IRS Publication Cheat Sheet — 2026

What it covers: The definitive employer reference for federal income tax withholding, FICA (Social Security and Medicare), FUTA, deposit schedules, penalties, and year-end reporting. Updated annually in January.

Deposit Schedules

Key IRC Sections

IRC §3101 Employee FICA IRC §3111 Employer FICA IRC §3102 Collection IRC §3301 FUTA IRC §3401 Withholding definitions IRC §3403 Employer liability IRC §6302 Deposit rules

What it covers: Worker classification (employee vs. independent contractor), special employment situations, sick pay withholding, and alternative income tax withholding methods.

Worker Classification — 3-Category Test

Third-Party Sick Pay

When a third party (insurance company) pays sick pay, Pub 15-A details who withholds what. The employer and insurer can shift FICA liability by agreement. If no transfer agreement is in place, the third party is responsible for FICA. Income tax withholding is voluntary unless employee requests it. Form W-2 reporting responsibilities must be clarified in the sick pay agreement.

Special Employment Situations Covered

• Corporate officers — always employees for FICA purposes
• Partners — never employees; self-employment tax applies
• Family employees — children under 18 working for parent's unincorporated business are exempt from FICA
• Religious orders — special FICA rules and exemption options
• Statutory employees — certain full-time life insurance salespeople, agent-drivers, home workers, traveling salespeople
• Statutory non-employees — direct sellers, licensed real estate agents treated as self-employed regardless of behavioral control

IRC §3121 FICA definitions IRC §3306 FUTA definitions IRC §3508 Direct sellers Section 530 TEFRA Classification relief

What it covers: Tax treatment of every employer-provided benefit — exclusions, inclusion thresholds, imputed income calculations, valuation methods, and W-2 reporting. Source: IRS Pub. 15-B (2026)

Vehicle Valuation Methods (2026)

What it covers: The withholding tables and calculation methods for federal income tax. Source for all wage bracket and percentage method tables. Covers both 2020+ W-4 (step-based) and pre-2020 W-4 (allowance-based) methods.

2020+ W-4 Structure (Post-Redesign)

Supplemental Wage Withholding Rates

Annualized Wage Method

Multiply wages by the number of pay periods in the year (annualize), apply percentage method bracket, then divide the annual tax by pay periods. Used when the wage bracket tables don't cover the wage level, or as an alternative calculation. PeopleSoft's delivered withholding engine uses this method for biweekly and semi-monthly payrolls.

What it covers: Employee guidance on withholding adequacy, estimated tax, underpayment penalties, and special situations. Employer relevance: exempt claims, lock-in letters, and understanding when employees must update W-4.

Exempt Withholding

An employee may claim exempt if they had no tax liability in 2025 and expect none in 2026. Exempt claims expire February 15, 2026. PeopleSoft Federal Tax Data must be updated to reflect the expiration — failure to do so is improper withholding. NRAs cannot claim exempt.

IRS Lock-In Letters (Letter 2800C)

Under-withholding Risk — 2026 OBBBA Connection

Employees who used W-4 Step 4(b) to claim large itemized deductions may now be under-withholding because many miscellaneous deductions were permanently eliminated by TCJA and further modified by OBBBA (2025). Employees who haven't updated their W-4 since 2017 are at highest risk of an underpayment penalty.

What it covers: Setup and contribution rules for employer-sponsored retirement plans. Critical for payroll because contribution limits drive W-2 Box 12 reporting and affect taxable wages.

Annual Addition Limit (415 Limit)

The total of employer contributions + employee deferrals + forfeitures allocated to a participant's 401(k) account cannot exceed the lesser of 100% of compensation or $70,000 in 2026 (up from $69,000 in 2025). Source: IRS Notice 2025-67.

590-A covers IRA contributions, deductibility, and rollover rules. 590-B covers distributions, RMDs, and early withdrawal penalties. Payroll relevance: IRA payroll deductions, 1099-R reporting for distributions.

Traditional IRA deductibility phases out for individuals covered by a workplace plan: Single: $79,000–$89,000 (2026); MFJ: $126,000–$146,000. Roth IRA contribution phase-out: Single: $150,000–$165,000; MFJ: $236,000–$246,000.

