IRS Publication 15 – In the ever-evolving world of payroll and employment taxes, staying compliant is crucial for businesses of all sizes. IRS Publication 15, also known as Circular E or the Employer’s Tax Guide, is an essential resource that outlines everything employers need to know about withholding, depositing, reporting, and paying federal employment taxes. Updated annually, the 2026 edition incorporates the latest changes to help you navigate tax responsibilities efficiently. Whether you’re a small business owner, HR professional, or payroll manager, this guide simplifies complex rules and ensures you avoid costly penalties.
What Is IRS Publication 15 (Circular E)?
IRS Publication 15 serves as a comprehensive manual for employers, covering federal income tax withholding, social security and Medicare taxes (collectively known as FICA taxes), and Federal Unemployment Tax Act (FUTA) taxes. It applies to all types of employers, including those in agriculture, U.S. territories, federal agencies, state and local governments, and tribal entities. The guide explains how to handle various forms of compensation, from wages and tips to fringe benefits, and provides step-by-step instructions on compliance.
The publication is designed for use in the calendar year 2026, aligning with tax year 2026. It consolidates information previously spread across multiple guides (like Publications 51, 80, and 179 for agricultural and territorial employers), making it a one-stop resource. Released by the Internal Revenue Service (IRS), it’s available for free download as a PDF on the official IRS website.
Key purposes include:
- Helping employers determine employee status (e.g., common law employees vs. independent contractors).
- Guiding the calculation and withholding of taxes from employee paychecks.
- Detailing deposit schedules and electronic payment requirements.
- Outlining reporting forms like W-2, 941, and 940.
By following this guide, employers can ensure withheld taxes—considered “trust fund taxes”—are properly managed, avoiding severe penalties like the 100% trust fund recovery penalty for willful non-compliance.
Key Updates in the 2026 Edition of IRS Publication 15
The IRS updates Publication 15 each year to reflect legislative changes, inflation adjustments, and new policies. For 2026, several notable revisions stand out, ensuring employers adapt to current tax landscapes.
- Social Security and Medicare Tax Rates: The social security tax rate remains 6.2% for both employers and employees, with a wage base limit of $184,500 (up from previous years). Medicare tax is 1.45% each, with no wage base limit. An additional 0.9% Medicare tax applies to employee wages over $200,000. These rates apply to household workers paid $3,000 or more in cash and election workers paid $2,500 or more.
- Supplemental Wages Withholding: For bonuses, commissions, and other supplemental pay, the flat withholding rate is 22% (or 37% if over $1 million per employee). Tips are treated as supplemental wages if $20 or more per month.
- Backup Withholding and Reporting Thresholds: The backup withholding rate stays at 24%, with the threshold for reportable payments increased to $2,000 (inflation-adjusted).
- Qualified Tips and Overtime Deductions: Employers can deduct up to $25,000 for qualified tips and $12,500 ($25,000 for joint filers) for overtime compensation for tax years 2025-2029. Transition relief applies for 2025 reporting.
- Employer Contributions to Trump Accounts: Up to $2,500 per year (indexed after 2027) can be excluded from employee income.
- Moving Expenses: Permanently eliminated except for military and intelligence relocations.
- Electronic Filing and Payments: Direct deposit for refunds is mandatory, and employment tax transcripts are available electronically for 2023 and later.
Other reminders include the expiration of COVID-19 credits (claimable via amended returns) and the qualified small business payroll tax credit up to $500,000.
Main Sections and Topics Covered in Publication 15
Publication 15 is organized into 17 sections, each addressing specific aspects of employer tax duties. Here’s a breakdown of the core areas:
Section 1-4: Setup and Employee Basics
- Obtaining an Employer Identification Number (EIN) via IRS.gov/EIN.
- Defining employees under common law rules, including statutory employees and nonemployees.
- Special rules for family employees (e.g., exemptions for children under 18).
- Verifying Social Security Numbers (SSNs) using tools like SSNVS or E-Verify.
Section 5-7: Wages, Compensation, and Withholding
- Taxable wages include cash, noncash items, and fringe benefits (refer to Publication 15-B for details).
- Handling tips, supplemental wages, and accountable vs. nonaccountable expense plans.
- Withholding federal income tax using Form W-4 and tables in Publication 15-T.
Section 8-11: Deposits and Payments
- Determining deposit schedules (monthly or semiweekly) based on lookback periods.
- Using EFTPS for electronic deposits; penalties for late payments range from 2% to 15%.
- Rules for FUTA taxes: 6.0% on the first $7,000 per employee, with state credits reducing it to 0.6%.
Section 12-14: Reporting and Adjustments
- Filing Forms 941 (quarterly), 943 (agricultural), 944 (small employers), and 940 (FUTA).
- Correcting errors with Form 941-X; reconciling W-2s with quarterly returns.
- Special adjustments for tips, sick pay, and group-term life insurance.
Section 15-17: Special Rules and Third Parties
- Exceptions for agricultural labor, household employees, nonresident aliens (e.g., H-2A workers), and more.
- Outsourcing payroll to third parties like Certified Professional Employer Organizations (CPEOs), with employers retaining liability.
- Certifying requirements for federal agencies in U.S. territories.
Additional topics include recordkeeping (retain for 4 years), penalties, and how to handle changes in business structure.
How to Use IRS Publication 15 Effectively?
To make the most of this guide:
- Download the Latest Version: Access the 2026 PDF directly from IRS.gov. Review the “What’s New” and “Reminders” sections first.
- Cross-Reference Related Publications: Use Pub 15-A for supplemental info on sick pay and pensions, Pub 15-B for fringe benefits, and Pub 15-T for withholding tables.
- Implement Updates: Encourage employees to update Form W-4 if their tax situation changes (e.g., after owing taxes in 2025).
- Seek Professional Help: For complex scenarios, consult a tax advisor or use IRS resources like the Taxpayer Assistance Center.
- Stay Informed: Check IRS.gov for future developments, as legislation can change post-publication.
Common Employer Tax Responsibilities Outlined in Circular E
Employers must:
- Withhold and match FICA taxes, depositing them timely via EFTPS.
- Report wages and taxes on appropriate forms, e-filing if required (e.g., for 10+ returns).
- Furnish W-2s to employees by January 31 and file with the SSA.
- Notify employees about the Earned Income Credit (EIC) if eligible.
- Verify work eligibility with Form I-9 and report new hires to state agencies.
Failure to comply can result in penalties, so accuracy in calculations (e.g., using the percentage method for withholding) is key.
Frequently Asked Questions About IRS Publication 15
What is the difference between Publication 15 and 15-A?
Publication 15 covers core employer tax rules, while 15-A provides supplemental details on topics like sick pay and nonresident aliens.
How do I calculate federal income tax withholding for 2026?
Use the employee’s Form W-4 and the withholding tables or methods in Publication 15-T.
Are there special rules for agricultural employers?
Yes, including wage tests ($150 or $2,500) for coverage and exemptions for certain noncash payments.
What if I outsource payroll?
You’re still responsible for taxes, but using a CPEO can shift some liability.
Where can I find the 2026 tax calendars?
Refer to Publication 509 for due dates.
Conclusion
IRS Publication 15 (Circular E) is indispensable for mastering employer tax obligations in 2026. By understanding its updates and sections, you can streamline payroll processes, ensure compliance, and minimize risks. Download the guide today from IRS.gov and integrate its advice into your operations for a smoother tax year ahead. For personalized guidance, visit the IRS website or consult a professional.