Department of the Treasury

Internal Revenue Service

Publication 15-A

Cat. No. 21453T

Employer's 

Supplemental 

Tax Guide

(Supplement to Pub. 15, 

Employer's Tax Guide)

For use in 2024

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• IRS.gov/Vietnamese (Tiếng Việt) 

Contents

What's New ............................... 1

Reminders ............................... 1

Introduction .............................. 3

1. Who Are Employees? ..................... 4

2. Employee or Independent Contractor? ....... 6

3. Employees of Exempt Organizations ......... 9

4. Religious Exemptions and Special Rules for 

Ministers ............................ 10

5. Wages and Other Compensation ........... 11

6. Sick Pay Reporting ...................... 14

7. Special Rules for Paying Taxes ............. 21

8. Federal Income Tax Withholding on 

Retirement Payments and Annuities ....... 23

How To Get Tax Help ....................... 25

Index .................................. 28

Future Developments

For the latest information about developments related to 

Pub. 15-A, such as legislation enacted after it was 

published, go to IRS.gov/Pub15A.

What's New

Social security and Medicare tax for 2024. The social 

security tax rate is 6.2% each for the employee and employer. The social security wage base limit is $168,600.

The Medicare tax rate is 1.45% each for the employee 

and employer, unchanged from 2023. There is no wage 

base limit for Medicare tax.

Social security and Medicare taxes apply to the wages 

of household workers you pay $2,700 or more in cash wages in 2024. Social security and Medicare taxes apply to 

election workers who are paid $2,300 or more in cash or 

an equivalent form of compensation in 2024.

Reminders

Form W-4P and Form W-4R. Form W-4P, Withholding 

Certificate for Periodic Pension or Annuity Payments, (previously titled Withholding Certificate for Pension or Annuity 

Payments) was redesigned for 2022. Form W-4P is now 

used only to make withholding elections for periodic pension or annuity payments. Previously, Form W-4P was also 

used to make withholding elections for nonperiodic payments and eligible rollover distributions. Withholding elections for nonperiodic payments and eligible rollover 

Dec 5, 2023
distributions are now made on Form W-4R, Withholding 

Certificate for Nonperiodic Payments and Eligible Rollover 

Distributions. Although the redesigned Form W-4P and 

new Form W-4R were available for use in 2022, the IRS 

postponed the requirement to begin using the new forms 

until January 1, 2023. Payers should have updated their 

system programming for these forms in 2022. See section 

8 for more information about withholding on retirement 

payments and annuities. See Pub. 15-T to figure withholding on periodic pension and annuity payments.

2024 withholding tables. The discussion on the alternative methods for figuring federal income tax withholding 

and the Tables for Withholding on Distributions of Indian 

Gaming Profits to Tribal Members are no longer included 

in Pub.15-A. This information is now included in Pub. 15-T 

with the Percentage Method and Wage Bracket Method 

withholding tables. However, the IRS is no longer providing the Formula Tables for Percentage Method Withholding (for Automated Payroll Systems); Wage Bracket Percentage Method Tables (for Automated Payroll Systems); 

or the Combined Federal Income Tax, Employee Social 

Security Tax, and Employee Medicare Tax Withholding Tables.

Form 1099-NEC. Use Form 1099-NEC, Nonemployee 

Compensation, to report nonemployee compensation paid 

in 2023.

Disaster tax relief. Disaster tax relief is available for 

those impacted by disasters. For more information about 

disaster relief, go to IRS.gov/DisasterTaxRelief.

Moving expense reimbursements. Section 11048 of 

P.L. 115-97, Tax Cuts and Jobs Act, suspends the exclusion for qualified moving expense reimbursements from 

your employee’s income for tax years beginning after 2017 

and before 2026. However, the exclusion 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 expenses that the member 

could deduct if they had paid or incurred them without reimbursement. See Moving Expenses in Pub. 3, Armed 

Forces’ Tax Guide, for the definition of what constitutes a 

permanent change of station and to learn which moving 

expenses are deductible.

No federal income tax withholding on disability payments for injuries incurred as a direct result of a terrorist attack directed against the United States. Disability payments (including Social Security Disability 

Insurance (SSDI) payments) for injuries incurred as a direct result of a terrorist attack directed against the United 

States (or its allies) aren't included in income. Because 

federal income tax withholding is only required when a 

payment is includible in income, no federal income tax 

should be withheld from these payments. See Pub. 907, 

Tax Highlights for Persons With Disabilities, and Pub. 

3920, Tax Relief for Victims of Terrorist Attacks.

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 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 the 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 Pub. 15. To get more information 

about EFTPS or to enroll in EFTPS, go to EFTPS.gov or 

call 800-555-4477. To contact EFTPS using Telecommunications Relay Services (TRS) for people who are deaf, 

hard of hearing, or have a speech disability, dial 711 and 

then provide the TRS assistant the 800-555-4477 number 

above or 800-733-4829. Additional information about 

EFTPS is also available in Pub. 966.

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 and secure 

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 800-555-4477. To 

contact EFTPS using TRS for people who are deaf, 

hard of hearing, or have a speech disability, dial 711 

and then provide the TRS assistant the 800-555-4477 

number above or 800-733-4829.

• 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.

Electronic submission of Forms W-4 and W-4P. You 

may also set up a system to electronically receive Forms 

W-4 and W-4P from an employee or payee. See Pub. 15-T 

for electronic submission requirements for Forms W-4 and 

W-4P.

Electronic submission of Forms W-4R, W-4S, and 

W-4V. You may also set up a system to electronically receive any or all of the following forms (and their Spanish 

versions, if available) from an employee or payee.

• Form W-4R, Withholding Certificate for Nonperiodic 

Payments and Eligible Rollover Distributions.

• Form W-4S, Request for Federal Income Tax Withholding From Sick Pay.

• Form W-4V, Voluntary Withholding Request.

For each form that you establish an electronic submission system for, you must meet each of the following five 

requirements.

1. The electronic system must ensure that the information received by you is the information sent by the employee or payee. The system must document all 

occasions of user access that result in a submission. 

Page 2 Publication 15-A (2024)
In addition, the design and operation of the electronic 

system, including access procedures, must make it 

reasonably certain that the person accessing the system and submitting the form is the person identified 

on the form.

2. The electronic system must provide exactly the same 

information as the paper form.

3. The electronic submission must be signed with an 

electronic signature by the employee or payee whose 

name is on the form. The electronic signature must be 

the final entry in the submission.

4. Upon request, you must furnish a hard copy of any 

completed electronic form to the IRS and a statement 

that, to the best of your knowledge, the electronic 

form was submitted by the named employee or payee. 

The hard copy of the electronic form must provide exactly the same information as, but need not be a facsimile of, the paper form.

5. You must also meet all recordkeeping requirements 

that apply to the paper forms.

See Substitute Submissions of Form W-4R in section 8 

for the specific requirements for Form W-4R.

More information on electronic submissions. For 

more information on electronic submissions for Forms 

W-4S and W-4V, see Announcement 99-6. You can find 

Announcement 99-6 on page 24 of Internal Revenue Bulletin 1999-4 at IRS.gov/pub/irs-irbs/irb99-04.pdf.

Additional employment tax information. Go to 

IRS.gov/EmploymentTaxes for additional employment tax 

information.

Telephone help. You can call the IRS Business and Specialty 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 employment tax questions. You may also use this number for assistance with unresolved tax problems.

Furnishing Form W-2 to employees electronically. 

You may set up a system to furnish Form W-2 electronically to employees. Each employee participating must 

consent (either electronically or by paper document) to receive their Form W-2 electronically, and you must notify 

the employee of all hardware and software requirements 

to receive the form. You may not send a Form W-2 electronically to any employee who doesn't consent or who 

has revoked consent previously provided.

To furnish Forms W-2 electronically, you must meet the 

following disclosure requirements and provide a clear and 

conspicuous statement of each requirement to your employees.

• The employee must be informed that they will receive 

a paper Form W-2 if consent isn't given to receive it 

electronically.

• The employee must be informed of the scope and duration of the consent.

• The employee must be informed of any procedure for 

obtaining a paper copy of their Form W-2 and whether 

or not the request for a paper statement is treated as a 

withdrawal of their consent to receiving their Form W-2 

electronically.

• The employee must be notified about how to withdraw 

a consent and the effective date and manner by which 

the employer will confirm the withdrawn consent. The 

employee must also be notified that the withdrawn 

consent doesn't apply to the previously issued Forms 

W-2.

• The employee must be informed about any conditions 

under which electronic Forms W-2 will no longer be 

furnished (for example, termination of employment).

• The employee must be informed of any procedures for 

updating their contact information that enables the 

employer to provide electronic Forms W-2.

• The employer must notify the employee of any 

changes to the employer's contact information.

You must furnish electronic Forms W-2 by the same 

due date as the paper Forms W-2. For more information 

on furnishing Form W-2 to employees electronically, see 

Regulations section 31.6051-1(j).

Pub. 5146 explains employment tax examinations 

and appeal rights. Pub. 5146 provides employers with 

information on how the IRS selects employment tax returns 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 issues 

and tip exams.

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.

Introduction

This publication supplements Pub.15. It contains specialized and detailed employment tax information supplementing the basic information provided in Pub.15. Pub. 

15-B contains information about the employment tax treatment of various types of noncash compensation. Pub. 

15-T contains the Percentage Method and Wage Bracket 

Method withholding tables, including information on how 

to withhold on periodic pension or annuity payments; Tables for Withholding on Distributions of Indian Gaming 

Profits to Tribal Members; and a discussion on the alternative methods for figuring federal income tax withholding.

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

Publication 15-A (2024) Page 3
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 comment received, we do appreciate your feedback and will 

consider your comments as we revise our tax forms, instructions, and publications. Don’t send tax questions, tax 

returns, or payments to the above 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 publication.

Getting tax forms, instructions, and publications. 

Go to IRS.gov/Forms to download current and prior-year 

forms, instructions, and publications.

Ordering tax forms, instructions, and publications. 

Go to IRS.gov/OrderForms to order current forms, instructions, and publications; call 800-829-3676 to order 

prior-year forms and instructions. The IRS will process 

your order for forms and publications as soon as possible. 

Don’t resubmit requests you’ve already sent us. You can 

get forms and publications faster online.

Useful Items

You may want to see:

Publication

Employer's Tax Guide to Fringe Benefits

Federal Income Tax Withholding Methods

Tax Withholding and Estimated Tax

Withholding of Tax on Nonresident Aliens and 

Foreign Entities

Starting a Business and Keeping Records

163 Employer Identification Number: 

Understanding Your EIN

1. Who Are Employees?

Before you can know how to treat payments that you make 

to workers for services, you must first know the business 

relationship that exists between you and the person performing the services. The person performing the services 

may be:

• An independent contractor,

• A common-law employee,

• A statutory employee, or

• A statutory nonemployee.

 15-B

 15-T

 505

 515

 583

 1635

This discussion explains these four categories. A later 

discussion, Employee or Independent Contractor in section 2, points out the differences between an independent 

contractor and an employee and gives examples from various types of occupations.

If an individual who works for you isn't an employee under the common-law rules (see section 2), you generally 

don't have to withhold federal income tax from that individual's pay. However, in some cases you may be required to 

withhold under the backup withholding requirements on 

these payments. See Pub. 15 for information on backup 

withholding.

Independent Contractors

People such as doctors, veterinarians, and auctioneers 

who work in an independent trade, business, or profession 

in which they offer their services to the public are generally not employees. However, whether such people are 

employees or independent contractors depends on the 

facts in each case. The general rule is that an individual is 

an independent contractor if you, the person for whom the 

services are performed, have the right to control or direct 

only the result of the work and not the means and methods of accomplishing the result.

Common-Law Employees

Under common-law rules, anyone who performs services 

for you is generally your employee if you have the right to 

control what will be done and how it will be done. This is 

so even when you give the employee freedom of action. 

What matters is that you have the right to control the details of how the services are performed. For a discussion 

of facts that indicate whether an individual providing services is an independent contractor or employee, see section 2.

If you have an employer-employee relationship, it 

makes no difference how it is labeled. The substance of 

the relationship, not the label, governs the worker's status. 

It doesn't matter whether the individual is employed full 

time or part time.

For employment tax purposes, no distinction is made 

between classes of employees. Superintendents, managers, and other supervisory personnel are all employees. 

An officer of a corporation is generally an employee; however, an officer who performs no services or only minor 

services, and neither receives nor is entitled to receive 

any pay, isn't considered an employee. A director of a corporation isn't an employee with respect to services performed as a director.

You generally have to withhold and pay income, social 

security, and Medicare taxes on wages that you pay to 

common-law employees. However, the wages of certain 

employees may be exempt from one or more of these 

taxes. See Employees of Exempt Organizations (section 

3) and Religious Exemptions and Special Rules for Ministers (section 4).

Page 4 Publication 15-A (2024)
Additional information. For more information about the 

treatment of special types of employment, the treatment of 

special types of payments, and similar subjects, see Pub. 

15.

Statutory Employees

If workers are independent contractors under the

common-law rules, such workers may nevertheless be 

treated as employees by statute (also known as statutory 

employees) for certain employment tax purposes. This 

would happen if they fall within any one of the following 

four categories and meet the three conditions described 

next under Social security and Medicare taxes.

1. A driver who distributes beverages (other than milk) or 

meat, vegetables, fruit, or bakery products; or who 

picks up and delivers laundry or dry cleaning, if the 

driver is your agent or is paid on commission.

2. A full-time life insurance sales agent whose principal 

business activity is selling life insurance or annuity 

contracts, or both, primarily for one life insurance 

company.

3. An individual who works at home on materials or 

goods that you supply and that must be returned to 

you or to a person you name, if you also furnish specifications for the work to be done.

4. A full-time traveling or city salesperson who works on 

your behalf and turns in orders to you from wholesalers; retailers; contractors; or operators of hotels, restaurants, or other similar establishments. The goods 

sold must be merchandise for resale or supplies for 

use in the buyer's business operation. The work performed for you must be the salesperson's principal 

business activity. See Salesperson in section 2.

Social security and Medicare taxes. You must withhold 

social security and Medicare taxes from the wages of statutory employees if all three of the following conditions apply.

• The service contract states or implies that substantially all the services are to be performed personally by 

them.

• They don't have a substantial investment in the equipment and property used to perform the services (other 

than an investment in facilities for transportation, such 

as a car or truck).

• The services are performed on a continuing basis for 

the same payer.

