the conven-
ience of the employer depends on all of the facts and cir-
cumstances. A written statement that the meals or lodging
are for your convenience isn't sufficient.
50% test. If over 50% of the employees who are pro-
vided meals on an employer's business premises receive
these meals for the convenience of the employer, all
meals provided on the premises are treated as furnished
for the convenience of the employer. If this 50% test is
met, the value of the meals is excludable from income for
all employees and isn't subject to federal income tax with-
holding or employment taxes. For more information, see
Pub. 15-B.
Health insurance plans. If you pay the cost of an acci-
dent or health insurance plan for your employees, includ-
ing an employee's spouse and dependents, your pay-
ments aren't wages and aren't subject to social security,
Medicare, and FUTA taxes, or federal income tax with-
holding. Generally, this exclusion also applies to qualified
long-term care insurance contracts. However, for income
tax withholding, the value of health insurance benefits
must be included in the wages of S corporation employ-
ees who own more than 2% of the S corporation (2%
shareholders). For social security, Medicare, and FUTA
taxes, the health insurance benefits are excluded from the
2% shareholder's wages. See Announcement 92-16 for
more information. You can find Announcement 92-16 on
page 53 of Internal Revenue Bulletin 1992-5.
Health savings accounts (HSAs) and medical sav-
ings accounts (MSAs). Your contributions to an em-
ployee's HSA or Archer MSA aren't subject to social se-
curity, Medicare, or FUTA taxes, or federal income tax
withholding if it is reasonable to believe at the time of pay-
ment of the contributions they’ll be excludable from the in-
come of the employee. To the extent it isn't reasonable to
believe they’ll be excludable, your contributions are sub-
ject to these taxes. Employee contributions to their HSAs
or MSAs through a payroll deduction plan must be inclu-
ded in wages and are subject to social security, Medicare,
and FUTA taxes and income tax withholding. However,
HSA contributions made under a salary reduction ar-
rangement in a section 125 cafeteria plan aren't wages
and aren't subject to employment taxes or withholding.
For more information, see the Instructions for Form 8889.
Publication 15 (2021)

Page 17
Medical care reimbursements. Generally, medical care
reimbursements paid for an employee under an employ-
er's self-insured medical reimbursement plan aren't wa-
ges and aren't subject to social security, Medicare, and
FUTA taxes, or income tax withholding. See Pub. 15-B for
a rule regarding inclusion of certain reimbursements in the
gross income of highly compensated individuals.
Differential wage payments. Differential wage pay-
ments are any payments made by an employer to an indi-
vidual for a period during which the individual is perform-
ing service in the uniformed services while on active duty
for a period of more than 30 days and represent all or a
portion of the wages the individual would have received
from the employer if the individual were performing serv-
ices for the employer.
Differential wage payments are wages for income tax
withholding, but aren't subject to social security, Medi-
care, or FUTA taxes. Employers should report differential
wage payments in box 1 of Form W-2. For more informa-
tion about the tax treatment of differential wage payments,
see Revenue Ruling 2009-11, 2009-18 I.R.B. 896, availa-
ble at IRS.gov/irb/2009-18_IRB#RR-2009-11.
Fringe benefits. You must generally include fringe bene-
fits in an employee's wages (but see Nontaxable fringe
benefits next). The benefits are subject to income tax
withholding and employment taxes. Fringe benefits in-
clude cars you provide, flights on aircraft you provide, free
or discounted commercial flights, vacations, discounts on
property or services, memberships in country clubs or
other social clubs, and tickets to entertainment or sporting
events. In general, the amount you must include is the
amount by which the fair market value of the benefit is
more than the sum of what the employee paid for it plus
any amount the law excludes. There are other special
rules you and your employees may use to value certain
fringe benefits. See Pub. 15-B for more information.
Nontaxable fringe benefits. Some fringe benefits
aren't taxable (or are minimally taxable) if certain condi-
tions are met. See Pub. 15-B for details. The following are
some examples of nontaxable fringe benefits.
• Services provided to your employees at no additional
cost to you.
• Qualified employee discounts.
• Working condition fringes that are property or services
that would be allowable as a business expense or de-
preciation expense deduction to the employee if he or
she had paid for them. Examples include a company
car for business use and subscriptions to business
magazines.
