Publication 15 - Introductory Material


Future Developments

For the latest information about developments related to Publication 15 (Circular E), such as legislation enacted after it was published, go to www.irs.gov/pub15.

What's New

Social security and Medicare tax for 2014. The social security tax rate is 6.2% each for the employee and employer, unchanged from 2013. The social security wage base limit is $117,000.The Medicare tax rate is 1.45% each for the employee and employer, unchanged from 2013. There is no wage base limit for Medicare tax.Social security and Medicare taxes apply to the wages of household workers you pay $1,900 or more in cash or an equivalent form of compensation. Social security and Medicare taxes apply to election workers who are paid $1,600 or more in cash or an equivalent form of compensation.

2014 withholdng tables. This publication includes the 2014 Percentage Method Tables and Wage Bracket Tables for Income Tax Withholding.

Withholding allowance. The 2014 amount for one withholding allowance on an annual basis is $3,950.

Voluntary withholding on dividends and other distributions by an Alaska Native Corporation (ANC). A shareholder of an ANC may now 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, Voluntary Withholding Request. For more information see Notice 2013-77, 2013-50 I.R.B. 632, available at www.irs.gov/irb/2013-50_IRB/ar10.html.

Change of responsible party. Beginning January 1, 2014, any entity with an employer identification number (EIN) must file Form 8822-B, Change of Address or Responsible Party — Business, to report the latest change to its responsible party. Form 8822-B must be filed within 60 days of the change. If the change in the identity of your responsible party occurred before 2014, and you have not previously notified the IRS of the change, file Form 8822-B before March 1, 2014, reporting only the most recent change. For a definition of “responsible party,” see the Form 8822-B instructions.

Same-sex marriage. For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. For more information, see Revenue Ruling 2013-17, 2013-38 I.R.B. 201, available at www.irs.gov/irb/2013-38_IRB/ar07.html. Notice 2013-61 provides special administrative procedures for employers to make claims for refunds or adjustments of overpayments of social security and Medicare taxes with respect to certain same-sex spouse benefits before expiration of the period of limitations. Notice 2013-61, 2013-44 I.R.B. 432, is available at www.irs.gov/irb/2013-44_IRB/ar10.html.

Reminders

Additional Medicare Tax withholding. In addition to withholding Medicare tax at 1.45%, you must withhold a 0.9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Additional Medicare Tax is only imposed on the employee. There is no employer share of Additional Medicare Tax. All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold.For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments , in section 15. For more information on Additional Medicare Tax, visit IRS.gov and enter “Additional Medicare Tax” in the search box.

Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans. The work opportunity tax credit is available for eligible unemployed veterans who began work on or after November 22, 2011, and before January 1, 2014. Qualified tax-exempt organizations that hire eligible unemployed veterans can claim the work opportunity tax credit against their payroll tax liability using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. For more information, visit IRS.gov and enter “work opportunity tax credit” in the search box.

Outsourcing payroll duties. Employers are responsible to ensure that tax returns are filed and deposits and payments are made, even if the employer contracts with a third party to perform these acts. The employer remains responsible if the third party fails to perform any required action. If 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 provider or reporting agent, visit IRS.gov and enter “outsourcing payroll duties” in the search box for helpful information on this topic.

COBRA premium assistance credit. The credit for COBRA premium assistance payments applies to premiums paid for employees involuntarily terminated between September 1, 2008, and May 31, 2010, and to premiums paid for up to 15 months. See COBRA premium assistance credit under Introduction.

Federal tax deposits must be made by electronic funds transfer. You must use electronic funds transfer to make all federal tax deposits. Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). If you do not 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 behalf. 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 Treasury. 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 information about EFTPS or to enroll in EFTPS, visit www.eftps.gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started.

You must receive written notice from the IRS to file Form 944. If you have been filing Forms 941, Employer's QUARTERLY Federal Tax Return (or Forms 941-SS, Employer's QUARTERLY Federal Tax Return—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, Employer's ANNUAL Federal Tax Return, instead of Forms 941, you must contact the IRS 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 requesting to file Form 944, visit IRS.gov and enter “file employment taxes annually” in the search box.

Employers can request to file Forms 941 instead of Form 944. If you received notice from the IRS and have been filing Form 944 but would like to file Forms 941 instead, you must contact the IRS 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 information on requesting to file Form 944, visit IRS.gov and enter “file employment taxes annually” in the search box.