Federal unemployment (FUTA) tax. For FUTA tax (the 

unemployment tax paid under the Federal Unemployment 

Tax Act), the term “employee” means the same as it does 

for social security and Medicare taxes, except that it 

doesn't include statutory employees defined in categories 

2 and 3 above. Any individual who is a statutory employee 

described under category 1 or 4 above is also an employee for FUTA tax purposes and subject to FUTA tax.

Income tax. Don't withhold federal income tax from the 

wages of statutory employees.

Reporting payments to statutory employees. Furnish 

Form W-2 to a statutory employee, and check “Statutory 

employee” in box 13. Show your payments to the employee as “other compensation” in box 1. Also, show social security wages in box 3, social security tax withheld in 

box 4, Medicare wages in box 5, and Medicare tax withheld in box 6. The statutory employee can deduct their 

trade or business expenses from the payments shown on 

Form W-2. The statutory employee reports earnings on 

line 1 of Schedule C (Form 1040), Profit or Loss From 

Business, and also deducts business expenses on 

Schedule C (Form 1040).

H-2A agricultural workers. On Form W-2, don't check 

box 13 (Statutory employee), as H-2A workers aren't statutory employees.

Statutory Nonemployees

There are three categories of statutory nonemployees: direct sellers, licensed real estate agents, and certain companion sitters. Direct sellers and licensed real estate 

agents are treated as self-employed for all federal tax purposes, including income and employment taxes, if:

• Substantially all payments for their services as direct 

sellers or real estate agents are directly related to 

sales or other output, rather than to the number of 

hours worked; and

• Their services are performed under a written contract 

providing that they won't be treated as employees for 

federal tax purposes.

Direct sellers. Direct sellers include persons falling 

within any of the following three groups.

1. Persons engaged in selling (or soliciting the sale of) 

consumer products in the home or place of business 

other than in a permanent retail establishment.

2. Persons engaged in selling (or soliciting the sale of) 

consumer products to any buyer on a buy-sell basis, a 

deposit-commission basis, or any similar basis prescribed by regulations, for resale in the home or at a 

place of business other than in a permanent retail establishment.

3. Persons engaged in the trade or business of delivering or distributing newspapers or shopping news (including any services directly related to such delivery 

or distribution).

Direct selling includes activities of individuals who attempt to increase direct sales activities of their direct sellers and who earn income based on the productivity of 

their direct sellers. Such activities include providing motivation and encouragement; imparting skills, knowledge, or 

experience; and recruiting.

Publication 15-A (2024) Page 5
Licensed real estate agents. This category includes individuals engaged in appraisal activities for real estate 

sales if they earn income based on sales or other output.

Companion sitters. Companion sitters are individuals 

who furnish personal attendance, companionship, or 

household care services to children or to individuals who 

are elderly or disabled. A person engaged in the trade or 

business of putting the sitters in touch with individuals who 

wish to employ them (that is, a companion sitting placement service) won't be treated as the employer of the sitters if that person doesn't receive or pay the salary or wages of the sitters and is compensated by the sitters or the 

persons who employ them on a fee basis. Companion sitters who aren't employees of a companion sitting placement service are generally treated as self-employed for all 

federal tax purposes. However, the companion sitter may 

be an employee of the individual for whom the sitting services are performed; see Pub. 926.

Misclassification of Employees

Consequences of treating an employee as an independent contractor. If you classify an employee as an 

independent contractor and you have no reasonable basis 

for doing so, you’re liable for employment taxes for that 

worker, and the relief provision, discussed next, won't apply. See section 2 of Pub. 15 for more information.

Relief provision. If you have a reasonable basis for not 

treating a worker as an employee, you may be relieved 

from having to pay employment taxes for that worker. To 

get this relief, you must file all required federal information 

returns on a basis consistent with your treatment of the 

worker. You (or your predecessor) must not have treated 

any worker holding a substantially similar position as an 

employee for any periods beginning after 1977.

Technical service specialists. This relief provision 

doesn't apply for a technical services specialist you provide to another business under an arrangement between 

you and the other business. A technical service specialist 

is an engineer, designer, drafter, computer programmer, 

systems analyst, or other similarly skilled worker engaged 

in a similar line of work.

This limit on the application of the rule doesn't affect the 

determination of whether such workers are employees under the common-law rules. The common-law rules control 

whether the specialist is treated as an employee or an independent contractor. However, if you directly contract 

with a technical service specialist to provide services for 

your business and not for another business, you may still 

be entitled to the relief provision.

Test proctors and room supervisors. The consistent treatment requirement doesn't apply to services performed after December 31, 2006, by an individual as a 

test proctor or room supervisor assisting in the administration of college entrance or placement examinations if the 

individual:

• Is performing the services for a section 501(c) organization exempt from tax under section 501(a) of the 

Code, and

• Isn't otherwise treated as an employee of the organization for employment taxes.

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.

2. Employee or Independent 

Contractor?

An employer must generally withhold federal income 

taxes, withhold and pay over social security and Medicare 

taxes, and pay unemployment tax on wages paid to an 

employee. An employer doesn't generally have to withhold 

or pay over any federal taxes on payments to independent 

contractors.

Common-Law Rules

To determine whether an individual is an employee or an 

independent contractor under the common-law rules, the 

relationship of the worker and the business must be examined. In any employee-independent contractor determination, all information that provides evidence of the degree 

of control and the degree of independence must be considered.

Facts that provide evidence of the degree of control 

and independence fall into three categories: behavioral 

control, financial control, and the type of relationship of the 

parties. These facts are discussed next.

Behavioral control. Facts that show whether the business has a right to direct and control how the worker does 

the task for which the worker is hired include the type and 

degree of the following.

Instructions that the business gives to the worker. 

An employee is generally subject to the business' instructions about when, where, and how to work. All of the following are examples of types of instructions about how to 

do work.

• When and where to do the work.

• What tools or equipment to use.

• What workers to hire or to assist with the work.

• Where to purchase supplies and services.

Page 6 Publication 15-A (2024)
• What work must be performed by a specified

individual.

• What order or sequence to follow.

The amount of instruction needed varies among different jobs. Even if no instructions are given, sufficient behavioral control may exist if the employer has the right to 

control how the work results are achieved. A business 

may lack the knowledge to instruct some highly specialized professionals; in other cases, the task may require little or no instruction. The key consideration is whether the 

business has retained the right to control the details of a 

worker's performance or instead has given up that right.

Training that the business gives to the worker. An 

employee may be trained to perform services in a particular manner. Independent contractors ordinarily use their 

own methods.

Financial control. Facts that show whether the business 

has a right to control the business aspects of the worker's 

job include the following.

The extent to which the worker has unreimbursed 

business expenses. Independent contractors are more 

likely to have unreimbursed expenses than are employees. Fixed ongoing costs that are incurred regardless of 

whether work is currently being performed are especially 

important. However, employees may also incur unreimbursed expenses in connection with the services that they 

perform for their employer.

The extent of the worker's investment. An independent contractor often has a significant investment in 

the facilities or tools they use in performing services for 

someone else. However, a significant investment isn't necessary for independent contractor status.

The extent to which the worker makes their services available to the relevant market. An independent 

contractor is generally free to seek out business opportunities. Independent contractors often advertise, maintain a 

visible business location, and are available to work in the 

relevant market.

How the business pays the worker. An employee is 

generally guaranteed a regular wage amount for an hourly, 

weekly, or other period of time. This usually indicates that 

a worker is an employee, even when the wage or salary is 

supplemented by a commission. An independent contractor is often paid a flat fee or on a time and materials basis 

for the job. However, it is common in some professions, 

such as law, to pay independent contractors hourly.

The extent to which the worker can realize a profit 

or loss. An independent contractor can make a profit or 

loss.

Type of relationship. Facts that show the parties' type of 

relationship include the following.

• Written contracts describing the relationship the parties intended to create.

• Whether or not the business provides the worker with 

employee-type benefits, such as insurance, a pension 

plan, vacation pay, or sick pay.

• The permanency of the relationship. If you engage 

a worker with the expectation that the relationship will 

continue indefinitely, rather than for a specific project 

or period, this is generally considered evidence that 

your intent was to create an employer-employee relationship.

• The extent to which services performed by the 

worker are a key aspect of the regular business 

of the company. If a worker provides services that 

are a key aspect of your regular business activity, it is 

more likely that you’ll have the right to direct and control their activities. For example, if a law firm hires an 

attorney, it is likely that it will present the attorney's 

work as its own and would have the right to control or 

direct that work. This would indicate an employer-employee relationship.

IRS help. If you want the IRS to determine whether or not 

a worker is an employee, file Form SS-8 with the IRS.

Industry Examples

The following examples may help you properly classify 

your workers.

Building and Construction Industry

Example 1. Jerry Jones has an agreement with Wilma 

White to supervise the remodeling of a house. Wilma 

didn't advance funds to help Jerry carry on the work. 

Wilma makes direct payments to the suppliers for all necessary materials. Wilma carries liability and workers' compensation insurance covering Jerry and others that Jerry 

engaged to assist on the remodel. Wilma pays them an 

hourly rate and exercises almost constant supervision 

over the work. Jerry isn't free to transfer the assistants to 

other jobs. Jerry may not work on other jobs while working 

for Wilma. Jerry assumes no responsibility to complete 

the work and will incur no contractual liability if the work 

isn't completed. Jerry and the assistants perform personal 

services for hourly wages. Jerry Jones and the assistants 

are employees of Wilma White.

Example 2. Milton Manning, an experienced tile setter, 

orally agreed with a corporation to perform full-time services at construction sites. Milton uses personally owned 

tools and performs services in the order designated by the 

corporation and according to its specifications. The corporation supplies all materials, makes frequent inspections 

of Milton’s work, pays Milton on a piecework basis, and 

carries workers' compensation insurance on Milton. Milton 

doesn't have a place of business or seek to perform similar services for others. Either party can end the services at 

any time. Milton Manning is an employee of the corporation.

Example 3. Wallace Black agreed with Sawdust Co. to 

supply the construction labor for a group of houses. The 

Publication 15-A (2024) Page 7
company agreed to pay all construction costs. However, 

Wallace supplies all the tools and equipment. Wallace 

performs personal services as a carpenter and mechanic 

for an hourly wage. Wallace also acts as superintendent 

and foreman and engages other individuals to assist with 

construction. The company has the right to select, approve, or discharge any helper. A company representative 

makes frequent inspections of the construction site. When 

a house is finished, Wallace is paid a certain percentage 

of its costs. Wallace isn't responsible for faults, defects of 

construction, or wasteful operation. At the end of each 

week, Wallace presents the company with a statement of 

the amount that was spent, including the payroll. The company gives Wallace a check for that amount from which 

Wallace pays the assistants, although Wallace isn't personally liable for their wages. Wallace Black and the assistants are employees of Sawdust Co.

Example 4. Bill Plum contracted with Elm Corporation 

to complete the roofing on a housing complex. A signed 

contract established a flat amount for the services rendered by Bill Plum. Bill is a licensed roofer and carries 

workers' compensation and liability insurance under the 

business name, Plum Roofing. Bill hires roofers for Plum 

Roofing who are treated as employees for federal employment tax purposes. If there is a problem with the roofing 

work, Plum Roofing is responsible for paying for any repairs. Bill Plum, doing business as Plum Roofing, is an independent contractor.

Example 5. Vera Elm, an electrician, submitted a job 

estimate to a housing complex for electrical work at $16 

per hour for 400 hours. Vera is to receive $1,280 every 2 

weeks for the next 10 weeks. This isn't considered payment by the hour. Even if Vera works more or less than 

400 hours to complete the work, Vera will receive $6,400. 

Vera also performs additional electrical installations under 

contracts with other companies that are obtained through 

advertisements. Vera is an independent contractor.

Trucking Industry

Example. Rose Trucking contracts to deliver material 

for Forest, Inc., at $140 per ton. Rose Trucking isn't paid 

for any articles that aren't delivered. At times, Jan Rose, 

who operates as Rose Trucking, may also lease another 

truck and engage a driver to complete the contract. All operating expenses, including insurance coverage, are paid 

by Jan Rose. All equipment is owned or rented by Jan and 

Jan is responsible for all maintenance. None of the drivers 

are provided by Forest, Inc. Jan Rose, operating as Rose 

Trucking, is an independent contractor.

Computer Industry

Example. Steve Smith, a computer programmer, is 

laid off when Megabyte, Inc., downsizes. Megabyte 

agrees to pay Steve a flat amount to complete a one-time 

project to create a certain product. It isn't clear how long it 

will take to complete the project, and Steve isn't guaranteed any minimum payment for the hours spent on the 

program. Megabyte provides Steve with no instructions 

beyond the specifications for the product itself. Steve and 

Megabyte have a written contract, which provides that 

Steve is considered to be an independent contractor, is required to pay federal and state taxes, and receives no 

benefits from Megabyte. Megabyte will file Form 

1099-NEC to report the amount paid to Steve. Steve 

works at home and isn't expected or allowed to attend 

meetings of the software development group. Steve is an 

independent contractor.

Automobile Industry

Example 1. Donna Lee is a salesperson employed on 

a full-time basis by Bob Blue, an auto dealer. Donna works 

6 days a week and is on duty in Bob's showroom on certain assigned days and times. Donna appraises trade-ins, 

but the appraisals are subject to the sales manager's approval. Lists of prospective customers belong to the 

dealer. Donna is required to develop leads and report results to the sales manager. Due to experience, Donna requires only minimal assistance in closing and financing 

sales and in other phases of work. Donna is paid a commission and is eligible for prizes and bonuses offered by 

Bob. Bob also pays the cost of health insurance and 

group-term life insurance for Donna. Donna is an employee of Bob Blue.

Example 2. Sam Sparks performs auto repair services 

in the repair department of an auto sales company. Sam 

works regular hours and is paid on a percentage basis. 

Sam has no investment in the repair department. The 

sales company supplies all facilities, repair parts, and supplies; issues instructions on the amounts to be charged, 

parts to be used, and the time for completion of each job; 

and checks all estimates and repair orders. Sam is an employee of the sales company.

Example 3. An auto sales agency furnishes space for 

Helen Bach to perform auto repair services. Helen provides personally owned tools, equipment, and supplies. 

Helen seeks out business from insurance adjusters and 

other individuals and does all of the body and paint work 

that comes to the agency. Helen hires and discharges 

helpers; determines working hours; quotes prices for repair work; makes all necessary adjustments; assumes all 

losses from uncollectible accounts; and receives, as compensation for services, a large percentage of the gross 

collections from the auto repair shop. Helen is an independent contractor and the helpers are Helen’s employees.