• Certain minimal value fringes (including an occasional
cab ride when an employee must work overtime and
meals you provide at eating places you run for your
employees if the meals aren't furnished at below cost).
• Qualified transportation fringes subject to specified
conditions and dollar limitations (including transporta-
tion in a commuter highway vehicle, any transit pass,
and qualified parking).
• The use of on-premises athletic facilities operated by
you if substantially all of the use is by employees, their
spouses, and their dependent children.
• Qualified tuition reduction an educational organization
provides to its employees for education. For more in-
formation, see Pub. 970.
• Employer-provided cell phones provided primarily for
a noncompensatory business reason.
However, don't exclude the following fringe benefits
from the wages of highly compensated employees unless
the benefit is available to other employees on a nondiscri-
minatory basis.
• No-additional-cost services.
• Qualified employee discounts.
• Meals provided at an employer-operated eating fa-
cility.
• Reduced tuition for education.
For more information, including the definition of a highly
compensated employee, see Pub. 15-B.
When taxable fringe benefits are treated as paid.
You may choose to treat certain taxable noncash fringe
benefits as paid by the pay period, by the quarter, or on
any other basis you choose, as long as you treat the ben-
efits as paid at least once a year. You don't have to make
a formal choice of payment dates or notify the IRS of the
dates you choose. You don't have to make this choice for
all employees. You may change methods as often as you
like, as long as you treat all benefits provided in a calen-
dar year as paid by December 31 of the calendar year.
See section 4 of Pub. 15-B for more information, including
a discussion of the special accounting rule for fringe bene-
fits provided during November and December.
Valuation of fringe benefits. Generally, you must
determine the value of fringe benefits no later than Janu-
ary 31 of the next year. Before January 31, you may rea-
sonably estimate the value of the fringe benefits for purpo-
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-
riod and figure withholding taxes on the total, or you may
withhold federal income tax on the value of the fringe ben-
efits at the optional flat 22% supplemental wage rate.
However, see Withholding on supplemental wages when
an employee receives more than $1 million of supplemen-
tal wages during the calendar year in section 7.
You may choose not to withhold income tax on the
value of an employee's personal use of a vehicle you pro-
vide. You must, however, withhold social security and
Medicare taxes on the use of the vehicle. See Pub. 15-B
for more information on this election.
Depositing taxes on fringe benefits. Once you
choose when fringe benefits are paid, you must deposit
taxes in the same deposit period you treat the fringe bene-
fits as paid. To avoid a penalty, deposit the taxes following
the general deposit rules for that deposit period.
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Publication 15 (2021)
If you determine by January 31 you overestimated the
value of a fringe benefit at the time you withheld and de-
posited for it, you may claim a refund for the overpayment
or have it applied to your next employment tax return. See
Valuation of fringe benefits, earlier. If you underestimated
the value and deposited too little, you may be subject to a
failure-to-deposit (FTD) penalty. See section 11 for infor-
mation on deposit penalties.
If you deposited the required amount of taxes but with-
held a lesser amount from the employee, you can recover
from the employee the social security, Medicare, or in-
come taxes you deposited on his or her behalf, and inclu-
ded in the employee's Form W-2. However, you must re-
cover the income taxes before April 1 of the following
year.
Sick pay. In general, sick pay is any amount you pay un-
der a plan to an employee who is unable to work because
of sickness or injury. These amounts are sometimes paid
by a third party, such as an insurance company or an em-
ployees' trust. In either case, these payments are subject
to social security, Medicare, and FUTA taxes. These
taxes don't apply to sick pay paid more than 6 calendar
months after the last calendar month in which the em-
ployee worked for the employer. The payments are al-
ways subject to federal income tax. See section 6 of Pub.
15-A for more information.
For purposes of this publication, all references to
"sick pay" mean ordinary sick pay, not "qualified
sick leave wages" under the FFCRA. See Coro-
navirus (COVID-19) related employment tax credits and
other tax relief, earlier, under What's New for more infor-
mation about qualified sick leave wages.
Identity protection services. The value of identity pro-
tection services provided by an employer to an employee
isn't included in an employee's gross income and doesn't
need to be reported on an information return (such as
Form W-2) filed for employees. This includes identity pro-
tection services provided before a data breach occurs.