Aggregate Form 941 filers. Agents must complete Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, when filing an aggregate Form 941. Aggregate Forms 941 may only be 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, Employer/Payer Appointment of Agent, with the IRS.

Aggregate Form 940 filers. Agents 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.

Electronic Filing and Payment

 Now, more than ever before, businesses can enjoy the benefits of filing and paying their federal taxes electronically. Whether you rely on a tax professional or handle your own taxes, the IRS offers you convenient programs to make filing and payment easier.Spend less time and worry about taxes and more time running your business. Use e-file and the Electronic Federal Tax Payment System (EFTPS) to your benefit.

If you are filing your tax return or paying your federal taxes electronically, a valid EIN is required. If a valid EIN is not provided, the return or payment will not be processed. This may result in penalties and delays in processing your return or payment.

Electronic funds withdrawal (EFW). If you file Form 940, Form 941, Form 944, or Form 945 electronically, you can e-file and e-pay (electronic funds withdrawal) the balance due in a single step using tax preparation software or through a tax professional. However, do not use EFW to make federal tax deposits. For more information on paying your taxes using EFW, visit the IRS website at www.irs.gov/e-pay. A fee may be charged to file electronically.

Credit or debit card payments. For information on paying your taxes with a credit or debit card, visit the IRS website at www.irs.gov/e-pay. However, do not use credit or debit cards to make federal tax deposits.

Forms in Spanish

You can provide Formulario W-4(SP), Certificado de Exención de Retenciones del Empleado, in place of Form W-4, Employee's Withholding Allowance Certificate, to your Spanish-speaking employees. For more information, see Publicación 17(SP), El Impuesto Federal sobre los Ingresos (Para Personas Físicas). For nonemployees, Formulario W-9(SP), Solicitud y Certificación del Número de Identificación del Contribuyente, may be used in place of Form W-9, Request for Taxpayer Identification Number and Certification.

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 Eligibility Verification. You can get the form from USCIS offices or by calling 1-800-870-3676. Contact the USCIS at 1-800-375-5283, or visit the USCIS website at www.uscis.gov for more information.

New hire reporting. You are required to report any new employee to a designated state new hire registry. A new employee is an employee who has not previously been employed 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 Enforcement website at www.acf.hhs.gov/programs/cse/newhire for more information.

W-4 request. Ask each new employee to complete the 2014 Form W-4. See section 9.

Name and social security number. Record each new employee's name and number from his or her social security card. Any employee without a social security card should apply for one. See section 4.

Paying Wages, Pensions, or Annuities

Correcting Form 941 or Form 944. If you discover an error on a previously filed Form 941 or Form 944, make the correction using Form 941-X, Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund, or Form 944-X, Adjusted Employer's ANNUAL Federal Tax Return or Claim for Refund. Forms 941-X and 944-X are stand-alone forms, meaning taxpayers can file them when an error is discovered. Forms 941-X and 944-X are used by employers to claim refunds or abatements of employment taxes, rather than Form 843, Claim for Refund and Request for Abatement. See section 13 for more information.

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. If you have nonresident alien employees, see Withholding income taxes on the wages of nonresident alien employees in section 9.Withhold from periodic pension and annuity payments as if the recipient is married claiming three withholding allowances, unless he or she has provided Form W-4P, Withholding Certificate for Pension or Annuity Payments, either electing no withholding or giving a different number of allowances, marital status, or an additional amount to be withheld. Do not withhold on direct rollovers from qualified plans or governmental section 457(b) plans. See section 9 and Publication 15-A, Employer's Supplemental Tax Guide. Publication 15-A includes information about withholding on pensions and annuities.

Zero wage return. If you have not filed a “final” Form 941 or Form 944, or are not a “seasonal” employer, you must continue to file a Form 941 or Form 944 even for periods during which you paid no wages. The IRS encourages you to file your “Zero Wage” Forms 941 or 944 electronically using IRS e-file at www.irs.gov/efile.