Attorney

Example. Donna Yuma is a sole practitioner who rents 

office space and pays for the following items: telephone, 

computer, online legal research linkup, fax machine, and 

photocopier. Donna buys office supplies and pays bar 

dues and membership dues for three other professional 

organizations. Donna has a part-time receptionist who 

also does the bookkeeping. Donna pays the receptionist, 

withholds and pays federal and state employment taxes, 

and files a Form W-2 each year. For the past 2 years, 

Page 8 Publication 15-A (2024)
Donna has had only three clients, corporations with which 

there have been long-standing relationships. Donna 

charges the corporations an hourly rate for services, sending monthly bills detailing the work performed for the prior 

month. The bills include charges for long-distance calls, 

online research time, fax charges, photocopies, postage, 

and travel, costs for which the corporations have agreed to 

reimburse Donna. Donna is an independent contractor.

Taxicab Driver

Example. Tom Spruce rents a cab from Taft Cab Co. 

for $150 per day. Tom pays the costs of maintaining and 

operating the cab. Tom keeps all fares received from customers. Although Tom receives the benefit of Taft's 

two-way radio communication equipment, dispatcher, and 

advertising, these items benefit both Taft and Tom Spruce. 

Tom is an independent contractor.

Salesperson

To determine whether salespersons are employees under 

the usual common-law rules, you must evaluate each individual case. If a salesperson who works for you doesn't 

meet the tests for a common-law employee, discussed 

earlier in this section, you don't have to withhold federal income tax from their pay (see Statutory Employees in section 1). However, even if a salesperson isn't an employee 

under the usual common-law rules for income tax withholding, their pay may still be subject to social security, 

Medicare, and FUTA taxes as a statutory employee.

To determine whether a salesperson is an employee for 

social security, Medicare, and FUTA tax purposes, the 

salesperson must meet all eight elements of the statutory 

employee test. A salesperson is a statutory employee for 

social security, Medicare, and FUTA tax purposes if they:

1. Work full time for one person or company except, possibly, for sideline sales activities on behalf of some 

other person;

2. Sell on behalf of, and turn their orders over to, the person or company for which they work;

3. Sell to wholesalers, retailers, contractors, or operators 

of hotels, restaurants, or similar establishments;

4. Sell merchandise for resale, or supplies for use in the 

customer's business;

5. Agree to do substantially all of this work personally;

6. Have no substantial investment in the facilities used to 

do the work, other than in facilities for transportation;

7. Maintain a continuing relationship with the person or 

company for which they work; and

8. Aren’t an employee under common-law rules.

3. Employees of Exempt 

Organizations

Many nonprofit organizations are exempt from federal income tax. Although they don't have to pay federal income 

tax themselves, they must still withhold federal income tax 

from the pay of their employees. However, there are special social security, Medicare, and FUTA tax rules that apply to the wages that they pay their employees.

Section 501(c)(3) organizations. Nonprofit organizations that are exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code include any 

community chest, fund, or foundation organized and operated exclusively for religious, charitable, scientific, testing 

for public safety, or literary or educational purposes; fostering national or international amateur sports competition; or the prevention of cruelty to children or animals. 

These organizations are usually corporations and are exempt from federal income tax under section 501(a).

Social security and Medicare taxes. Wages paid to 

employees of section 501(c)(3) organizations are subject 

to social security and Medicare taxes unless one of the 

following situations applies.

• The organization pays an employee less than $100 in 

a calendar year.

• The organization is a church or church-controlled organization opposed for religious reasons to the payment of social security and Medicare taxes and has 

filed Form 8274 to elect exemption from social security 

and Medicare taxes. The organization must have filed 

for exemption before the first date on which a quarterly 

employment tax return (Form 941) or annual employment tax return (Form 944) would otherwise be due.

An employee of a church or church-controlled organization that is exempt from social security and Medicare 

taxes must pay self-employment tax if the employee is 

paid $108.28 or more in a year. However, an employee 

who is a member of a qualified religious sect can apply for 

an exemption from the self-employment tax by filing Form 

4029. See Members of recognized religious sects opposed to insurance in section 4.

FUTA tax. An organization that is exempt from federal 

income tax under section 501(c)(3) of the Internal Revenue Code is also exempt from FUTA tax. This exemption 

can't be waived. However, a section 501(c)(3) organization is subject to FUTA tax when paying wages to employees on behalf of a non-section 501(c)(3) organization (for 

example, a section 501(c)(3) organization paying wages to 

employees of a related non-section 501(c)(3) organization, a section 501(c)(3) organization that is a section 

3504 agent paying wages on behalf of a non-section 

501(c)(3) organization, a section 501(c)(3) organization 

that is a common paymaster paying wages on behalf of a 

non-section 501(c)(3) organization, etc.).

Publication 15-A (2024) Page 9
An organization wholly owned by a state or its political subdivision should contact the appropriate 

state official for information about reporting and 

getting social security and Medicare coverage for its employees.

Other than section 501(c)(3) organizations. Nonprofit 

organizations that aren't section 501(c)(3) organizations 

may also be exempt from federal income tax under section 

501(a) or section 521. However, these organizations aren't 

exempt from withholding federal income, social security, or 

Medicare tax from their employees' pay, or from paying 

FUTA tax. Two special rules for social security, Medicare, 

and FUTA taxes apply.

1. If an employee is paid less than $100 during a calendar year, their wages aren't subject to social security 

and Medicare taxes.

2. If an employee is paid less than $50 in a calendar 

quarter, their wages aren't subject to FUTA tax for the 

quarter.

The above rules don't apply to employees who work for 

pension plans and other similar organizations described in 

section 401(a).

Excise tax on excess executive compensation. Certain tax-exempt organizations may be subject to an excise 

tax on excess executive compensation. For more information, see the Instructions for Form 4720.

4. Religious Exemptions and 

Special Rules for Ministers

Special rules apply to the treatment of ministers for social 

security and Medicare tax purposes. An exemption from 

social security and Medicare taxes is available for ministers and certain other religious workers and members of 

certain recognized religious sects. For more information 

on getting an exemption, see Pub. 517.

Ministers. Ministers are individuals who are duly ordained, commissioned, or licensed by a religious body 

constituting a church or church denomination. They are 

given the authority to conduct religious worship, perform 

sacerdotal functions, and administer ordinances and sacraments according to the prescribed tenets and practices 

of that religious organization.

Ministers are employees if they perform services in the 

exercise of ministry and are subject to your will and control. The common-law rules discussed in section 1 and 

section 2 should be applied to determine whether a minister is your employee or is self-employed. Whether the minister is an employee or self-employed, the earnings of a 

minister aren't subject to federal income, social security, 

and Medicare tax withholding. However, even if the minister is a common-law employee, the earnings as reported 

on the minister's Form 1040 or 1040-SR are subject to 

self-employment tax and federal income tax. You don't 

withhold these taxes from wages earned by a minister, but 

TIP

if the minister is your employee, you may agree with the 

minister to voluntarily withhold tax to cover the minister's 

liability for self-employment tax and federal income tax. 

For more information, see Pub. 517.

Form W-2. If your minister is an employee, report all 

taxable compensation as wages in box 1 of Form W-2. Include in this amount expense allowances or reimbursements paid under a nonaccountable plan, discussed in 

section 5 of Pub. 15. Don't include a parsonage allowance 

(excludable housing allowance) in this amount. You may 

report a designated parsonage or rental allowance (housing allowance) and a utilities allowance, or the rental value 

of housing provided in a separate statement or in box 14 

of Form W-2. Don't show on Form W-2, Form 941, or Form 

944 any amount as social security or Medicare wages, or 

any withholding for social security or Medicare tax. If you 

withheld federal income tax from the minister under a voluntary agreement, this amount should be shown in box 2 

of Form W-2 as federal income tax withheld. For more information on ministers, see Pub. 517.

Exemptions for ministers and others. Certain ordained ministers, Christian Science practitioners, and 

members of religious orders who haven't taken a vow of 

poverty may apply to exempt their earnings from self-employment tax on religious grounds. The application must 

be based on conscientious opposition because of personal considerations to public insurance that makes payments in the event of death, disability, old age, or retirement, or that makes payments toward the cost of, or 

provides services for, medical care, including social security and Medicare benefits. The exemption applies only to 

qualified services performed for the religious organization. 

See Revenue Procedure 91-20, 1991-1 C.B. 524, for 

guidelines to determine whether an organization is a religious order or whether an individual is a member of a religious order.

To apply for the exemption, the employee should file 

Form 4361. See Pub. 517 for more information about 

claiming an exemption from self-employment tax using 

Form 4361.

Members of recognized religious sects opposed to 

insurance. If you belong to a recognized religious sect or 

to a division of such sect that is opposed to insurance, you 

may qualify for an exemption from the self-employment 

tax. To qualify, you must be conscientiously opposed to 

accepting the benefits of any public or private insurance 

that makes payments because of death, disability, old 

age, or retirement, or makes payments toward the cost of, 

or provides services for, medical care (including social security and Medicare benefits). If you buy a retirement annuity from an insurance company, you won't be eligible for 

this exemption. Religious opposition based on the teachings of the sect is the only legal basis for the exemption. In 

addition, your religious sect (or division) must have existed 

since December 31, 1950.

Self-employed. If you’re self-employed and a member 

of a recognized religious sect opposed to insurance, you 

Page 10 Publication 15-A (2024)
can apply for exemption by filing Form 4029 to waive all 

social security and Medicare benefits.

Employees. The social security and Medicare tax exemption available to the self-employed who are members 

of a recognized religious sect opposed to insurance is 

also available to their employees who are members of 

such a sect. This applies to partnerships only if each partner is a member of the sect. This exemption for employees applies only if both the employee and the employer 

are members of such a sect, and the employer has an exemption. To get the exemption, the employee must file 

Form 4029.

An employee of a church or church-controlled organization that is exempt from social security and Medicare 

taxes can also apply for an exemption on Form 4029.

5. Wages and Other 

Compensation

Pub. 15 provides a general discussion of taxable wages. 

Pub. 15-B discusses fringe benefits. The following topics 

supplement those discussions.

Relocating for Temporary Work 

Assignments

If an employee is given a temporary work assignment 

away from their regular place of work, certain travel expenses reimbursed or paid directly by the employer in accordance with an accountable plan (see section 5 of Pub. 15) 

may be excludable from the employee’s wages. Generally, 

a temporary work assignment in a single location is one 

that is realistically expected to last (and does in fact last) 

for 1 year or less. If the employee’s new work assignment 

is indefinite, any living expenses reimbursed or paid by the 

employer (other than qualified moving expenses paid to 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) must be included in the employee’s wages 

as compensation. For the travel expenses to be excludable:

• The new work location must be outside of the city or 

general area of the employee’s regular workplace or 

post of duty,

• The travel expenses must otherwise be allowed as a 

deduction by the employee, and

• The expenses must be for the period during which the 

employee is at the temporary work location.

If you reimburse or pay any personal expenses of an 

employee during their temporary work assignment, such 

as expenses for home leave for family members or for vacations, these amounts must be included in the employee's wages. See chapter 1 of Pub. 463, Travel, Gift, and 

Car Expenses, and section 5 of Pub. 15 for more information. These rules generally apply to temporary work assignments both inside and outside the United States.

Employee Achievement Awards

Don't withhold federal income, social security, or Medicare 

tax on the fair market value of an employee achievement 

award if it is excludable from your employee's gross income. To be excludable from your employee's gross income, the award must be tangible personal property given 

to an employee for length of service or safety achievement, awarded as part of a meaningful presentation, and 

awarded under circumstances that don't indicate that the 

payment is disguised compensation. Excludable employee achievement awards also aren't subject to FUTA 

tax.

The exclusion doesn’t apply to awards of cash, cash 

equivalents, gift cards, gift coupons, or gift certificates 

(other than arrangements granting only the right to select 

and receive tangible personal property from a limited assortment of items preselected or preapproved by you). 

The exclusion also doesn’t apply to vacations, meals, 

lodging, tickets to theater or sporting events, stocks, 

bonds, other securities, and other similar items.

Limits. The most that you can exclude for the cost of all 

employee achievement awards to the same employee for 

the year is $400. A higher limit of $1,600 applies to qualified plan awards. Qualified plan awards are employee 

achievement awards under a written plan that doesn't discriminate in favor of highly compensated employees. An 

award can't be treated as a qualified plan award if the 

average cost per recipient of all awards under all of your 

qualified plans is more than $400.

If during the year an employee receives awards not 

made under a qualified plan and also receives awards under a qualified plan, the exclusion for the total cost of all 

awards to that employee can't be more than $1,600. The 

$400 and $1,600 limits can't be added together to exclude 

more than $1,600 for the cost of awards to any one employee during the year.

Scholarship and Fellowship Payments

Only amounts that you pay as a qualified scholarship to a 

candidate for a degree may be excluded from the recipient's gross income. A qualified scholarship is any amount 

granted as a scholarship or fellowship that is used for:

• Tuition and fees required to enroll in, or to attend, an 

educational institution; or

• Fees, books, supplies, and equipment that are required for courses at the educational institution.

The exclusion from income doesn't apply to the portion 

of any amount received that represents payment for teaching, research, or other services required as a condition of 

receiving the scholarship or tuition reduction. These 

amounts are reportable on Form W-2. However, the exclusion will still apply for any amount, despite any service 

condition attached to the amount, received under the National Health Service Corps Scholarship Program; the 

Armed Forces Health Professions Scholarship and Financial Assistance Program; and a comprehensive student 

Publication 15-A (2024) Page 11
work-learning-service program operated by a work college, as defined in section 448(e) of the Higher Education 

Act of 1965.

Any amounts that you pay for room and board aren't excludable from the recipient's gross income. A qualified 

scholarship isn't subject to social security, Medicare, and 

FUTA taxes, or federal income tax withholding. For more 

information, see Pub. 970, Tax Benefits for Education.

Outplacement Services

If you provide outplacement services to your employees to 

help them find new employment (such as career counseling, resume assistance, or skills assessment), the value of 

these benefits may be income to them and subject to all 

withholding taxes. However, the value of these services 

won't be subject to any employment taxes if:

• You derive a substantial business benefit from providing the services (such as improved employee morale 

or business image) separate from the benefit that you 

would receive from the mere payment of additional 

compensation, and

• The employee would be able to deduct the cost of the 

services as employee business expenses if they had 

paid for them.