What it covers: Rules for HSAs, Archer MSAs, Health FSAs, and HRAs — eligibility, contribution limits, qualified expenses, and tax treatment. The definitive reference for healthcare account payroll deductions.

What it covers: The rules specific to 403(b) plans for employees of public schools, tax-exempt organizations (501(c)(3)), churches, and hospital cooperatives. 403(b) plans follow most 401(k) rules but have special provisions.

403(b) Special Provisions

• 15-year rule: Employees with 15+ years of service at qualifying organizations may contribute an extra $3,000/year (up to $15,000 lifetime) beyond the standard limit — even before age 50. This provision is unique to 403(b) plans.
• Universal availability: If a 403(b) plan allows salary deferrals, it must be offered to all employees (with limited exceptions) — not just highly compensated employees.
• Church plans: Some church 403(b) plans are exempt from ERISA — different plan document and reporting requirements.
• Designated Roth contributions: Allowed in 403(b) plans; same limits as traditional 403(b).

2026 403(b) elective deferral: $23,500 (same as 401(k)); age 50+ catch-up: $7,500; age 60–63 super catch-up: $11,250 additional. W-2 Box 12 Code E.

What it covers: Technical specifications for filing 1099-series, W-2G, and other information returns via the IRS FIRE (Filing Information Returns Electronically) system. Critical for organizations filing more than 10 information returns.

FIRE System Record Structure

Each transmission must include: Transmitter (T) record, Payer (A) record, Payee (B) records, End-of-Payer (C) record, End-of-Transmission (F) record. The Payee (B) record format differs by form type. Incorrect formatting causes IRS rejection with no substitute filing credit.

What it covers: Specifications for substitute W-2 and W-3 forms, paper filing requirements, and the EFW2 electronic filing format for SSA submissions. Companion to the SSA's EFW2 specifications.

W-2 Key Deadlines — 2026 (for Tax Year 2025)

W-2 Box Quick Reference — Most Common

What it covers: FICA, FUTA, and income tax rules for household employees paid to work in or around a private home. Source: IRS Publication 926 (2026). Payroll relevance: executive benefit packages with household employee arrangements; employer-provided domestic help.

What it covers: Special payroll tax rules for agricultural employers — farms, ranches, and related agricultural businesses. Agricultural employers follow different FICA thresholds and have unique FUTA rules.

What it covers: Tax withholding and reporting rules for employers in Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands. Each territory has unique rules that overlap with but differ from mainland U.S. requirements.

What it covers: Withholding rules for all U.S.-source payments to nonresident aliens (NRAs) and foreign entities — wages, FDAP income, and treaty benefits. The withholding agent (employer) is personally liable for failure to withhold.

Residency & Classification

Substantial Presence Test

Met if: 31+ days in current year AND 183+ weighted days over 3 years (current year × 1 + prior year × 1/3 + 2-years-prior × 1/6). Exempt days (F, J, M, Q visa students/trainees; A, G government) do not count toward the test.

FICA by Visa Type

NRA W-4 Rules

• NRAs must use Single filing status (even if married) and one allowance/withholding step on the W-4
• NRAs cannot claim exempt from withholding
• An additional flat amount from Pub 15-T NRA tables must be added to each paycheck
• Treaty exemption from withholding requires filing Form 8233 with the employer

Key NRA Forms

IRC §871 NRA income tax IRC §1441 Chapter 3 withholding IRC §1461 Withholding agent liability IRC §3121(b)(19) Student visa FICA exemption IRC §894 Treaty benefits

What it covers: Comprehensive guide to U.S. tax treatment of resident and nonresident aliens — residency determination, dual-status years, income sourcing, and treaty benefits. The employee-facing counterpart to Pub 515.

Dual-Status Year Payroll Protocol

In the year status changes (NRA → resident, or resident → NRA), split withholding at the precise date:

• NRA period: NRA withholding rules; report on Form 1042-S
• Resident period: Standard Pub 15-T rules; report on Form W-2
• Document the change-of-status date precisely with the employee's supporting documentation
• Employer may receive TWO documents from the employee — a W-4 (resident period) and Form 8233 or W-8BEN (NRA period)

First-Year Election (IRC §7701(b)(4))

An NRA who meets the substantial presence test may elect to be treated as a resident for the entire year. This can affect withholding retroactively. Do not adjust prior-period withholding without confirming the election with the employee and their tax advisor.