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 (By January 31 of the current year, Page
Verify work eligibility of new employees 3     for the prior year):  
Record employees' names and SSNs from     File Form 944 if required (pay tax with return if  
  social security cards 4     not required to deposit) 29
Ask employees for Form W-4 3     Annually (see Calendar for due dates):  
  Each Payday:     Remind employees to submit a new Form W-4  
Withhold federal income tax based on each       if they need to change their withholding 20
  employee's Form W-4 20   Ask for a new Form W-4 from employees  
Withhold employee's share of social security       claiming exemption from income tax  
  and Medicare taxes 23     withholding 20
Deposit:     Reconcile Forms 941 (or Form 944) with Forms  
  • Withheld income tax       W-2 and W-3 31
  • Withheld and employer social security taxes     Furnish each employee a Form W-2 7
  • Withheld and employer Medicare taxes 24   File Copy A of Forms W-2 and the transmittal  
  Note:Due date of deposit generally depends       Form W-3 with the SSA 8
  on your deposit schedule (monthly or semiweekly)     Furnish each other payee a Form 1099 (for example, Form 1099-MISC, Miscellaneous Income) 7
  Quarterly (By April 30, July 31, October 31, and January 31):     File Forms 1099 and the transmittal Form  
Deposit FUTA tax if undeposited amount       1096 8
  is over $500 35   File Form 940 7
File Form 941 (pay tax with return if not     File Form 945 for any nonpayroll income tax  
  required to deposit) 29     withholding 8

Information Returns

You may be required to file information returns to report certain types of payments made during the year. For example, you must file Form 1099-MISC, Miscellaneous Income, 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, Instructions for Form 1099-MISC). Generally, do not 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. If you file 250 or more Forms 1099, you must file them electronically. If you file 250 or more Forms W-2, you must file them electronically. SSA will not accept Forms W-2 and W-3 filed on magnetic media.

Information reporting customer service site. The IRS operates the Enterprise Computing Center—Martinsburg, a centralized 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 1-866-455-7438 (toll free), 304-263-8700 (toll call), or 304-267-3367 (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. Do not include tax identification numbers (TINs) or attachments in email correspondence because electronic mail is not secure.

Nonpayroll Income Tax Withholding

Nonpayroll federal income tax withholding (reported on Forms 1099 and Form W-2G) 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:

  • Pensions (including distributions from tax-favored retirement plans, for example, section 401(k), section 403(b), and governmental section 457(b) plans) and annuities.

  • Military retirement.

  • Gambling winnings.

  • Indian gaming profits.

  • Certain government payments, such as unemployment compensation, social security, and Tier 1 railroad retirement benefits, subject to voluntary withholding.

  • Payments subject to backup withholding.

For details on depositing and reporting nonpayroll income tax withholding, see the Instructions for Form 945.

All income tax withholding reported on Form W-2 must be reported on Form 941, Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, Form 944, or Schedule H (Form 1040), Household Employment Taxes.

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 are not wages and are reported on Forms 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.; income tax withheld must be reported on Form 945.

Backup withholding. You generally must withhold 28% 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 withholding. Payments subject to backup withholding include interest, dividends, patronage dividends, rents, royalties, commissions, nonemployee compensation, and certain other payments you make in the course of your trade or business. In addition, transactions by brokers and barter exchanges and certain payments made by fishing boat operators are subject to backup withholding.

Backup withholding does not apply to wages, pensions, annuities, IRAs (including simplified employee pension (SEP) and SIMPLE retirement plans), section 404(k) distributions from an employee stock ownership plan (ESOP), medical savings accounts, health savings accounts, long-term-care benefits, or real estate transactions.You can use Form W-9 or Formulario W-9(SP) to request payees to furnish a TIN and to certify the number furnished is correct. You can also use Form W-9 or Formulario W-9(SP) to get certifications from payees that they are not subject to backup withholding or that they are exempt 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 withholding. For more information, see Publication 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, social security numbers, 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 payors made to them.

  • Copies of employees' and recipients' income tax withholding allowance certificates (Forms W-4, W-4P, W-4(SP), W-4S, and W-4V).

  • Copies of employees' Earned Income Credit Advance Payment Certificates (Forms W-5 and W-5(SP)).

  • 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.

Change of Business Address or Responsible Party

To notify the IRS of a change in business address or responsible party, file Form 8822-B. Do not mail Form 8822-B with your employment tax return.

Private Delivery Services

You can use certain private delivery services designated by the IRS to mail tax returns and payments. The list includes only the following:

  • DHL Express (DHL): DHL Same Day Service.

  • Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First.

  • United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A.M., UPS Worldwide Express Plus, and UPS Worldwide Express.

For the IRS mailing address to use if you are using a private delivery service, go to IRS.gov and enter “private delivery service” in the search box.

Your private delivery service can tell you how to get written proof of the mailing date.