However, if you receive no additional benefit from providing the services, or if the services aren't provided on 

the basis of employee need, then the value of the services 

is treated as wages and is subject to federal income tax 

withholding and social security and Medicare taxes. Similarly, if an employee receives the outplacement services in 

exchange for reduced severance pay (or other taxable 

compensation), then the amount the severance pay is reduced is treated as wages for employment tax purposes.

Withholding for Idle Time

Payments made under a voluntary guarantee to employees for idle time (any time during which an employee performs no services) are wages for the purposes of social 

security, Medicare, and FUTA taxes, and federal income 

tax withholding.

Back Pay

Treat back pay as wages in the year paid and withhold and 

pay employment taxes as required. If back pay was awarded by a court or government agency to enforce a federal 

or state statute protecting an employee's right to employment or wages, special rules apply for reporting those wages to the Social Security Administration. These rules also 

apply to litigation actions and settlement agreements or 

agency directives that are resolved out of court and not 

under a court decree or order. Examples of pertinent statutes include, but aren't limited to, the National Labor Relations Act, Fair Labor Standards Act, Equal Pay Act, and 

Age Discrimination in Employment Act. See Pub. 957, Reporting Back Pay and Special Wage Payments to the Social Security Administration, and Form SSA-131, Employer Report of Special Wage Payments, for details.

Supplemental Unemployment 

Compensation Benefits

If you pay, under a plan, supplemental unemployment 

compensation benefits to a former employee, all or part of 

the payments may be taxable and subject to federal income tax withholding, depending on how the plan is funded. Amounts that represent a return to the employee of 

amounts previously subject to tax aren't taxable and aren't 

subject to withholding. You should withhold federal income tax on the taxable part of the payments made, under 

a plan, to an employee who is involuntarily separated because of a reduction in force, discontinuance of a plant or 

operation, or other similar condition. It doesn't matter 

whether the separation is temporary or permanent.

There are special rules that apply in determining 

whether supplemental unemployment compensation benefits are excluded from wages for social security, Medicare, and FUTA tax purposes. To be excluded from wages 

for such purposes, the benefits must meet the following 

requirements.

• Benefits are paid only to unemployed former employees who are laid off by the employer.

• Eligibility for benefits depends on meeting prescribed 

conditions after termination.

• The amount of weekly benefits payable is based upon 

state unemployment benefits, other compensation allowable under state law, and the amount of regular 

weekly pay.

• The right to benefits doesn't accrue until a prescribed 

period after termination.

• Benefits aren't attributable to the performance of particular services.

• No employee has any right to the benefits until qualified and eligible to receive benefits.

• Benefits may not be paid in a lump sum.

Withholding on taxable supplemental unemployment 

compensation benefits must be based on the withholding 

certificate (Form W-4) that the employee gave to you.

For more information, see Revenue Ruling 90-72, 

1990-36 I.R.B. 13.

Golden Parachute Payments

A golden parachute payment, in general, is a payment 

made under a contract entered into by a corporation and 

key personnel. Under the agreement, the corporation 

agrees to pay certain amounts to its key personnel in the 

event of a change in ownership or control of the corporation. Payments to employees under golden parachute 

contracts are subject to social security, Medicare, and 

Page 12 Publication 15-A (2024)
FUTA taxes, and federal income tax withholding. See Regulations section 1.280G-1 for more information.

No deduction is allowed to the corporation for any excess parachute payment. To determine the amount of the 

excess parachute payment, you must first determine if 

there is a parachute payment for purposes of section 

280G. A parachute payment for purposes of section 280G 

is any payment that meets all of the following.

1. The payment is in the nature of compensation.

2. The payment is to, or for the benefit of, a disqualified 

individual. A disqualified individual is anyone who at 

any time during the 12-month period prior to, and ending on, the date of the change in ownership or control 

of the corporation (the disqualified individual determination period) was an employee or independent contractor and was, in regard to that corporation, a shareholder, an officer, or a highly compensated individual.

3. The payment is contingent on a change in ownership 

of the corporation, the effective control of the corporation, or the ownership of a substantial portion of the 

assets of the corporation.

4. The payment has an aggregate present value of at 

least three times the individual's base amount. The 

base amount is the average annual compensation for 

service includible in the individual's gross income over 

the most recent 5 tax years.

An excess parachute payment amount is the excess of 

any parachute payment over the base amount. For more 

information, see Regulations section 1.280G-1. The recipient of an excess parachute payment is subject to a 20% 

nondeductible excise tax. If the recipient is an employee, 

the 20% excise tax is to be withheld by the corporation.

Example. An officer of a corporation receives a golden 

parachute payment of $400,000. This is more than three 

times greater than their average compensation of 

$100,000 over the previous 5-year period. The excess 

parachute payment is $300,000 ($400,000 minus 

$100,000). The corporation can't deduct the $300,000 

and must withhold the excise tax of $60,000 (20% of 

$300,000).

Reporting golden parachute payments. Golden parachute payments to employees must be reported on Form 

W-2. See the General Instructions for Forms W-2 and W-3 

for details. For nonemployee reporting of these payments, 

see the Instructions for Forms 1099-MISC and 1099-NEC.

Exempt payments. Payments by most small business 

corporations and payments under certain qualified plans 

are exempt from the golden parachute rules. See sections 

280G(b)(5) and (6) for more information.

Interest-Free and 

Below-Market-Interest-Rate Loans

In general, if an employer lends an employee more than 

$10,000 at an interest rate less than the current applicable 

federal rate (AFR), the difference between the interest 

paid and the interest that would be paid under the AFR is 

considered additional compensation to the employee. 

This rule applies to a loan of $10,000 or less if one of its 

principal purposes is the avoidance of federal tax.

This additional compensation to the employee is subject to social security, Medicare, and FUTA taxes, but not 

to federal income tax withholding. Include it in compensation on Form W-2 (or Form 1099-NEC for an independent 

contractor). The AFR is established monthly and published by the IRS each month in the Internal Revenue Bulletin. You can get these rates by going to IRS.gov and entering “AFR” in the search box. For more information, see 

section 7872 and its related regulations.

Leave-Sharing Plans

If you establish a leave-sharing plan for your employees 

that allows them to transfer leave to other employees for 

medical emergencies, the amounts paid to the recipients 

of the leave are considered wages. These amounts are includible in the gross income of the recipients and are subject to social security, Medicare, and FUTA taxes, and federal income tax withholding. Don't include these amounts 

in the wages of the transferors. These rules apply only to 

leave-sharing plans that permit employees to transfer 

leave to other employees for medical emergencies.

In addition, you may establish a leave-sharing plan that 

allows your employees to deposit leave in an employer-sponsored leave bank for use by other employees 

who have been adversely affected by a major disaster. 

Under such programs, the IRS won’t assert that a leave 

donor who deposits leave in the employer-sponsored 

leave bank under a major disaster leave-sharing program 

has income, wages, compensation, or rail wages for the 

deposited leave if the plan treats the employer’s payments 

to the leave recipient as wages or compensation for purposes of the Federal Insurance Contributions Act (FICA), 

the Federal Unemployment Tax Act (FUTA), the Railroad 

Retirement Tax Act (RRTA), the Railroad Unemployment 

Repayment Tax (RURT), and federal income tax withholding, unless excluded by another provision of law. See Notice 2006-59, 2006-28 I.R.B. 60, available at IRS.gov/irb/

2006-28_IRB#NOT-2006-59, for what constitutes a major 

disaster and other rules.

Nonqualified Deferred Compensation 

Plans

Income Tax and Reporting

Section 409A provides that all amounts deferred under a 

nonqualified deferred compensation (NQDC) plan for all 

tax years are currently includible in gross income (to the 

extent the amounts deferred are not subject to a substantial risk of forfeiture and not previously included in gross 

income) and subject to additional taxes, unless certain requirements are met pertaining to, among other things, 

elections to defer compensation and distributions under 

an NQDC plan. Section 409A also includes rules that 

apply to certain trusts or similar arrangements associated 

Publication 15-A (2024) Page 13
with NQDC plans if the trusts or arrangements are located 

outside the United States, are restricted to the provision of 

benefits in connection with a decline in the financial health 

of the plan sponsor, or contributions are made to the trust 

during certain periods such as when a qualified plan of the 

service recipient is underfunded. Employers must withhold federal income tax (but not the additional section 

409A taxes) on any amount includible in gross income under section 409A. Income included under section 409A 

from an NQDC plan must be reported on Form W-2 or on 

Form 1099-MISC or on Form 1099-NEC, whichever applies. Amounts deferred during the year under an NQDC 

plan subject to section 409A may also be reported on the 

Form W-2 or Form 1099-MISC, but this isn’t required. For 

more information, see the General Instructions for Forms 

W-2 and W-3 and the Instructions for Forms 1099-MISC 

and 1099-NEC. These reporting rules don't affect the application or reporting of social security, Medicare, or FUTA 

tax.

The provisions don't prevent the inclusion of amounts in 

income or wages under other provisions of the Internal 

Revenue Code or common-law principles, such as when 

amounts are actually or constructively received or irrevocably contributed to a separate fund. For more information 

about NQDC plans, see Regulations sections 1.409A-1 

through 1.409A-6. Notice 2008-113 provides guidance on 

the correction of certain operation failures of an NQDC 

plan. Notice 2008-113, 2008-51 I.R.B. 1305, is available 

at IRS.gov/irb/2008-51_IRB#NOT-2008-113. Also, see 

Notice 2010-6, 2010-3 I.R.B. 275, available at IRS.gov/irb/

2010-03_IRB#NOT-2010-6; and Notice 2010-80, 2010-51 

I.R.B. 853, available at IRS.gov/irb/

2010-51_IRB#NOT-2010-80.

Social security, Medicare, and FUTA taxes. Employer 

contributions to NQDC plans, as defined in the applicable 

regulations, are treated as wages subject to social security, Medicare, and FUTA taxes when the services are performed or the employee no longer has a substantial risk of 

forfeiting the right to the deferred compensation, whichever is later.

Amounts deferred are subject to social security, Medicare, and FUTA taxes at that time unless the amount that 

is deferred can't be reasonably ascertained, for example, 

if benefits are based on final pay. If the value of the future 

benefit is based on any factors that aren't yet reasonably 

ascertainable, you may choose to estimate the value of 

the future benefit and withhold and pay social security, 

Medicare, and FUTA taxes on that amount. You’ll have to 

determine later, when the amount is reasonably ascertainable, whether any additional taxes are required. If taxes 

aren't paid before the amounts become reasonably ascertainable, when the amounts become reasonably ascertainable they are subject to social security, Medicare, and 

FUTA taxes on the amounts deferred plus the income attributable to those amounts deferred. For more information, see Regulations sections 31.3121(v)(2)-1 and 

31.3306(r)(2)-1.

Section 83(i) election to defer income on equity 

grants (qualified stock). An arrangement under which 

an employee may receive qualified stock (as defined in 

section 83(i)(2)) isn’t treated as an NQDC plan with respect to such employee solely because of such employee’s election, or ability to make an election, to defer recognition of income under section 83(i).

Tax-Sheltered Annuities

Employer payments made by a public educational institution or a tax-exempt organization to purchase a tax-sheltered annuity for an employee (annual deferrals) are included in the employee's social security and Medicare wages 

if the payments are made because of a salary reduction 

agreement. However, they aren't included in box 1 of Form 

W-2 in the year the deferrals are made and aren't subject 

to federal income tax withholding. See Regulations section 31.3121(a)(5)-2 for the definition of a salary reduction 

agreement.

Contributions to a Simplified 

Employee Pension (SEP)

An employer's SEP contributions to an employee's individual retirement arrangement (IRA) are excluded from the 

employee's gross income. These excluded amounts aren't 

subject to social security, Medicare, or FUTA tax, or federal income tax withholding. However, any SEP contributions paid under a salary reduction agreement (SARSEP) 

are included in wages for purposes of social security, 

Medicare, and FUTA taxes. See Pub. 560 for more information about SEPs.

Salary reduction simplified employee pensions 

(SARSEPs) repealed. You may not establish a SARSEP 

after 1996. However, SARSEPs established before January 1, 1997, may continue to receive contributions.

SIMPLE Retirement Plans

Employer and employee contributions to a savings incentive match plan for employees (SIMPLE) retirement account (subject to limitations) are excludable from the employee's income and are exempt from federal income tax 

withholding. An employer's nonelective (2%) or matching 

contributions are exempt from social security, Medicare, 

and FUTA taxes. However, an employee's salary reduction 

contributions to a SIMPLE retirement plan are subject to 

social security, Medicare, and FUTA taxes. For more information about SIMPLE retirement plans, see Pub. 560.

6. Sick Pay Reporting

Special rules apply to the reporting of sick pay payments 

to employees. How these payments are reported depends 

on whether the payments are made by the employer or a 

third party, such as an insurance company.

Sick pay is usually subject to social security, Medicare, 

and FUTA taxes. For exceptions, see Social Security, 

Medicare, and FUTA Taxes on Sick Pay, later in this 

Page 14 Publication 15-A (2024)
section. Sick pay may also be subject to either mandatory 

or voluntary federal income tax withholding, depending on 

who pays it.

Sick Pay

Sick pay generally means any amount paid under a plan 

because of an employee's temporary absence from work 

due to injury, sickness, or disability. It may be paid by either the employer or a third party, such as an insurance 

company. Sick pay includes both short- and long-term 

benefits. It is often expressed as a percentage of the employee's regular wages.

Payments That Aren't Sick Pay

Sick pay doesn't include the following payments.

1. Disability retirement payments. Disability retirement payments aren't sick pay and aren't discussed in 

this section. Those payments are subject to the rules 

for federal income tax withholding from pensions and 

annuities. See section 8.

2. Workers' compensation. Payments because of a 

work-related injury or sickness that are made under a 

workers' compensation law aren't sick pay and aren't 

subject to employment taxes. But see Payments in the 

nature of workers' compensation—public employees 

next.

3. Payments in the nature of workers' compensation—public employees. State and local government employees, such as police officers and firefighters, sometimes receive payments due to an injury in 

the line of duty under a statute that isn't the general 

workers' compensation law of a state. If the statute 

limits benefits to work-related injuries or sickness and 

doesn't base payments on the employee's age, length 

of service, or prior contributions, the statute is “in the 

nature of” a workers' compensation law. Payments under a statute in the nature of a workers' compensation 

law aren't sick pay and aren't subject to employment 

taxes. For more information, see Regulations section 

31.3121(a)(2)-1.

4. Medical expense payments. Payments under a definite plan or system for medical and hospitalization expenses, or for insurance covering these expenses, 

aren't sick pay and aren't subject to employment 

taxes.

