IRS Issues 2020 Versions of Publication 15 (Employer’s Tax Guide, Circular E) and 15-A (Supplemental Tax Guide)

The IRS has issued the 2020 versions of Publication 15 ((Circular E) Employer’s Tax Guide) and Publication 15-A (Employer’s Supplemental Tax Guide).

Publication 15. This publication provides guidance on the requirements for withholding, depositing, reporting, paying, and correcting employment taxes. The publication also includes information on the forms that employers must give to employees and that employees must give to employers, as well as the forms that must be sent to the IRS and the Social Security Administration (SSA).

What’s new for 2020. This publication no longer includes the percentage method and wage bracket withholding tables, as well as the amount to add to a nonresident alien employee’s wages for figuring income tax withholding. The above information will be included in new Publication 15-T (Federal Income Tax Withholding Methods). The final version of this publication for use in 2020 is expected to be released by the end of December. An early release of some of these 2020 tables were posted on the IRS website in late-November 2019. The Income Tax Withholding Assistant for Employers may also be used to help determine federal income tax withholding.

The new version of IRS Publication 15 discusses the redesign of Form W-4 (Employee’s Withholding Certificate), beginning in 2020. In the past, the value of a withholding allowance was tied to the amount of the personal exemption. Due to changes in the law, taxpayers can no longer claim personal exemptions or dependency exemptions; therefore, the 2020 Form W-4 no longer asks an employee to report the number of withholding allowances that they are claiming. Employees who have submitted Form W-4 in any year before 2020 aren’t required to submit a new form merely because of the redesign. However, all new employees in 2020, and all employees who make withholding changes beginning in 2020, must complete the redesigned Form W-4. The IRS notes that the withholding tables in Publication 15-T will allow employers to figure withholding based on a Form W-4 for an earlier year as well as the redesigned 2020 Form W-4.

Publication 15-A. This publication supplements Publication 15 (Circular E), by providing more specialized and detailed employment tax information on certain topics covered in IRS Publication 15. There are sections in IRS Publication 15-A on: (1) Who Are Employees; (2) Employee or Independent Contractor; (3) Employees of Exempt Organizations; (4) Religious Exemptions and Special Rules for Ministers; (5) Wages and Other Compensation; (6) Sick Pay Reporting; (7) Special Rules for Paying Taxes; and (8) Pensions and Annuities.

What’s new for 2020. 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 Publication 15-A. This information is now included in new Publication 15-T. The IRS is no longer providing: (1) the formula tables for percentage method withholding for automated payroll systems; (2) the wage bracket percentage method tables for automated payroll systems; or (3) the combined federal income tax, employee Social Security Tax, and employee Medicare tax withholding tables.

New Form 1099-NEC. Both Publications 15 and 15-A point out that there is a new Form 1099-NEC to report nonemployee compensation paid in 2020. The 2020 Form 1099-NEC will be due on Feb. 1, 2021. For nonemployee compensation paid in 2019, employers should continue to use Form 1099-MISC, which is due on Jan. 31, 2020.

2020 Social Security and Medicare tax. Both Publications 15 and 15-A note that the 2020 Social Security tax rate for employers and employees remains at 6.2%. The Social Security taxable wage base in 2020 increases from $132,900 to $137,700. The Medicare tax rate remains at 1.45% in 2020 for both employers and employees. There is no wage base limit for Medicare tax.