 

Private delivery services cannot 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.

Telephone Help

Tax questions.  You can call the IRS Business and Specialty Tax Line with your employment tax questions at 1-800-829-4933.

Help for people with disabilities. You may call 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability) with any tax question or to order forms and publications. You may also use this number for assistance with unresolved tax problems.

Recorded tax information (TeleTax). The IRS TeleTax service provides recorded tax information on topics that answer many individual and business federal tax questions. You can listen to up to three topics on each call you make. Touch-Tone service is available 24 hours a day, 7 days a week. TeleTax topics are also available on the IRS website at www.irs.gov/taxtopics. Most tax topics listed below are also available in Spanish. For a complete list of TeleTax topics in Spanish, visit the IRS website at www.irs.gov/Spanish/Índice-de-Temas-Tributarios-Año-2013.A list of employment tax topics is provided next. Select, by number, the topic you want to hear and call 1-800-829-4477. For the directory of all topics, select Topic 123.

Teletax Topics

Topic No. Subject
751 Social Security and Medicare Withholding Rates
752 Form W-2—Where, When, and How to File
753 Form W-4—Employee's Withholding Allowance Certificate
755 Employer Identification Number (EIN)—How to Apply
756 Employment Taxes for Household Employees
757 Form 941 and Form 944—Deposit Requirements
758 Form 941—Employer's QUARTERLY Federal Tax Return and Form 944—Employer's ANNUAL Federal Tax Return
759 Form 940—Employer's Annual Federal Unemployment (FUTA) Tax Return—Filing and Deposit Requirements
760 Reporting and Deposit Requirements for Agricultural Employers
761 Tips—Withholding and Reporting
762 Independent Contractor vs. Employee
763 The “Affordable Care Act” of 2010 Offers Employers New Tax Deductions and Credits

Additional employment tax information. Visit the IRS website at www.irs.gov/businesses and click on the Employment Taxes link under Businesses Topics.

Ordering Employer Tax Forms and Publications

You can order employer tax forms and publications and information returns online at www.irs.gov/businesses. To order 2013 and 2014 forms, click on the Online Ordering for Information Returns and Employer Returns link. You may also order employer tax forms and publications and information returns by calling 1-800-TAX-FORM (1-800-829-3676).

Instead of ordering paper Forms W-2 and W-3, consider filing them electronically using the Social Security Administration's (SSA) free e-file service. Visit the SSA's Employer W-2 Filing Instructions & Information website at www.socialsecurity.gov/employer to register for Business Services Online. You will 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.

Filing Addresses

Generally, your filing address for Forms 940, 941, 943, 944, 945, and CT-1 depends on the location of your residence or principal place of business and whether or not you are including a payment with your return. There are separate filing addresses for these returns if you are a tax-exempt organization or government entity. See the separate instructions for Forms 940, 941, 943, 944, 945, or CT-1 for the filing addresses.

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.

Photographs of Missing Children

The IRS is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

Calendar

The following is a list of important dates. Also see Publication 509, Tax Calendars.

 

If any date shown below for filing a return, furnishing a form, or depositing taxes falls on a Saturday, Sunday, or legal holiday, use the next business day. A statewide legal holiday delays a filing due date only if the IRS office where you are required to file is located in that state. However, a statewide legal holiday does not delay the due date of federal tax deposits. See Deposits on Business Days Only in section 11. For any filing due date, you will meet the “file” or “furnish” requirement if the envelope containing the return or form is properly addressed, contains sufficient postage, and is postmarked by the U.S. Postal Service on or before the due date, or sent by an IRS-designated private delivery service on or before the due date. See Private Delivery Services under Reminders for more information.

Introduction

This publication explains your tax responsibilities as an employer. It explains the requirements for withholding, depositing, reporting, paying, and correcting employment taxes. It explains the forms you must give to your employees, those your employees must give to you, and those you must send to the IRS and SSA. This guide also has tax tables you need to figure the taxes to withhold from each employee for 2014. References to “income tax” in this guide apply only to “federal” income tax. Contact your state or local tax department to determine if their rules are different.

Additional employment tax information is available in Publication 15-A. Publication 15-A includes specialized information supplementing the basic employment tax information provided in this publication. Publication 15-B, Employer's Tax Guide to Fringe Benefits, contains information about the employment tax treatment and valuation of various types of noncash compensation.

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 section 15 for guidance. Railroad retirement taxes are explained in the Instructions for Form CT-1.