5. Payments unrelated to absence from work. Accident or health insurance payments unrelated to absence from work aren't sick pay and aren't subject to 

employment taxes. These include payments for:

a. Permanent loss of a member or function of the 

body,

b. Permanent loss of the use of a member or function 

of the body, or

c. Permanent disfigurement of the body.

Example. Donald was injured in a car accident and 

lost an eye. Under a policy paid for by Donald's employer, Delta Insurance Co. paid Donald $20,000 as 

compensation for the loss of the eye. Because the 

payment was determined by the type of injury and 

was unrelated to Donald's absence from work, it isn't 

sick pay and isn't subject to federal employment 

taxes.

Sick Pay Plan

A sick pay plan is a plan or system established by an employer under which sick pay is available to employees 

generally or to a class or classes of employees. This 

doesn't include a situation in which benefits are provided 

on a discretionary or occasional basis with merely an intention to aid particular employees in time of need.

You have a sick pay plan or system if the plan is in writing or is otherwise made known to employees, such as by 

a bulletin board notice or your long and established practice. Some indications that you have a sick pay plan or 

system include references to the plan or system in the 

contract of employment, employer contributions to a plan, 

or segregated accounts for the payment of benefits.

Definition of employer. The “employer” for whom the 

employee normally works, a term used in the following discussion, is either the employer for whom the employee 

was working at the time that the employee became sick or 

disabled or the last employer for whom the employee 

worked before becoming sick or disabled, if that employer 

made contributions to the sick pay plan on behalf of the 

sick or disabled employee.

Note. Contributions to a sick pay plan through a cafeteria plan (by direct employer contributions or salary reduction) are employer contributions unless they are after-tax employee contributions (that is, included in taxable 

wages).

Third-Party Payers of Sick Pay

Employer's agent. An employer's agent is a third party 

that bears no insurance risk and is reimbursed on a 

cost-plus-fee basis for payment of sick pay and similar 

amounts. A third party may be your agent even if the third 

party is responsible for determining which employees are 

eligible to receive payments. For example, if a third party 

provides administrative services only, the third party is 

your agent. If the third party is paid an insurance premium 

and isn't reimbursed on a cost-plus-fee basis, the third 

party isn't your agent. Whether an insurance company or 

other third party is your agent depends on the terms of 

their agreement with you.

A third party that makes payments of sick pay as your 

agent isn't considered the employer and generally has no 

responsibility for employment taxes. This responsibility remains with you. However, under an exception to this rule, 

the parties may enter into an agreement that makes the 

third-party agent responsible for employment taxes. In this 

situation, the third-party agent should use its own name 

Publication 15-A (2024) Page 15
and employer identification number (EIN) (rather than your 

name and EIN) for the responsibilities that it has assumed.

Third party not employer's agent. A third party that 

makes payments of sick pay other than as an agent of the 

employer is liable for federal income tax withholding (if requested by the employee) and the employee part of the 

social security and Medicare taxes.

The third party is also liable for the employer part of 

the social security and Medicare taxes, and the FUTA tax, 

unless the third party transfers this liability to the employer 

for whom the employee normally works. This liability is 

transferred if the third party takes the following steps.

1. Withholds the employee part of social security and 

Medicare taxes from the sick pay payments.

2. Makes timely deposits of the employee part of social 

security and Medicare taxes.

3. Notifies the employer for whom the employee normally works of the payments on which employee 

taxes were withheld and deposited. The third party 

must notify the employer within the time required for 

the third party's deposit of the employee part of the 

social security and Medicare taxes. For instance, if 

the third party is a monthly schedule depositor, it must 

notify the employer by the 15th day of the month following the month in which the sick pay payment is 

made because that is the day by which the deposit is 

required to be made. The third party should notify the 

employer as soon as information on payments is available so that an employer can make electronic deposits timely. For multiemployer plans, see the special 

rule discussed next.

Multiemployer plan timing rule. A special rule applies to sick pay payments made to employees by a 

third-party insurer under an insurance contract with a multiemployer plan established under a collectively bargained 

agreement. If the third-party insurer making the payments 

complies with steps 1 and 2, earlier, and gives the plan 

(rather than the employer) the required timely notice described in step 3, earlier, then the plan (not the third-party 

insurer) must pay the employer part of the social security 

and Medicare taxes, and the FUTA tax. Similarly, if within 

6 business days of the plan's receipt of notification, the 

plan gives notice to the employer for whom the employee 

normally works, the employer (not the plan) must pay the 

employer part of the social security and Medicare taxes, 

and the FUTA tax.

Reliance on information supplied by the employer. A 

third party that pays sick pay should request information 

from the employer to determine amounts that aren't subject to employment taxes. Unless the third party has reason not to believe the information, it may rely on that information for the following items.

• The total wages paid to the employee during the calendar year.

• The last month in which the employee worked for the 

employer.

• The employee contributions to the sick pay plan made 

with after-tax dollars.

The third party shouldn't rely on statements regarding 

these items made by the employee.

Social Security, Medicare, and FUTA 

Taxes on Sick Pay

Employer. If you pay sick pay to your employee, you 

must generally withhold employee social security and 

Medicare taxes from the sick pay. You must timely deposit 

employee and employer social security and Medicare 

taxes, and FUTA tax. There are no special deposit rules 

for sick pay. See section 11 of Pub. 15 for more information on the deposit rules.

Amounts not subject to social security, Medicare, or 

FUTA tax. The following payments, whether made by the 

employer or a third party, aren't subject to social security, 

Medicare, or FUTA tax (different rules apply to federal income tax withholding).

• Payments after an employee's death or disability 

retirement. Social security, Medicare, and FUTA 

taxes don't apply to amounts paid under a definite 

plan or system, as defined under Sick Pay Plan, earlier 

in this section, on or after the termination of the employment relationship because of death or disability 

retirement. However, even if there is a definite plan or 

system, amounts paid to a former employee are subject to social security, Medicare, and FUTA taxes if 

they would have been paid even if the employment relationship hadn't terminated because of death or disability retirement. For example, a payment to a disabled 

former employee for unused vacation time would have 

been made whether or not the employee retired on 

disability. Therefore, the payment is wages and is subject to social security, Medicare, and FUTA taxes.

• Payments after calendar year of employee's 

death. Sick pay paid to the employee's estate or survivor after the calendar year of the employee's death 

isn't subject to social security, Medicare, or FUTA tax. 

Also, see Amounts not subject to federal income tax 

withholding, later in this section.

Example. Sandra became entitled to sick pay on 

November 20, 2023, and died on December 31, 2023. 

On January 5, 2024, Sandra's sick pay for the period 

from December 24 through December 31, 2023, was 

paid to Sandra's surviving spouse. The payment isn't 

subject to social security, Medicare, or FUTA tax.

• Payments to an employee entitled to disability insurance benefits. Payments to an employee when 

the employee is entitled to disability insurance benefits 

under section 223(a) of the Social Security Act aren't 

subject to social security and Medicare taxes. This 

rule applies only if the employee became entitled to 

the Social Security Act benefits before the calendar 

year in which the payments are made, and the employee performs no services for the employer during 

Page 16 Publication 15-A (2024)
the period for which the payments are made. However, 

these payments are subject to FUTA tax.

• Payments that exceed the applicable wage base. 

Social security and FUTA taxes don't apply to payments of sick pay that, when combined with the regular wages and sick pay previously paid to the employee during the year, exceed the applicable wage 

base. Because there is no Medicare tax wage base, 

this exception doesn't apply to Medicare tax. For 

2024, the social security tax wage base is $168,600 

and the FUTA tax wage base is $7,000.

Example. If an employee receives $161,600 in wages from an employer in 2024 and also receives 

$10,000 of sick pay, only the first $7,000 ($168,600 – 

$161,600) of the sick pay is subject to social security 

tax. All of the sick pay is subject to Medicare tax. None 

of the sick pay is subject to FUTA tax. See Example of 

Figuring and Reporting Sick Pay, later in this section.

• Payments after 6 months absence from work. Social security, Medicare, and FUTA taxes don't apply to 

sick pay paid more than 6 calendar months after the 

last calendar month in which the employee worked.

Example 1. Ralph's last day of work before becoming entitled to receive sick pay was December 8, 2023. 

Ralph was paid sick pay for 9 months before returning 

to work on September 13, 2024. Sick pay paid to 

Ralph after June 30, 2024, isn't subject to social security, Medicare, or FUTA tax.

Example 2. The facts are the same as in Example 1, except that Ralph worked 1 day during the 

9-month period on February 9, 2024. Because the 

6-month period begins again in March, only the sick 

pay paid to Ralph after August 31, 2024, is exempt 

from social security, Medicare, and FUTA taxes.

• Payments attributable to employee contributions. 

Social security, Medicare, and FUTA taxes don't apply 

to payments, or parts of payments, attributable to employee contributions to a sick pay plan made with after-tax dollars. Contributions to a sick pay plan made 

on behalf of employees with employees' pre-tax dollars under a cafeteria plan are employer contributions.

Group policy. If both the employer and the employee contributed to the sick pay plan under a group 

insurance policy, figure the taxable sick pay by multiplying total sick pay by the percentage of the policy's 

cost that was contributed by the employer for the 3 

policy years before the calendar year in which the sick 

pay is paid. If the policy has been in effect fewer than 3 

years, use the cost for the policy years in effect or, if in 

effect less than 1 year, a reasonable estimate of the 

cost for the first policy year.

Example. Alan is employed by Edgewood Corporation. Because of an illness, Alan was absent from work 

for 3 months during 2024. Key Insurance Company 

paid Alan $2,000 sick pay for each month of absence 

under a policy paid for by contributions from both 

Edgewood and its employees. All of the employees' 

contributions were paid with after-tax dollars. For the 3 

policy years before 2024, Edgewood paid 70% of the 

policy's cost and its employees paid 30%. Because 

70% of the sick pay paid under the policy is due to 

Edgewood's contributions, $1,400 ($2,000 × 70%) of 

each payment made to Alan is taxable sick pay. The 

remaining $600 of each payment that is due to employee contributions isn't taxable sick pay and isn't 

subject to employment taxes. Also, see Example of 

Figuring and Reporting Sick Pay, later in this section.

Income Tax Withholding on Sick Pay

The requirements for federal income tax withholding on 

sick pay and the methods for figuring it differ depending 

on whether the sick pay is paid by:

• The employer,

• An agent of the employer (defined earlier in this section), or

• A third party that isn't the employer's agent.

Employer or employer's agent. Sick pay paid by you or 

your agent is subject to mandatory federal income tax 

withholding. An employer or agent paying sick pay generally determines the federal income tax to be withheld 

based on the employee's Form W-4. The employee can't 

choose how much federal income tax will be withheld by 

giving you or your agent a Form W-4S. Sick pay paid by 

an agent is treated as supplemental wages. If the agent 

doesn't pay regular wages to the employee, the agent may 

choose to withhold federal income tax at a flat 22% rate, 

rather than at the wage withholding rate. See section 7 of 

Pub. 15 for guidance on withholding employment taxes 

from supplemental wages, including the rules for withholding federal income tax when wages to an individual exceed $1 million during the year.

Third party not an agent. Sick pay paid by a third party 

that isn't your agent isn't subject to mandatory federal income tax withholding. However, an employee may elect to 

have federal income tax withheld by submitting Form 

W-4S to the third party.

If Form W-4S has been submitted, the third party 

should withhold federal income tax on all payments of sick 

pay made 8 or more days after receiving the form. The 

third party may, at its option, withhold federal income tax 

before 8 days have passed.

The employee may request on Form W-4S to have a 

specific whole dollar amount withheld. However, if the requested withholding would reduce any net payment below 

$10, the third party shouldn't withhold any federal income 

tax from that payment. The minimum amount of withholding that the employee can specify is $4 per day, $20 per 

week, or $88 per month based on the payroll period.

Withhold from all payments at the same rate whether 

full or partial payments. For example, if $25 is withheld 

from a regular full payment of $100, then $20 (25%) 

should be withheld from a partial payment of $80.

Amounts not subject to federal income tax withholding. The following amounts, whether paid by you or a 

Publication 15-A (2024) Page 17
third party, aren't wages and aren't subject to federal income tax withholding.

• Payments after the employee's death. Sick pay 

paid to the employee's estate or survivor at any time 

after the employee's death isn't subject to federal income tax withholding, regardless of who pays it.

• Payments attributable to employee contributions. 

Payments, or parts of payments, attributable to employee contributions made to a sick pay plan with after-tax dollars aren't subject to federal income tax 

withholding. For more information, see the corresponding discussion under Amounts not subject to social security, Medicare, or FUTA tax, earlier in this section.

Depositing and Reporting

This section discusses who is liable for depositing social 

security, Medicare, FUTA, and withheld federal income 

taxes on sick pay. These taxes must be deposited under 

the same rules that apply to deposits of taxes on regular 

wage payments. See Pub. 15 for information on the deposit rules.

This section also explains how sick pay should be reported on Forms W-2, W-3, 940, and 941 (or Form 944).

Sick Pay Paid by Employer or Agent

If you or your agent (defined earlier in this section) makes 

sick pay payments, you deposit taxes and file Forms W-2, 

W-3, 940, and 941 (or Form 944) under the same rules 

that apply to regular wage payments.

However, any agreement between the parties may require your agent to carry out responsibilities that would 

otherwise have been borne by you. In this situation, your 

agent should use its own name and EIN (rather than 

yours) for the responsibilities that it has assumed.

Reporting sick pay on Form W-2. You may either combine the sick pay with other wages and prepare a single 

Form W-2 for each employee, or you may prepare separate Forms W-2 for each employee, one reporting sick pay 

and the other reporting regular wages. A Form W-2 must 

be prepared even if all of the sick pay is nontaxable (see 

Box 12 below). All Forms W-2 must be given to the employees by January 31.

The Form W-2 filed for the sick pay must include the 

employer's name, address, and EIN; the employee's 

name, address, and social security number (SSN); and 

the following information.

Box 1—The amount of sick pay the employee must include in income.

Box 2—The amount of any federal income tax withheld 

from the sick pay.

Box 3—The amount of sick pay subject to employee 

social security tax.

Box 4—The amount of employee social security tax 

withheld from the sick pay.

Box 5—The amount of sick pay subject to employee 

Medicare tax.

Box 6—The amount of employee Medicare tax (including Additional Medicare Tax, if applicable) withheld 

from the sick pay.

