IRS Publication 15-A: Employer's Supplemental Tax Guide

What Is the IRS Publication 15-A?

IRS Publication 15-A is a supplement to IRS Publication 15: Employer's Tax Guide. Publication 15-A helps employers calculate withholding taxes on income, Social Security, and Medicare. It also provides employers with updates on new tax legislation and important reminders regarding previously implemented tax laws.

Some of the topics covered in Publication 15-A include defining the differences between employees and independent contractors and explaining withholding rules for employees of exempt organizations. The publication also includes several examples designed to help employers correctly classify their workers.

Another related supplementary publication is IRS Publication 15-B, which is the employer’s tax guide for handling fringe benefits. IRS Publication 15-T helps employers calculate the amount of federal income tax to withhold from their employees' wages based on different tax withholding methods.

Understanding IRS Publication 15-A

IRS Publication 15-A classifies workers into four types: independent contractor, common-law employee, statutory employee, and statutory nonemployee. Employers face stiff penalties for incorrectly classifying employees as independent contractors. If they have no reasonable basis for classifying an employee as an independent contractor, the employer will be liable for employment taxes for that worker. Understanding these classifications is important and increasingly difficult given the large number of independent contractors now used by businesses.

In determining whether someone performing work is an employee or an independent contractor, a key variable is whether the means and methods of performing the work are controlled by the employer. Put another way, an independent contractor is free to perform the required work using their own methods and tools, as long as the result satisfies the employer. This is analogous to independent contractors working on a construction job site, where they own their own tools and use them to perform work for the builder, but are not actual employees of the contractor.

There are also special rules for Social Security and Medicare taxes available for religious workers, such as ministers. People belonging to religious sects opposed to insurance are eligible for special treatment and these guidelines are detailed in Publication 15-A.

Additional unusual situations covered in IRS Publication 15-A include how to handle temporary work relocation assignments, which is defined as performing work in a different location outside a certain proximity from the primary work location and for less than one year; how to handle scholarship and fellowship payments; and how to treat back pay and golden parachute one-time payouts.

Changes to IRS Publication 15-A

Each year the IRS publishes a new Publication 15-A that details new developments and regulations employers need to know. For example, most IRS publications and forms released by the IRS for 2018 required revisions to reflect the Tax Cuts and Jobs Act (TCJA) passed by the United States Congress in December 2017. The IRS released the new Publication 15-A in the first half of 2018. At the beginning of the publication, the IRS summarized a variety of changes, such as new federal income tax withholding tables, changes to employee moving expense reimbursements, and information about disaster tax relief for victims of hurricanes and wildfires.

In 2020, Publication 15-A provided employers with information about new Form 1099-NEC: Nonemployee Compensation. Businesses use this form to report payments of $600 or more made to nonemployees during the year. Nonemployees include independent contractors, sole proprietors, freelancers, and self-employed individuals.