Comments and suggestions.   We welcome your comments about this publication and your suggestions for future editions.

  You can write to us at the following address:

Internal Revenue Service 
Tax Forms & Publications Division 
1111 Constitution Ave. NW, IR-6526 
Washington, DC 20224

  We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.

  You can also send us comments from www.irs.gov/formspubs. Click on More Information and then click on Comment on Tax Forms and Publications.

  Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax forms, instructions, and publications.

Federal Government employers.   The information in this publication, including the rules for making federal tax deposits, 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 income 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 Publication 963, Federal-State Reference Guide. In addition, wages, 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 www.irs.gov/pub/irs-irbs/irb00-06.pdf.

  You can get information on reporting and social security coverage from your local IRS office. If you have any questions about coverage under a section 218 (Social Security Act) agreement, contact the appropriate state official. To find your State Social Security Administrator, visit the National Conference of State Social Security Administrators website at www.ncsssa.org.

Disregarded entities and qualified subchapter S subsidiaries (QSubs).   Eligible single-owner disregarded entities and QSubs are treated as separate entities for employment tax purposes. Eligible single-member entities that have not elected to be taxed as corporations 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).

COBRA premium assistance credit.   The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. COBRA generally covers multiemployer health plans and health plans maintained by private-sector employers (other than churches) with 20 or more full and part-time employees. Parallel requirements apply to these plans under the Employee Retirement Income Security Act of 1974 (ERISA). Under the Public Health Service Act, COBRA requirements apply also to health plans covering state or local government employees. Similar requirements apply under the Federal Employees Health Benefits Program and under some state laws. For the premium assistance (or subsidy) discussed below, these requirements are all referred to as COBRA requirements.

  Under the American Recovery and Reinvestment Act of 2009 (ARRA), employers are allowed a credit against “payroll taxes” (referred to in this publication as “employment taxes”) for providing COBRA premium assistance to assistance eligible individuals. For periods of COBRA continuation coverage beginning after February 16, 2009, a group health plan must treat an assistance eligible individual as having paid the required COBRA continuation coverage premium if the individual elects COBRA coverage and pays 35% of the amount of the premium.

  An assistance eligible individual is a qualified beneficiary of an employer's group health plan who is eligible for COBRA continuation coverage during the period beginning September 1, 2008, and ending May 31, 2010, due to the involuntarily termination from employment of a covered employee during the period and elects continuation COBRA coverage. The assistance for the coverage can last up to 15 months.

  Employees terminated during the period beginning September 1, 2008, and ending May 31, 2010, who received a severance package that delayed the start of the COBRA continuation coverage, may still be eligible for premium assistance for COBRA continuation coverage. For more information see Notice 2009-27, 2009-16 I.R.B. 838, available at www.irs.gov/irb/2009-16_irb/ar09.html.

  Administrators of the group health plans (or other entities) that provide or administer COBRA continuation coverage must provide notice to assistance eligible individuals of the COBRA premium assistance.

  The 65% of the premium not paid by the assistance eligible individuals is reimbursed to the employer maintaining the group health plan. The reimbursement is made through a credit against the employer's employment tax liabilities. For information on how to claim the credit, see the Instructions for Form 941 or the Instructions for Form 944. The credit is treated as a deposit made on the first day of the return period (quarter or year). In the case of a multiemployer plan, the credit is claimed by the plan, rather than the employer. In the case of an insured plan subject to state law continuation coverage requirements, the credit is claimed by the insurance company, rather than the employer.

  Anyone claiming the credit for COBRA premium assistance payments must maintain the following information to support their claim, including the following.
  • Information on the receipt of the assistance eligible individuals' 35% share of the premium, including dates and amounts.

  • In the case of an insurance plan, a copy of invoice or other supporting statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier required under COBRA.

  • In the case of a self-insured plan, proof of the premium amount and proof of the coverage provided to the assistance eligible individuals.

  • Attestation of involuntary termination, including the date of the involuntary termination for each covered employee whose involuntary termination is the basis for eligibility for the subsidy.

  • Proof of each assistance eligible individual's eligibility for COBRA coverage and the election of COBRA coverage.

  • A record of the SSNs of all covered employees, the amount of the subsidy reimbursed with respect to each covered employee, and whether the subsidy was for one individual or two or more individuals.

  For more information, visit IRS.gov and enter “COBRA” in the search box.


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