Box 12 (code J)—Any sick pay that was paid by a 

third-party and wasn't includible in income (and not 

shown in boxes 1, 3, and 5) because the employee 

contributed to the sick pay plan. Don't include nontaxable disability payments made directly to a state.

Box 13—Check the “Third-party sick pay” box only if 

the amounts were paid by a third party.

Sick Pay Paid by Third Party

The depositing and reporting rules for a third party that 

isn't your agent depend on whether liability has been 

transferred as discussed under Third party not employer's 

agent, earlier in this section.

To figure the due dates and amounts of its deposits of 

employment taxes, a third party should combine:

• The liability for the wages paid to its own employees, 

and

• The liability for payments it made to all employees of 

all its clients. This doesn't include any liability transferred to the employer.

Liability not transferred to the employer. If the third 

party doesn't satisfy the requirements for transferring liability for FUTA tax and the employer part of the social security and Medicare taxes, the third party reports the sick 

pay on its own Form 940 and Form 941 (or Form 944). In 

this situation, the employer has no tax responsibilities for 

sick pay.

The third party must deposit social security, Medicare, 

FUTA, and withheld federal income taxes using its own 

name and EIN. The third party must give each employee 

to whom it paid sick pay a Form W-2 by January 31 of the 

following year. The Form W-2 must include the third party's name, address, and EIN instead of the employer information.

Liability transferred to the employer. Generally, if a 

third party satisfies the requirements for transferring liability for the employer part of the social security and Medicare taxes and for the FUTA tax, the following rules apply.

Deposits. The third party must make deposits of withheld employee social security and Medicare taxes and 

withheld federal income tax using its own name and EIN. 

You must make deposits of the employer part of the social security and Medicare taxes and the FUTA tax using 

your name and EIN. In applying the deposit rules, your liability for these taxes begins when you receive the third 

party's notice of sick pay payments.

Form 941 or Form 944. The third party and you must 

each file Form 941 or Form 944. The discussion that follows only explains how to report sick pay on Form 941. If 

you file Form 944, use the lines on that form that 

Page 18 Publication 15-A (2024)
correspond to the lines on Form 941 that are discussed 

here.

Form 941, line 8, must contain a special adjusting entry 

for social security and Medicare taxes. These entries are 

required because the total tax liability for social security 

and Medicare taxes (employee and employer parts) is 

split between you and the third party.

• Employer. You must include third-party sick pay on 

Form 941, lines 2, 5a, 5c, and 5d (if applicable). There 

should be no sick pay entry on line 3 because the third 

party withheld federal income tax, if any. After completing line 6, subtract on line 8 the employee part of 

social security and Medicare taxes withheld and deposited by the third party.

• Third party. The third party must include on Form 941 

the employee part of the social security and Medicare 

taxes (and federal income tax, if any) it withheld. The 

third party doesn't include on line 2 any sick pay paid 

as a third party but does include on line 3 any federal 

income tax withheld. On line 5a, column 1, the third 

party enters the total amount it paid subject to social 

security taxes. This amount includes both wages paid 

to its own employees and sick pay paid as a third 

party. The third party completes lines 5c and 5d (if applicable), column 1, in a similar manner. On line 8, the 

third party subtracts the employer part of the social 

security and Medicare taxes that you must pay.

Form 940. You, not the third party, must prepare Form 

940 for sick pay.

Form 8922, Third-Party Sick Pay Recap. The third 

party (or in certain cases, the employer) must file Form 

8922 to report sick pay paid by a third party for or on behalf of employers for whom services are normally performed. Form 8922 doesn't show the names of individuals 

who received the third-party sick pay, but the total 

amounts paid in the calendar year to all employees whose 

sick pay wages are required to be reported on Form 8922.

Third-party sick pay is reported on Form 8922 if the liability for the employer part of social security tax and Medicare tax has been shifted by the third party or insurer paying the sick pay to the employer for whom services are 

normally rendered. Whether the third party or employer reports the sick pay on Form 8922 depends on which entity 

is filing Forms W-2 reporting the sick pay paid to individual 

employees receiving the sick pay. The third party reports 

the sick pay on Form 8922 if the employer is filing Forms 

W-2 reporting the third-party sick pay under the name and 

EIN of the employer. However, if the third party is filing 

Forms W-2 with respect to the sick pay under the name 

and EIN of the third party, the employer files Form 8922 reporting the sick pay.

If the third party is paying all employment taxes, including the employer part of social security tax and Medicare 

tax, with respect to the sick pay, the third party files Forms 

W-2 using its name and EIN as employer with respect to 

the sick pay for each employee receiving sick pay and reports social security and Medicare taxes and federal income tax withholding on its Form 941. Neither the third 

party nor the employer reports the sick pay on Form 8922.

Third parties that are agents with respect to the payment of sick pay (because they have no insurance risk) 

are required to report sick pay on Form 8922 only if the 

agency agreement between the employer and the agent 

imposes the following requirements.

The agreement must require the agent to:

• Withhold and pay the employee part of social security 

tax and Medicare tax and income tax withholding on 

the sick pay, and

• Report the withheld amounts on Form 941 using the 

agent’s name and EIN.

The agreement must require the employer to:

• Pay and report the employer part of social security 

tax and Medicare tax on a Form 941 using the employer's name and EIN and report the sick pay on 

Form W-2.

Optional rule for Form W-2. You and the third party 

may choose to enter into a legally binding agreement designating the third party to be your agent for purposes of 

preparing Forms W-2 reporting sick pay. The agreement 

must specify what part, if any, of the payments under the 

sick pay plan is excludable from the employees' gross incomes because it is attributable to their contributions to 

the plan. If you enter into an agreement, the third party 

prepares the actual Forms W-2, not Form 8922 as discussed above, for each employee who receives sick pay 

from the third party. If the optional rule is used:

• The third party doesn't provide you with the sick pay 

statement described next, and

• You (not the third party) files Form 8922. Form 8922 is 

needed to reconcile the sick pay shown on your Forms 

941 or Form 944.

Sick pay statement. The third party must furnish you 

with a sick pay statement by January 15 of the year following the year in which the sick pay was paid. The statement 

must show the following information about each employee 

who was paid sick pay.

• The employee's name.

• The employee's SSN (if social security, Medicare, or 

income tax was withheld).

• The sick pay paid to the employee.

• Any federal income tax withheld.

• Any employee part of social security tax withheld.

• Any employee part of Medicare tax withheld.

Example of Figuring and Reporting 

Sick Pay

Note. The following example is for wages paid in 2023.

Dave, an employee of Edgewood Corporation, was seriously injured in a car accident on January 1, 2023. Dave's last day of work was December 31, 2022. The accident wasn't job related.

Publication 15-A (2024) Page 19
Key, an insurance company that wasn't an agent of the 

employer, paid Dave $2,000 sick pay each month for 10 

months, beginning in January 2023. Dave submitted a 

Form W-4S to Key, requesting $210 be withheld from each 

payment for federal income tax. Dave received no payments from Edgewood from January 2023 through October 2023. Dave returned to work on November 1, 2023.

For the policy year in which the car accident occurred, 

Dave paid a part of the premiums for coverage, and Edgewood paid the remaining part. The plan was, therefore, a 

“contributory plan.” During the 3 policy years before the 

calendar year of the accident, Edgewood paid 70% of the 

total of the net premiums for its employees' insurance coverage, and its employees paid 30%.

Social security and Medicare taxes. For social security and Medicare tax purposes, taxable sick pay was 

$8,400 ($2,000 per month × 70% (0.70) = $1,400 taxable 

portion per payment; $1,400 × 6 months = $8,400 total 

taxable sick pay). Only the six $2,000 checks received by 

Dave from January through June are included in the calculation. The check received by Dave in July (the seventh 

check) was received more than 6 months after the month 

in which Dave last worked.

Of each $2,000 payment Dave received, 30% ($600) 

isn't subject to social security and Medicare taxes because the plan is contributory and Dave's after-tax contribution is considered to be 30% of the premiums during the 

3 policy years before the calendar year of the accident.

FUTA tax. Of the $8,400 taxable sick pay (figured the 

same as for social security and Medicare taxes), only 

$7,000 is subject to the FUTA tax because the FUTA tax 

contribution base is $7,000.

Federal income tax withholding. Of each $2,000 

payment, $1,400 ($2,000 × 70% (0.70)) is subject to voluntary federal income tax withholding. In accordance with 

Dave's Form W-4S, $210 was withheld from each payment.

Liability transferred. For the first 6 months following 

the last month in which Dave worked, Key was liable for 

social security, Medicare, and FUTA taxes on any payments that constituted taxable wages. However, Key could 

have shifted the liability for the employer part of the social 

security and Medicare taxes (and for the FUTA tax) during 

the first 6 months by withholding Dave's part of the social 

security and Medicare taxes, timely depositing the taxes, 

and notifying Edgewood of the payments.

If Key shifted liability for the employer part of the social 

security and Medicare taxes to Edgewood and provided 

Edgewood with a sick pay statement, Key wouldn't prepare a Form W-2 for Dave. However, Key would file Form 

8922. Key and Edgewood must each prepare Forms 941. 

Edgewood must also report the sick pay and withholding 

for Dave on Forms W-2, W-3, and 940.

As an alternative, the parties could have followed the 

optional rule described under Optional rule for Form W-2, 

earlier in this section. Under this rule, Key would prepare 

Form W-2 even though liability for the employer part of 

the social security and Medicare taxes had been shifted to 

Edgewood. Also, Key wouldn't prepare a sick pay statement, and Edgewood, not Key, would file Form 8922 reflecting the sick pay shown on Edgewood's Forms 941.

Liability not transferred. If Key didn't shift liability for 

the employer part of the social security and Medicare 

taxes to Edgewood, Key would prepare Forms W-2 and 

W-3 as well as Forms 941 and 940. In this situation, Edgewood wouldn't report the sick pay.

Payments received after 6 months. The payments 

received by Dave in July through October aren't subject to 

social security, Medicare, or FUTA tax because they were 

received more than 6 months after the last month in which 

Dave worked (December 2022). However, Key must continue to withhold federal income tax from each payment 

because Dave furnished Key with a Form W-4S. Also, Key 

must prepare Forms W-2 and W-3, unless it has furnished 

Edgewood with a sick pay statement. If the sick pay statement was furnished, then Edgewood must prepare Forms 

W-2 and W-3.

Page 20 Publication 15-A (2024)
THIRD-PARTY SICK PAY—NOT AS AN AGENT AND LIABILITY TRANSFERRED TO EMPLOYER

Employer Responsibilities Third-Party Responsibilities

Withhold Employee Taxes

Income No Yes, if Form W-4S is submitted

Social Security No Yes

Medicare No Yes

Deposit Employee Taxes

Income No Yes — Using Third Party EIN

Social Security No Yes — Using Third Party EIN

Medicare No Yes — Using Third Party EIN

Deposit Employer Taxes

Social Security Yes — Using Employer EIN No

Medicare Yes — Using Employer EIN No

FUTA Yes — Using Employer EIN No

Report Employee Wages and Taxes on Form 941

Income Report Taxable Wages Report Tax Withheld

Social Security Report Taxable Wages* Report Taxable Wages*

Medicare Report Taxable Wages* Report Taxable Wages*

* Adjustment on line 8 for employee taxes deposited by third party. * Adjustment on line 8 for employer taxes deposited by employer.

Report Employee Wages and Taxes on Form W-21

Income Yes No — File Form 8922

Social Security Yes No — File Form 8922

Medicare Yes No — File Form 8922

1

 See the instructions earlier if operating under the optional rule for form W-2.

7. Special Rules for Paying 

Taxes

Common Paymaster

If two or more related corporations employ the same individual at the same time and pay this individual through a 

common paymaster that is one of the corporations, the 

corporations are considered to be a single employer. They 

have to pay, in total, no more in social security tax than a 

single employer would pay.

Each corporation must pay its own part of the employment taxes and may deduct only its own part of the wages. The deductions won't be allowed unless the corporation reimburses the common paymaster for the wage and 

tax payments. See Regulations section 31.3121(s)-1 for 

more information. The common paymaster is responsible 

for filing information and tax returns and issuing Forms 

W-2 with respect to wages it is considered to have paid as 

a common paymaster.

Agent With an Approved Form 2678

Employers and payers must use Form 2678 to request approval for an agent to file returns and make deposits or 

payments of their employment or other withholding taxes. 

See Revenue Procedure 2013-39, 2013-52 I.R.B. 830, 

available at IRS.gov/irb/2013-52_IRB#RP-2013-39; Revenue Procedure 84-33, 1984-1 C.B. 502; and the General 

Instructions for Forms W-2 and W-3 for procedures and 

reporting requirements. Form 2678 doesn't apply to FUTA 

tax reportable on Form 940 unless the employer is a home 

care service recipient receiving home care services 

through a program administered by a federal, state, or local government agency.

Agents filing an aggregate Form 940 must file Schedule R (Form 940). Agents filing an aggregate Form 941 

must file Schedule R (Form 941).

Reporting Agents

Electronic filing of Forms 940, 941, and 944. Reporting agents may file Forms 940, 941, and 944 electronically. For details, see Pub. 3112, IRS e-file Application & 

Participation. For information on electronic filing of Forms 

940, 941, and 944, see Revenue Procedure 2007-40, 

2007-26 I.R.B. 1488, available at IRS.gov/irb/

2007-26_IRB#RP-2007-40. For more information on electronic filing, go to IRS.gov/EmploymentEfile or call 

866-255-0654.

For more information on third-party payer arrangements, including agents with an approved Form 

2678, reporting agents, and certified professional 

employer organizations, see section 16 of Pub. 15.

Employee's Portion of Taxes Paid by 

Employer

The information provided in this section doesn't 

take into account an employer that chooses to 

pay the Additional Medicare Tax on behalf of the 

employee.

TIP

CAUTION

!

Publication 15-A (2024) Page 21
If you pay your employee's social security and Medicare taxes without deducting them from the employee's 

pay, you must include the amount of the payments in the 

employee's wages for federal income tax withholding and 

social security, Medicare, and FUTA taxes. This increase 

in the employee's wages for your payment of the employee's social security and Medicare taxes is also subject to 

employee social security and Medicare taxes. This again 

increases the amount of the additional taxes you must 

pay.

To figure the employee's increased wages in this situation, divide the stated pay (the amount that you pay without taking into account your payment of employee social 

security and Medicare taxes) by a factor for that year. This 

factor is determined by subtracting from 1.0 the combined 

employee social security and Medicare tax rate for the 

year that the wages are paid. For 2024, the factor is 

0.9235 (1.0 − 0.0765). If the stated pay is more than 

$155,702.10 (2024 wage base $168,600 × 0.9235), follow 

the procedure described under Stated pay of more than 

$155,702.10 in 2024 below.