This exception doesn't apply to cash received instead of
identity protection services or to proceeds received under
an identity theft insurance policy. For more information,
see Announcement 2015-22, 2015-35 I.R.B. 288, availa-
ble at IRS.gov/irb/2015-35_IRB#ANN-2015-22, and An-
nouncement 2016-02, 2016-3 I.R.B. 283, available at
IRS.gov/irb/2016-03_IRB#ANN-2016-02.
6. Tips
Cash tips your employee receives from customers are
generally subject to withholding. Your employee must re-
port cash tips to you by the 10th of the month after the
month the tips are received. Cash tips include tips paid by
cash, check, debit card, and credit card. The report
should include tips you paid over to the employee for
charge customers, tips the employee received directly
from customers, and tips received from other employees
under any tip-sharing arrangement. Both directly and
TIP
indirectly tipped employees must report tips to you. No re-
port is required for months when tips are less than $20.
Your employee reports the tips on Form 4070 or on a simi-
lar statement. The statement must be signed and dated
by the employee and must include:
• The employee's name, address, and SSN;
• Your name and address;
• The month and year (or the beginning and ending
dates, if the statement is for a period of less than 1
calendar month) the report covers; and
• The total of tips received during the month or period.
Both Forms 4070 and 4070-A, Employee's Daily Re-
cord of Tips, are included in Pub. 1244, Employee's Daily
Record of Tips and Report to Employer.
You’re permitted to establish a system for elec-
tronic tip reporting by employees. See Regula-
tions section 31.6053-1(d).
Collecting taxes on tips. You must collect federal in-
come tax, employee social security tax, and employee
Medicare tax on the employee's tips. The withholding
rules for withholding an employee's share of Medicare tax
on tips also apply to withholding the Additional Medicare
Tax once wages and tips exceed $200,000 in the calen-
dar year.
You can collect these taxes from the employee's wages
(excluding tips) or from other funds he or she makes avail-
able. See Tips are treated as supplemental wages in sec-
tion 7 for more information. Stop collecting the employee
social security tax when his or her wages and tips for tax
year 2021 reach $142,800; collect the income and em-
ployee Medicare taxes for the whole year on all wages
and tips. You’re responsible for the employer social secur-
ity tax on wages and tips until the wages (including tips)
reach the limit. You’re responsible for the employer Medi-
care tax for the whole year on all wages and tips. Tips are
considered to be paid at the time the employee reports
them to you. Deposit taxes on tips based on your deposit
schedule as described in section 11. File Form 941 or
Form 944 to report withholding and employment taxes on
tips.
Ordering rule. If, by the 10th of the month after the
month for which you received an employee's report on
tips, you don't have enough employee funds available to
deduct the employee tax, you no longer have to collect it.
If there aren't enough funds available, withhold taxes in
the following order.
1. Withhold on regular wages and other compensation.
2. Withhold social security and Medicare taxes on tips.
3. Withhold income tax on tips.
Reporting tips. Report tips and any collected and un-
collected social security and Medicare taxes on Form W-2
and on Form 941, lines 5b, 5c, and, if applicable, 5d
(Form 944, lines 4b, 4c, and, if applicable, 4d). Report a
negative adjustment on Form 941, line 9 (Form 944,
line 6), for the uncollected social security and Medicare
TIP
Publication 15 (2021)

Page 19
taxes. Enter the amount of uncollected social security tax
and Medicare tax in box 12 of Form W-2 with codes “A”
and “B.” Don't include any uncollected Additional Medi-
care Tax in box 12 of Form W-2. For additional informa-
tion on reporting tips, see section 13 and the General In-
structions for Forms W-2 and W-3.
Revenue Ruling 2012-18 provides guidance for em-
ployers regarding social security and Medicare taxes im-
posed on tips, including information on the reporting of the
employer share of social security and Medicare taxes un-
der section 3121(q), the difference between tips and serv-
ice charges, and the section 45B credit. See Revenue
Ruling 2012-18, 2012-26 I.R.B. 1032, available at
IRS.gov/irb/2012-26_IRB#RR-2012-18.
FUTA tax on tips. If an employee reports to you in writ-
ing $20 or more of tips in a month, the tips are also subject
to FUTA tax.