Publication 529 — Miscellaneous Deductions

Publication 529 covers miscellaneous itemized deductions. Key payroll connection: employees claiming large deductions on W-4 Step 4(b) may now be over-reducing withholding because TCJA suspended and OBBBA permanently eliminated many of these deductions. Employees who haven't updated their W-4 since 2017 are at risk of an underpayment penalty.

What it covers: Technical specifications for employers who print W-2s on substitute (non-SSA-official) forms — laser/inkjet, thermal, continuous-feed, and electronic employee copies. Required reading for any organization using a payroll system (including PeopleSoft BI Publisher) to generate W-2 forms rather than purchasing pre-printed stock.

Key Specification Requirements

Acceptable vs. Not Acceptable Substitute Forms

• Acceptable: Laser/inkjet printed Copies B, C, D (employee and employer copies) using approved specifications
• Acceptable: Electronic W-2 delivery with employee consent
• NOT acceptable: Black-and-white laser-printed Copy A to SSA — must use red-scannable SSA stock or file electronically via Business Services Online (BSO)
• NOT acceptable: Handwritten W-2 substitutes

What it covers: Technical specifications for employers and payers who use substitute (non-IRS-official) 1099-series forms, W-2G, and related information returns. Companion to Pub 1141 for the 1099 world. Required if you generate 1099s from a payroll or ERP system rather than using IRS-printed stock.

Key Requirements

What it covers: Rules for combining multiple 1099 types on a single consolidated recipient statement (the "composite 1099"). Common in brokerage and financial services. Also covers substitute Form 1096 (the paper transmittal for information returns).

Composite Statement Rules

• A composite statement may combine 1099-DIV, 1099-INT, 1099-B, 1099-OID, and 1099-MISC on a single recipient statement
• Each combined form type must meet its individual specifications per Pub 1167
• The IRS copy (Copy A) of each form type must still be filed separately to the IRS (paper red-scannable or electronically via FIRE) — the composite statement is for the recipient's copy only
• 1099-NEC cannot be included in a composite statement for recipient copies because it has a January 31 due date (same-day as Copy A filing) — timing conflict
• Composite statements must clearly identify each form type with a box reference to standard IRS box numbers

What it covers: Electronic filing specifications for Form 8027, which large food or beverage establishments must file annually to report receipts and tips. Required when 10 or more Forms 8027 must be filed.

Who Must File Form 8027

• Employers operating a large food or beverage establishment (more than 10 employees working on a typical business day)
• Where tipping is customary
• Must be filed by February 28 (paper) or March 31 (electronic)

Allocated Tips

If an employee's reported tips are less than 8% of their share of gross receipts, the employer must allocate additional tips to the employee. Allocated tips are reported in Box 8 of the W-2 (not subject to income tax withholding but subject to FICA). The IRS may use 8027 data to cross-reference employee-reported tip income on Form 4137 and W-2 Box 7.

What it covers: The complete compliance guide for backup withholding — when it applies, how to implement it, and how to respond to IRS B-notices and C-notices. Critical for payroll operations that also manage 1099 payments to independent contractors.

When Backup Withholding Applies

B-Notice Process (IRS CP2100 / CP2100A)

The IRS sends CP2100 or CP2100A notices listing payees whose TINs on 1099s don't match IRS records. The payer must:

1. First B-notice: Send a solicitation notice to the payee within 15 business days of receiving the IRS notice. The payee has 30 business days to respond with a corrected TIN (Form W-9). If no response, begin backup withholding.
2. Second B-notice: Received within 3 years of the first. Send the payee a solicitation requiring them to contact the SSA (for individuals) or IRS (for entities) to certify their TIN. Do not accept a simple W-9 response — SSA/IRS certification required.
3. Begin withholding: If no timely response to either notice, withhold 24% from all reportable payments to that payee until resolved.

Amounts Subject to Backup Withholding

Backup withholding applies to: interest, dividends, rents, royalties, commissions, non-employee compensation (1099-NEC), and other payments reportable on information returns. It does not apply to: wages (W-2), real estate transactions, or payments to corporations (with limited exceptions).