Stated pay of $155,702.10 or less in 2024. For an employee with stated pay of $155,702.10 or less in 2024, figure the correct wages (wages plus employer-paid employee taxes) to report by dividing the stated pay by 

0.9235. This will give you the wages to report in box 1 and 

the social security and Medicare wages to report in boxes 

3 and 5 of Form W-2.

On Form W-2, to figure the correct social security tax to 

enter in box 4, multiply the amount in box 3 by the social 

security withholding rate of 6.2% and enter the result in 

box 4. To figure the correct Medicare tax to enter in box 6, 

multiply the amount in box 5 by the Medicare withholding 

rate of 1.45% and enter the result in box 6.

Example. Donald Devon hires Lydia Lone for only 1 

week during 2024. Donald pays Lydia $500 for that week. 

Donald agrees to pay Lydia's part of the social security 

and Medicare taxes. To figure Lydia’s reportable wages, 

Donald divides $500 by 0.9235. The result, $541.42, is 

the amount that is reported as wages in boxes 1, 3, and 5 

of Form W-2. To figure the amount to report as social security tax, Donald multiplies $541.42 by the social security 

tax rate of 6.2% (0.062). The result, $33.57, is entered in 

box 4 of Form W-2. To figure the amount to report as Medicare tax, Donald multiplies $541.42 by the Medicare tax 

rate of 1.45% (0.0145). The result, $7.85, is entered in 

box 6 of Form W-2. Although Donald didn't actually withhold the amounts from Lydia, Donald will report these 

amounts as taxes withheld on Form 941 or Form 944 and 

is responsible for the employer share of these taxes.

For FUTA tax and federal income tax withholding, Lydia's weekly wages are $541.42.

Stated pay of more than $155,702.10 in 2024. For an 

employee with stated pay of more than $155,702.10 in 

2024, the portion of stated wages subject to social security tax is $155,702.10 (the first $168,600 of wages × 

0.9235). The stated pay in excess of $155,702.10 isn't 

subject to social security tax because the tax only applies 

to the first $168,600 of wages (stated pay plus employer-paid employee taxes). Enter $168,600 in box 3 of 

Form W-2. The social security tax to enter in box 4 is 

$10,453.20 ($168,600 x 0.062).

To figure the correct Medicare wages to enter in box 5 

of Form W-2, subtract $155,702.10 from the stated pay. 

Divide the result by 0.9855 (1.0 − 0.0145) and add 

$168,600.

For example, if stated pay is $160,000, the correct 

Medicare wages are figured as follows.

$160,000 – $155,702.10 = $4,297.90

$4,297.90 ÷ 0.9855 = $4,361.14

$4,361.14 + $168,600 = $172,961.14

The Medicare wages are $172,961.14. Enter this 

amount in box 5 of Form W-2. The Medicare tax to enter in 

box 6 is $2,507.94 ($172,961.14 × 0.0145).

Although these employment tax amounts aren't actually 

withheld from the employee's pay, report them as withheld 

on Forms 941, and pay this amount as the employer's 

share of the social security and Medicare taxes. If the wages for federal income tax withholding purposes in the 

preceding example are the same as for social security and 

Medicare tax purposes, the correct wage amount for federal income tax withholding is $172,961.14 ($160,000 + 

$10,453.20 + $2,507.94), which is included in box 1 of 

Form W-2.

Household and agricultural employees. The discussion above doesn't apply to household and agricultural 

employers. If you pay a household or agricultural employee's social security and Medicare taxes, these payments 

must be included in the employee's wages. However, this 

wage increase due to the tax payments made for the employee isn't subject to social security or Medicare tax as 

discussed in this section.

Tax deposits and Form 941 or Form 944. If you pay 

your employee's portion of their social security and Medicare taxes rather than deducting them from their pay, 

you’re liable for timely depositing or paying the increased 

taxes associated with the wage increase. Also, report the 

increased wages on the appropriate lines of Form 941 for 

the quarter during which the wages were paid or on Form 

944 for the year during which the wages were paid.

International Social Security 

Agreements

The United States has social security agreements, also 

known as totalization agreements, with many countries 

that eliminate dual social security coverage and taxation. 

Under these agreements, employees must generally pay 

social security taxes only to the country where they work. 

Employees and employers who are subject to foreign social security taxes under these agreements are potentially 

exempt from U.S. social security taxes, including the Medicare portion. For more information, go to SSA.gov/

international, or see Pub. 519, U.S. Tax Guide for Aliens.

Page 22 Publication 15-A (2024)
8. Federal Income Tax 

Withholding on Retirement 

Payments and Annuities

Generally, federal income tax withholding applies to the 

taxable part of payments made from pension, profit-sharing, stock bonus, annuity, certain deferred compensation 

plans, IRAs, and commercial annuities. Don't withhold income taxes from amounts totally exempt from tax. If part 

of a distribution is taxable and part is nontaxable, withhold 

income taxes only on the part subject to tax when known. 

The method and rate of withholding depends on (a) the 

kind of payment; (b) whether the payments are to be delivered outside the United States and its territories; and (c) 

whether the payee is a nonresident alien individual, a nonresident alien beneficiary, or a foreign estate. Qualified 

distributions from Roth IRAs and Roth 401(k) plans are 

nontaxable and, therefore, not subject to withholding. See 

Payments Outside the United States and Payments to Foreign Persons, later in this section, for special withholding 

rules that apply to payments outside the United States 

and payments to foreign persons.

Federal income tax must be withheld from eligible rollover distributions. See Eligible Rollover Distribution—20% 

Default Withholding Rate, later in this section.

Periodic Payments

Periodic payments are those made in installments at regular intervals over a period of more than 1 year. They may 

be paid annually, quarterly, monthly, etc. Withholding from 

periodic payments of a pension or annuity is generally figured in the same manner as withholding from wages. 

Form W-4P is used to request withholding on periodic 

payments. Form W-4P was redesigned for 2022. Although 

the final redesigned Form W-4P was available for use in 

2022, the IRS postponed the requirement to begin using 

the redesigned form until January 1, 2023. Payers should 

have updated their system programming for this form in 

2022. See Pub. 15-T for more information on how to withhold on periodic payments.

Consider advising payees to use the IRS Tax 

Withholding Estimator, available at IRS.gov/

W4App, when completing Form W-4P if they have 

social security, dividend, capital gain, or business income; 

are subject to the Additional Medicare Tax or Net Investment Income Tax; or receive these payments or pension 

and annuity payments for only part of the year.

There are some kinds of periodic payments for which 

the payee can't use Form W-4P because they are already 

defined as wages subject to federal income tax withholding. These include retirement pay for service in the U.S. 

Armed Forces and payments from certain NQDC plans 

and deferred compensation plans of exempt organizations 

described in section 457.

TIP

The payee’s Form W-4P stays in effect until they 

change or revoke it. You must notify payees each year of 

their right to choose not to have federal income tax withheld or to change their previous choice.

Nonperiodic Payments—10% Default 

Withholding Rate

Form W-4R is used to request withholding on nonperiodic 

payments. Distributions from an IRA that are payable on 

demand are treated as nonperiodic payments. Although 

Form W-4R was available for use in 2022, the IRS postponed the requirement to begin using the new form until 

January 1, 2023. Payers should have updated their system programming for this form in 2022.

Withholding on nonperiodic payments using a 2021 

or earlier Form W-4P. You must withhold at a flat 10% 

rate from nonperiodic payments (but see Eligible Rollover 

Distribution—20% Default Withholding Rate, later) unless 

the payee chose not to have income tax withheld (if permitted). A payee could've chosen not to have income tax 

withheld from a nonperiodic payment by submitting a 

2021 or earlier Form W-4P (containing their correct SSN) 

and checking the box on line 1. Generally, the choice not 

to have federal income tax withheld applies to any later 

payment from the same plan. A payee couldn't use line 2 

for nonperiodic payments; they may have used line 3 to 

specify an additional amount that they wanted withheld.

If a payee submitted a Form W-4P that didn't contain 

their correct SSN, you can’t honor their request not to 

have income tax withheld and you must withhold 10% of 

the payment for federal income tax

Withholding on nonperiodic payments using a 2022 

or later Form W-4R. The default withholding rate is 10%, 

but Form W-4R allows a payee to choose a different rate 

of withholding by entering a rate between 0% and 100% 

on Form W-4R, line 2. However, the payee can't choose a 

rate of less than 10% for payments to be delivered outside 

the United States and its territories. If a payee submits a 

Form W-4R that doesn't contain their correct SSN, you 

can't honor their request to have income tax withheld at a 

rate of less than 10% and you must withhold 10% of the 

payment for federal income tax.

Eligible Rollover Distribution—20% 

Default Withholding Rate

Form W-4R is used to request withholding on eligible rollover distributions. Eligible rollover distributions include 

distributions from eligible retirement plans (other than 

IRAs), such as qualified plans, section 401(k) plans, section 457(b) plans maintained by a governmental employer, 

section 403(a) annuity plans, or section 403(b) tax-sheltered annuities that are eligible to be rolled over tax free to 

an IRA or another eligible retirement plan. Although the 

Form W-4R was available for use in 2022, the IRS postponed the requirement to begin using the new form until 

January 1, 2023. Payers should have updated their system programming for this form in 2022.

Publication 15-A (2024) Page 23
Withholding on eligible rollover distributions using a 

2021 or earlier Form W-4P. Eligible rollover distributions 

are subject to a flat 20% withholding rate. The 20% withholding rate is required and a payee can't choose to have 

less federal income tax withheld from eligible rollover distributions. A payee that wanted an additional amount withheld would've requested the additional amount on line 3 of 

a 2021 or earlier Form W-4P.

Withholding on eligible rollover distributions using a 

2022 or later Form W-4R. The default withholding rate is 

20%, but Form W-4R allows a payee to choose a rate of 

withholding that is greater than 20% on Form W-4R, line 2. 

However, the payee can’t choose a rate of less than 20%.

Exceptions. Distributions that are (a) qualifying “hardship” distributions; and (b) distributions required by federal 

law, such as required minimum distributions, aren't subject 

to the mandatory 20% federal income tax withholding. 

See Pub. 505 for details. Also, see Nonperiodic Payments—10% Default Withholding Rate, earlier. You 

shouldn’t withhold federal income tax if the entire distribution is transferred in a direct rollover to a traditional IRA or 

another eligible retirement plan.

Payments Outside the United States 

and Payments to Foreign Persons

Generally, if a payee is a U.S. citizen or a resident alien, 

the payee can't choose not to have federal income tax 

withheld on periodic payments (or choose a rate of less 

than 10% for nonperiodic payments) to be delivered outside the United States and its territories.

Don't use Form W-4P or Form W-4R for payments to 

nonresident aliens, nonresident alien beneficiaries, or foreign estates. In the absence of a treaty exemption, nonresident aliens, nonresident alien beneficiaries, and foreign estates are generally subject to a 30% withholding 

tax under section 1441 on the taxable portion of a periodic 

or nonperiodic pension or annuity payment that is from 

U.S. sources. However, many tax treaties provide that private pensions and annuities are exempt from withholding 

and tax. Also, payments from certain pension plans are 

exempt from withholding even if no tax treaty applies. See 

Pub. 515 and Pub. 519. A foreign person should submit 

Form W-8BEN, Certificate of Foreign Status of Beneficial 

Owner for United States Tax Withholding and Reporting 

(Individuals), to you before receiving any payments. The 

Form W-8BEN must contain the foreign person's taxpayer 

identification number (TIN) to support a withholding exemption. A TIN for this purpose means a U.S. TIN (SSN or 

individual taxpayer identification number (ITIN)). However, 

for a claim based on a tax treaty, a foreign TIN may be 

substituted for a U.S. TIN.

Special rules may apply to nonresident aliens who relinquished U.S. citizenship or ceased to be long-term residents of the United States after June 16, 2008. For more 

information, see section 5 of Notice 2009-85, 2009-45 

I.R.B. 598, available at IRS.gov/irb/

2009-45_IRB#NOT-2009-85. Also, see Form W-8CE, 

Notice of Expatriation and Waiver of Treaty Benefits.

Statement of Income Tax Withheld

By January 31 of the next year, you must furnish a statement on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., showing the total amount of the 

payee's pension or annuity payments and the total federal 

income tax you withheld during the prior year. Report income tax withheld on Form 945, Annual Return of Withheld Federal Income Tax, not on Forms 941 or Form 944.

If the payee is a foreign person who has provided you 

with Form W-8BEN, you must instead furnish a statement 

to the payee on Form 1042-S, Foreign Person's U.S. 

Source Income Subject to Withholding, by March 15 for 

the prior year. Report federal income tax withheld on Form 

1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons.

Substitute Submissions of Form 

W-4R

General requirements for any system set up to electronically receive a Form W-4R are discussed earlier under 

Electronic submission of Forms W-4R, W-4S, and W-4V. 

This section provides specific requirements for substitute 

submissions of Form W-4R. For payers using electronic or 

paper substitutes for Form W-4R, substitute forms for the 

2024 Form W-4R incorporating all changes made to the 

2024 Form W-4R and complying with the guidelines provided here must be in use by the later of January 1, 2024, or 

30 days after the IRS releases the final version of the 2024 

Form W-4R.

Electronic Substitute to Form W-4R

There are several specific requirements for electronic systems set up as a substitute to paper Forms W-4R that are 

in addition to those described earlier under Electronic 

submission of Forms W-4R, W-4S, and W-4V. Electronic 

systems must exactly replicate the text from the face of the 

paper Form W-4R between lines 1 and 2, with the exception that electronic systems that are being used exclusively for nonperiodic payments may omit the second bullet, and systems that are being used exclusively for 

eligible rollover distributions may omit the first bullet. Electronic systems must also exactly replicate the text on line 2 

and the 2024 Marginal Rate Tables (inclusive of all related 

text above and within the tables) as they appear after the 

paper Form W-4R. An electronic substitute to Form W-4R 

can provide a link to a web page with the 2024 Marginal 

Rate Tables, inclusive of all related text on the first page of 

the W-4R starting with the text “2024 Marginal Rate Tables,” as well as the applicable Specific Instructions, starting with “Suggestion for determining withholding,” rather 

than providing the tables (and related first page text) 

themselves, but the link must be immediately below line 2 

on the electronic substitute form and be preceded by the 

following text: “The link below will take you to the 2024 

Marginal Rate Tables. You may use these tables to help 

you select the appropriate withholding rate for this 

Page 24 Publication 15-A (2024)
payment or distribution. Instructions on how to best use 

them are included.”

