Definition
Circular E, officially known as Publication 15, is an IRS document that provides detailed guidance for employers on their federal tax obligations concerning employment taxes. It includes instructions on how to withhold federal income tax, Social Security tax, and Medicare tax from employees’ salaries. Circular E also outlines the employer’s responsibilities for depositing and reporting these taxes as well as key deadlines and forms required for compliance.
Examples
- Withholding Instructions: Circular E provides tables to determine the amount of federal income tax to withhold from an employee’s paycheck based on their wage bracket and filing status.
- Reporting Requirements: The publication details how employers should fill out and file the IRS Form 941, which is used to report wages paid, tips received by employees, and the amount of employment taxes withheld.
- Deposit Guidelines: It provides a schedule for depositing employment taxes and explains the procedures if the due date falls on a non-business day.
Frequently Asked Questions (FAQ)
What is the purpose of Circular E?
Circular E serves as a comprehensive guide for employers to ensure they comply with federal employment tax laws. This includes accurately withholding, depositing, and reporting payroll taxes.
Who needs to use Circular E?
Any business or organization that has employees and is responsible for withholding and paying federal employment taxes should use Circular E to understand their tax obligations.
How often is Circular E updated?
The IRS typically updates Circular E annually to reflect changes in tax laws, rates, and procedures. Employers should ensure they are using the current year’s publication.
What kind of information can I find in Circular E?
Circular E covers a wide range of topics related to employment taxes, including tax tables, instructions for tax forms, deposit schedules, and information on tax credits and benefits.
Where can I obtain Circular E?
Circular E is available for free on the IRS website. Employers can download the publication as a PDF or view it online.
Related Terms
- Form W-4: A form completed by employees to indicate their tax situation to the employer, which in turn informs how much tax to withhold from their pay.
- Form 941: The Employer’s Quarterly Federal Tax Return used to report income taxes, Social Security tax, and Medicare tax withheld from employees’ paychecks and the employer’s share of Social Security and Medicare tax.
- Form W-2: The Wage and Tax Statement form that reports an employee’s annual wages and the amount of taxes withheld from their paycheck.
- Payroll Tax: Taxes imposed on employers and employees, including federal income tax, Social Security, and Medicare taxes.
Online References
- IRS Publication 15 (Circular E): Direct link to the IRS website where you can download Circular E.
- IRS Forms and Publications: Browse and search for all IRS forms and publications.
Suggested Books for Further Studies
- Payroll Accounting 2023 by Bernard J. Bieg and Judith A. Toland: A comprehensive guide on payroll accounting practices, including employment tax regulations.
- Tax Withholding and Reporting by Steven Rettig and David Ramadan: Focuses on the intricacies of tax withholding and reporting for employers.
Fundamentals of Employment Tax Withholding: Accounting Basics Quiz
Thank you for delving into the crucial aspects of the IRS’s Circular E. Keep honing your tax compliance skills for continued accuracy and effectiveness in payroll management!