Allocated tips. If you operate a large food or beverage
establishment, you must report allocated tips under cer-
tain circumstances. However, don't withhold income, so-
cial security, or Medicare taxes on allocated tips.
A large food or beverage establishment is one that pro-
vides food or beverages for consumption on the premises,
where tipping is customary, and where there were nor-
mally more than 10 employees on a typical business day
during the preceding year.
The tips may be allocated by one of three meth-
ods—hours worked, gross receipts, or good faith agree-
ment. For information about these allocation methods,
and for information about required electronic filing of Form
8027, see the Instructions for Form 8027. For more infor-
mation on filing Form 8027 electronically with the IRS, see
Pub. 1239.
Tip Rate Determination and Education Program. Em-
ployers may participate in the Tip Rate Determination and
Education Program. The program primarily consists of two
voluntary agreements developed to improve tip income
reporting by helping taxpayers to understand and meet
their tip reporting responsibilities. The two agreements are
the Tip Rate Determination Agreement (TRDA) and the
Tip Reporting Alternative Commitment (TRAC). A tip
agreement, the Gaming Industry Tip Compliance Agree-
ment (GITCA), is available for the gaming (casino) indus-
try. For more information, see Pub. 3144.
More information. Advise your employees to see Pub.
531 or use the IRS Interactive Tax Assistant at IRS.gov/
TipIncome for help in determining if their tip income is tax-
able and for information about how to report tip income.
7. Supplemental Wages
Supplemental wages are wage payments to an employee
that aren't regular wages. They include, but aren't limited
to, bonuses, commissions, overtime pay, payments for
accumulated sick leave, severance pay, awards, prizes,
back pay, reported tips, retroactive pay increases, and
payments for nondeductible moving expenses. However,
employers have the option to treat overtime pay and tips
as regular wages instead of supplemental wages. Other
payments subject to the supplemental wage rules include
taxable fringe benefits and expense allowances paid un-
der a nonaccountable plan. How you withhold on supple-
mental wages depends on whether the supplemental pay-
ment is identified as a separate payment from regular
wages. See Regulations section 31.3402(g)-1 for addi-
tional guidance. Also see Revenue Ruling 2008-29,
2008-24
I.R.B.
1149,
available
at
IRS.gov/irb/
2008-24_IRB#RR-2008-29.
Withholding on supplemental wages when an em-
ployee receives more than $1 million of supplemen-
tal wages from you during the calendar year. Special
rules apply to the extent supplemental wages paid to any
one employee during the calendar year exceed $1 million.
If a supplemental wage payment, together with other sup-
plemental wage payments made to the employee during
the calendar year, exceeds $1 million, the excess is sub-
ject to withholding at 37% (or the highest rate of income
tax for the year). Withhold using the 37% rate without re-
gard to the employee's Form W-4. In determining supple-
mental wages paid to the employee during the year, in-
clude payments from all businesses under common
control. For more information, see Treasury Decision
9276, 2006-37 I.R.B. 423, available at IRS.gov/irb/
2006-37_IRB#TD-9276.
Withholding on supplemental wage payments to an
employee who doesn't receive $1 million of supple-
mental wages during the calendar year. If the supple-
mental wages paid to the employee during the calendar
year are less than or equal to $1 million, the following
rules apply in determining the amount of income tax to be
withheld.
Supplemental wages combined with regular wages.
If you pay supplemental wages with regular wages but
don't specify the amount of each, withhold federal income
tax as if the total were a single payment for a regular pay-
roll period.
Supplemental wages identified separately from regu-
lar wages. If you pay supplemental wages separately
(or combine them in a single payment and specify the
amount of each), the federal income tax withholding
method depends partly on whether you withhold income
tax from your employee's regular wages.
1. If you withheld income tax from an employee's regular
wages in the current or immediately preceding calen-
dar year, you can use one of the following methods
for the supplemental wages.
a. Withhold a flat 22% (no other percentage al-
lowed).
b. If the supplemental wages are paid concurrently
with regular wages, add the supplemental wages
to the concurrently paid regular wages and with-
hold federal income tax as if the total were a single
payment for a regular payroll period. If there are
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Publication 15 (2021)