Publication 15-T is a publication released by the Internal Revenue Service (IRS) that provides employers with guidance on calculating the amount of federal income tax to withhold from their employees’ wages. In order to keep up with changing tax laws and regulations, this document is updated annually. In this publication, employers can calculate what amount should be withheld from employee paychecks using worksheets, tables, and examples.
Here, we will discuss how Publication 15-T’s employer instructions can benefit employers in ensuring accurate tax withholding.
Overview of Publication 15-T
To simplify employers’ ability to locate relevant information in the document, Publication 15-T is divided into multiple sections. The following are the key employer instructions found in the section of Publication 15-T:
1. Percentage Method Tables for Automated Payroll Systems:
A percentage method table provided in this section can be used by employers who are using an automated payroll system. To determine the employee’s filing status, the number of withholding exemptions, and extra tax withholding amounts, the employer must use the employee’s Form W-4. The right amount of federal income tax is then calculated in accordance with the tables and is deducted from the employee’s paycheck. By using this method employers can reduce the chances of errors and save time.
2. Wage Bracket Method Tables for Manual Payroll Systems with Forms W-4 from 2020 or later:
In this section, salary bracket method tables are provided for employers using manual payroll systems to process Forms W-4 beginning in 2020 or later. These tables are arranged depending on the employee’s filing status and paycheck period (weekly, biweekly, monthly, etc.). Employers must determine the appropriate table based on the employee’s filing status and pay period, locate the employee’s taxable earnings in the table, and determine how much federal income tax must be withheld. To avoid tax and penalties employers should make sure that they are calculating withholding amounts accurately and are using the right tables.
3. Wage Bracket Method Tables for Manual Payroll Systems with Forms W-4 from before 2020:
This section addresses employers who use manual payroll systems and handle Forms W-4 before 2020. In the same way as the preceding section, employers need to determine which wage bracket method table to use based on the employee’s filing status and payment period. According to these figures, however, the employee’s W-4 withholding allowances are taken into account in addition to the amount of withholding allowances. Employers should ensure that they are using the correct table and calculating the correct amount of withholding to avoid tax penalties.
4. Figuring withholding using the Annual Wage Calculation:
You can also calculate the federal income tax withheld by using the annual wage calculation. The strategy may be useful for employers whose employees earn a substantial amount of dividends or interest income. The instructions in this section explain how to calculate an employee’s taxable earnings, calculate their tax due, and divide that sum by the number of pay periods to calculate the appropriate withholding.
5. Other payroll periods:
Employers who have irregular payroll cycles, such as those that do not follow the weekly, bimonthly, or monthly schedule, might find guidance here. The daily or miscellaneous payroll period table can be used by businesses to calculate the correct amount of withholding for their employees.
Using Publication 15-T, employers can calculate the federal income tax withholding of their employees. It is important for employers to follow the instructions provided in each section to ensure they are withholding the appropriate amount of tax from the wages of the employees to minimize the risk of under-withholding or over-withholding. To keep up to date with changes to tax laws or regulations that may impact their withholding obligations, employers should review Publication 15-T annually. To learn more about employer instructions and form W-4 for 2023, visit Compliance Prime.