Reporting Backup Withholding

Backup withholding is deposited using EFTPS and reported on Form 945 (Annual Return of Withheld Federal Income Tax) — not Form 941. Amounts withheld are reported in Box 4 of Form 1099. The 945 is due January 31 of the following year.

What it covers: The EFTPS is the mandatory electronic system for making federal tax deposits. All employers must use EFTPS for employment tax deposits — no exceptions. Publication 3114 covers enrollment, payment procedures, and scheduling.

EFTPS Key Facts

Critical EFTPS Rules for Payroll

• 8 PM ET cutoff: Payments initiated after 8 PM ET are processed the next banking day — a late deposit for semi-weekly or monthly schedule purposes
• Tax period must match: When making a 941 deposit, select the correct tax period (quarter). A deposit applied to the wrong quarter creates an overpayment in one quarter and underpayment (with FTD penalty) in another
• Tax type code: 941 deposits use tax type code 941; 940 uses 940; 945 (backup withholding) uses 945 — do not mix
• Third-party liability: If you outsource payroll deposits to a PEO or payroll provider, the employer remains liable if the third party fails to deposit. Verify deposits independently in EFTPS

What it covers: How the IRS selects employers for employment tax examination, what the examination process looks like, and how referrals between IRS divisions work. Essential reading for understanding examination risk and preparing a defense posture.

How Employment Tax Examinations Are Initiated

The Employment Tax Examination Process

1. Notice of examination: IRS issues Letter 2205-B (employment tax audit) or contacts employer directly
2. Initial IDR: Information Document Request listing records needed — typically payroll registers, 941s, W-2s, independent contractor records, AP records, and GL
3. Examiner interview: May request interviews with payroll staff, HR, or executives — representation recommended
4. Issue development: Examiner develops proposed adjustments for each identified issue
5. 30-day letter: Proposed adjustments with right to appeal to IRS Appeals Office
6. 90-day letter (Notice of Deficiency): If no agreement reached with Appeals — taxpayer has 90 days to petition U.S. Tax Court

IRS Employment Tax Audit Campaigns (Active)

The IRS Large Business & International (LB&I) division and Small Business/Self-Employed (SB/SE) division conduct targeted employment tax campaigns. Recent active areas:

• Worker classification (independent contractor vs. employee) — particularly in gig economy, staffing, and construction
• S-corporation reasonable compensation — paying owners below-market wages to avoid FICA
• Unreported fringe benefits — GTL, vehicles, executive perquisites
• Section 409A deferred compensation — documentary failures
• AI/automation in payroll — emerging area with no formal campaign yet but growing IRS attention

What it covers: A country-by-country summary of U.S. income tax treaty provisions — withholding rates on wages, dividends, interest, and royalties, and treaty exemptions for students, teachers, researchers, and business travelers. The practical desk reference for international payroll withholding decisions.

Treaty Benefits — Payroll Relevance

Totalization Agreements — FICA Exemption for Foreign Assignees

The U.S. has totalization agreements with 30+ countries (including UK, Canada, Germany, France, Japan, Australia, and others). An employee from a totalization agreement country who is temporarily assigned to the U.S. may be exempt from U.S. FICA if they remain covered under their home country's social security system. The employee must obtain a Certificate of Coverage from their home country's social security agency. Without this certificate, FICA applies regardless of the assignment's temporary nature.

Key Treaty Countries — Student/Trainee Exemptions

What it covers: The tables used to calculate how much of an employee's wages are exempt from an IRS continuous wage levy (Form 668-W). This is the specific publication employers must use when they receive a 668-W — it contains the current-year exempt amounts by filing status and number of dependents.

How Form 668-W Works

When the IRS issues a Form 668-W (Notice of Levy on Wages, Salary, and Other Income), it is a continuous levy — it attaches to each future paycheck until the levy is released, the debt is satisfied, or the IRS issues a Release of Levy (Form 668-D).

Levy Exempt Amount Calculation — 2026

The exempt amount is based on the employee's filing status and number of personal exemptions claimed on Part 3 of the 668-W. Publication 1494 contains tables for weekly, biweekly, semi-monthly, monthly, and daily/miscellaneous pay periods. The IRS updates Pub 1494 annually.

IRS Levy vs. Creditor Garnishment — Key Differences