No pop-ups or hoverboxes are permitted, and if the 

electronic system has toggles for those steps that limit the 

amount of text that is viewable, the toggles must be off as 

the default. If the electronic system places steps on different pages, users must be required to go to each page before they may electronically sign the form. The electronic 

system must also include a hyperlink to Form W-4R on 

IRS.gov or include the General and Specific instructions in 

their entirety in the electronic system interface itself (that 

is, inclusion of only some of this information requires a link 

to the form). Specific references on Form W-4R to 

“page 2” of Form W-4R should be linked to where the information is located.

Requiring an SSN and other personal information already stored in payer's electronic system. If you electronically store payee personal information, including 

name, address, and SSN, and accept withholding elections through an account specifically tied to the payee, you 

need not require the payee to submit this personal information again when completing an electronic substitute, as 

long as the account where the election is being made is 

directly or indirectly linked to the electronically stored personal information.

Telephonic submissions of Form W-4R. Payers may 

provide for telephonic submissions of Form W-4R. Use 

one of the following three scripts below depending on the 

situation of the payee.

Nonperiodic distributions to be made to payees 

within the United States and its territories. "The default withholding rate is 10%. You can choose to have a 

different rate—including any rate from zero to 100%. You 

can also go to Form W-4R, found online at IRS.gov/

FormW4R, for further instructions and a rate table that 

helps you choose a rate that is appropriate for your tax situation."

Nonperiodic distributions to be made to payees 

outside the United States and its territories. "The default withholding rate is 10%. You can choose to have a 

different rate, but you generally can't choose a rate of less 

than 10% for payments to be delivered outside the United 

States and its territories. You can also go to Form W-4R, 

found online at IRS.gov/FormW4R, for further instructions 

and a rate table that helps you choose a rate that is appropriate for your tax situation."

Eligible rollover distrubtions. "The default withholding rate is 20%. You can choose a rate greater than 20%, 

but you may not choose a lower rate. You can also go to 

Form W-4R, found online at IRS.gov/FormW4R, for further 

instructions and a rate table that helps you choose a rate 

that is appropriate for your tax situation."

Paper Substitute to Form W-4R

When providing paper substitute forms for Form W-4R, 

you should generally follow the same guidelines that apply 

to electronic substitutes to Form W-4R, except where 

those guidelines apply only in the context of electronic 

substitutes (for example, instructions concerning pop-ups 

and hoverboxes). Paper substitute forms must include the 

instructions for Form W-4R and the 2024 Marginal Rate 

Tables rather than providing a web address to the instructions on IRS.gov.

How To Get Tax Help

If you have questions about a tax issue; need help preparing your tax return; or want to download free publications, 

forms, or instructions, go to IRS.gov to find resources that 

can help you right away.

Preparing and filing your tax return. Go to IRS.gov/

EmploymentEfile for more information on filing your employment tax returns electronically.

Getting answers to your tax questions. On 

IRS.gov, you can get up-to-date information on 

current events and changes in tax law.

• IRS.gov/Help: A variety of tools to help you get answers to some of the most common tax questions.

• IRS.gov/Forms: Find forms, instructions, and publications. You will find details on the most recent tax 

changes and interactive links to help you find answers 

to your questions.

• You may also be able to access tax information in your 

e-filing software.

Need someone to prepare your tax return? There are 

various types of tax return preparers, including enrolled 

agents, certified public accountants (CPAs), accountants, 

and many others who don’t have professional credentials. 

If you choose to have someone prepare your tax return, 

choose that preparer wisely. A paid tax preparer is:

• Primarily responsible for the overall substantive accuracy of your return,

• Required to sign the return, and

• Required to include their preparer tax identification 

number (PTIN).

Although the tax preparer always signs the return, 

you're ultimately responsible for providing all the 

information required for the preparer to accurately 

prepare your return and for the accuracy of every item reported on the return. Anyone paid to prepare tax returns 

for others should have a thorough understanding of tax 

matters. For more information on how to choose a tax preparer, go to Tips for Choosing a Tax Preparer on IRS.gov.

Employers can register to use Business Services Online. The Social Security Administration (SSA) offers online service at SSA.gov/employer for fast, free, and secure 

W-2 filing options to CPAs, accountants, enrolled agents, 

CAUTION

!

Publication 15-A (2024) Page 25
and individuals who process Form W-2 and Form W-2c, 

Corrected Wage and Tax Statement.

IRS social media. Go to IRS.gov/SocialMedia to see the 

various social media tools the IRS uses to share the latest 

information on tax changes, scam alerts, initiatives, products, and services. At the IRS, privacy and security are our 

highest priority. We use these tools to share public information with you. Don’t post your social security number 

(SSN) or other confidential information on social media 

sites. Always protect your identity when using any social 

networking site.

The following IRS YouTube channels provide short, informative videos on various tax-related topics in English, 

Spanish, and ASL.

• Youtube.com/irsvideos.

• Youtube.com/irsvideosmultilingua.

• Youtube.com/irsvideosASL.

Watching IRS videos. The IRS Video portal 

(IRSVideos.gov) contains video and audio presentations 

for individuals, small businesses, and tax professionals.

Online tax information in other languages. You can 

find information on IRS.gov/MyLanguage if English isn’t 

your native language.

Free Over-the-Phone Interpreter (OPI) Service. The 

IRS is committed to serving taxpayers with limited-English 

proficiency (LEP) by offering OPI services. The OPI Service is a federally funded program and is available at Taxpayer Assistance Centers (TACs), most IRS offices, and 

every VITA/TCE tax return site. The OPI Service is accessible in more than 350 languages.

Accessibility Helpline available for taxpayers with 

disabilities. Taxpayers who need information about accessibility services can call 833-690-0598. The Accessibility Helpline can answer questions related to current and 

future accessibility products and services available in alternative media formats (for example, braille, large print, 

audio, etc.). The Accessibility Helpline doesn’t have access to your IRS account. For help with tax law, refunds, or 

account-related issues, go to IRS.gov/LetUsHelp.

Disasters. Go to IRS.gov/DisasterRelief to review the 

available disaster tax relief.

Getting tax forms and publications. Go to IRS.gov/

Forms to view, download, or print most of the forms, instructions, and publications you may need. Or, you can go 

to IRS.gov/OrderForms to place an order.

Getting tax publications and instructions in eBook 

format. Download and view most tax publications and instructions (including Pub. 15-A) on mobile devices as 

eBooks at IRS.gov/eBooks.

IRS eBooks have been tested using Apple's iBooks for 

iPad. Our eBooks haven’t been tested on other dedicated 

eBook readers, and eBook functionality may not operate 

as intended.

Get a transcript of your return. You can get a copy of 

your tax transcript or a copy of your return by calling 

800-829-4933 or by mailing Form 4506-T (transcript request) or Form 4506 (copy of return) to the IRS.

Reporting and resolving your tax-related identity 

theft issues. 

• Tax-related identity theft happens when someone 

steals your personal information to commit tax fraud. 

Your taxes can be affected if your EIN is used to file a 

fraudulent return or to claim a refund or credit.

• The IRS doesn’t initiate contact with taxpayers by 

email, text messages (including shortened links), telephone calls, or social media channels to request or 

verify personal or financial information. This includes 

requests for personal identification numbers (PINs), 

passwords, or similar information for credit cards, 

banks, or other financial accounts.

• Go to IRS.gov/IdentityTheft, the IRS Identity Theft 

Central webpage, for information on identity theft and 

data security protection for taxpayers, tax professionals, and businesses. If your EIN has been lost or stolen or you suspect you’re a victim of tax-related identity theft, you can learn what steps you should take.

Making a tax payment. Payments of U.S. tax must be 

remitted to the IRS in U.S. dollars. Digital assets are not 

accepted. Go to IRS.gov/Payments for information on how 

to make a payment using any of the following options.

• Debit Card, Credit Card, or Digital Wallet: Choose an 

approved payment processor to pay online or by 

phone.

• Electronic Funds Withdrawal: Schedule a payment 

when filing your federal taxes using tax return preparation software or through a tax professional.

• Electronic Federal Tax Payment System: Best option 

for businesses. Enrollment is required.

• Check or Money Order: Mail your payment to the address listed on the notice or instructions.

• Cash: You may be able to pay your taxes with cash at 

a participating retail store.

• Same-Day Wire: You may be able to do same-day 

wire from your financial institution. Contact your financial institution for availability, cost, and time frames.

Note. The IRS uses the latest encryption technology to 

ensure that the electronic payments you make online, by 

phone, or from a mobile device using the IRS2Go app are 

safe and secure. Paying electronically is quick, easy, and 

faster than mailing in a check or money order.

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

more information about your options.

• Apply for an online payment agreement (IRS.gov/

OPA) to meet your tax obligation in monthly installments if you can’t pay your taxes in full today. Once 

Page 26 Publication 15-A (2024)
you complete the online process, you will receive immediate notification of whether your agreement has 

been approved.

• Use the Offer in Compromise Pre-Qualifier to see if 

you can settle your tax debt for less than the full 

amount you owe. For more information on the Offer in 

Compromise program, go to IRS.gov/OIC.

Understanding an IRS notice or letter you’ve received. Go to IRS.gov/Notices to find additional information about responding to an IRS notice or letter.

Responding to an IRS notice or letter. You can now 

upload responses to all notices and letters using the 

Document Upload Tool. For notices that require additional 

action, taxpayers will be redirected appropriately on 

IRS.gov to take further action. To learn more about the 

tool, go to IRS.gov/Upload.

Contacting your local TAC. Keep in mind, many questions can be answered on IRS.gov without visiting a TAC. 

Go to IRS.gov/LetUsHelp for the topics people ask about 

most. If you still need help, TACs provide tax help when a 

tax issue can’t be handled online or by phone. All TACs 

now provide service by appointment, so you’ll know in advance that you can get the service you need without long 

wait times. Before you visit, go to IRS.gov/TACLocator to 

find the nearest TAC and to check hours, available services, and appointment options. Or, on the IRS2Go app, 

under the Stay Connected tab, choose the Contact Us option and click on “Local Offices.”

The Taxpayer Advocate Service (TAS) 

Is Here To Help You

What Is TAS?

TAS is an independent organization within the IRS that 

helps taxpayers and protects taxpayer rights. TAS strives 

to ensure that every taxpayer is treated fairly and that you 

know and understand your rights under the Taxpayer Bill 

of Rights.

How Can You Learn About Your Taxpayer 

Rights?

The Taxpayer Bill of Rights describes 10 basic rights that 

all taxpayers have when dealing with the IRS. Go to 

TaxpayerAdvocate.IRS.gov to help you understand what 

these rights mean to you and how they apply. These are 

your rights. Know them. Use them.

What Can TAS Do for You?

TAS can help you resolve problems that you can’t resolve 

with the IRS. And their service is free. If you qualify for 

their assistance, you will be assigned to one advocate 

who will work with you throughout the process and will do 

everything possible to resolve your issue. TAS can help 

you if:

• Your problem is causing financial difficulty for you, 

your family, or your business;

• You face (or your business is facing) an immediate 

threat of adverse action; or

• You’ve tried repeatedly to contact the IRS but no one 

has responded, or the IRS hasn’t responded by the 

date promised.

How Can You Reach TAS?

TAS has offices in every state, the District of Columbia, 

and Puerto Rico. To find your advocate’s number:

• Go to TaxpayerAdvocate.IRS.gov/Contact-Us;

• Download Pub. 1546, The Taxpayer Advocate Service 

Is Your Voice at the IRS, available at IRS.gov/pub/irspdf/p1546.pdf;

• Call the IRS toll free at 800-TAX-FORM 

(800-829-3676) to order a copy of Pub. 1546;

• Check your local directory; or

• Call TAS toll free at 877-777-4778.

How Else Does TAS Help Taxpayers?

TAS works to resolve large-scale problems that affect 

many taxpayers. If you know of one of these broad issues, 

report it to TAS at IRS.gov/SAMS. Be sure to not include 

any personal taxpayer information.

Publication 15-A (2024) Page 27
To help us develop a more useful index, please let us know if you have ideas for index entries.

Index See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.

A

Additional Medicare Tax 18

Agents, reporting 21

Agricultural workers 5

Annuity payments 23

Assistance (See Tax help)

Awards, employee achievement 11

B

Back pay 12

Below-market rate loans 13

C

Common paymaster 21

Common-law employees 4

Common-law rules 6

Corporate officers 4

D

Deferred compensation plans, 

nonqualified 13

Direct sellers 5

Director of corporation 4

E

Electronic Form W-2 3

Electronic Forms W-4 and W-4P 2

Electronic Forms W-4R, W-4S, and 

W-4V 2

Eligible rollover distributions 23

Employee achievement awards 11

Employee or contractor:

Attorney 8

Automobile industry 8

Building industry 7

Computer industry 8

Salesperson 9

Taxicab driver 9

Trucking industry 8

Employee's taxes paid by employer 21

Employees:

Common-law rules 6

Industry examples 7

Statutory 5

Employees defined 4

Employees misclassification 6

Excessive termination payments (golden 

parachute) 12

Exempt organizations 9

F

Fellowship payments 11

Form 8922 19

Form W-2, electronic filing 3

Form W-4P 1, 23

Form W-4R 1, 23

G

Golden parachute 12

I

Idle time 12

Independent contractors 4

Interest-free loans 13

International social security 

agreements 22

L

Leave sharing plans 13

Loans, interest-free or below-market 

rate 13

M

Ministers 10

Misclassification of employees 6

N

Nonperiodic payments 23

Nonqualified plans 13

O

Officer of corporation 4

Outplacement services 12

P

Pension payments 23

Periodic payments 23

Publications (See Tax help)

R

Real estate agents 6

Religious exemptions 10

Reporting agents 21

S

Scholarship payments 11

Sick pay 14

SIMPLE retirement plans 14

Simplified employee pension 14

Statutory employees 5

Statutory nonemployees 5

Substitute Form W-4R 24

Supplemental unemployment benefits 12

T

Tax help 25

Tax-exempt organizations 9

Tax-sheltered annuities 14

Technical service specialists 6

Third-party sick pay 18

Third-party sick pay recap 19

W

Withholding:

Idle time payments 12

Sick pay 17

Page 28 Publication 15-A (2024)