Publication 15 2019: Employer Tax Rules Explained

This article is a historical reference for IRS Publication 15, the Employer’s Tax Guide, for the 2019 tax year. It outlines an employer’s responsibilities for withholding, depositing, reporting, and paying federal employment taxes. The information is specific to 2019 and should not be used for current tax compliance, but for needs like amending a 2019 return or responding to an IRS inquiry for that year.

Calculating 2019 Federal Employment Taxes

In 2019, employers first determined the taxable wages paid to each employee, which included compensation like salaries, bonuses, and commissions. Certain non-cash fringe benefits, such as the personal use of a company vehicle or group-term life insurance coverage exceeding $50,000, were also part of an employee’s taxable income.

Once taxable wages were established, the employer calculated the employee’s share of Social Security and Medicare taxes, known as FICA taxes. For 2019, the employee Social Security tax rate was 6.2% on wages up to the $132,900 wage base limit. The Medicare tax rate was 1.45% on all covered wages. Employers also had to withhold a 0.9% Additional Medicare Tax on an employee’s wages exceeding $200,000 in a calendar year. The employer matched the standard FICA amounts but not the Additional Medicare Tax.

Next, employers calculated Federal Income Tax Withholding (FITW). To determine the correct amount, employers used the employee’s Form W-4, which provided their marital status and number of withholding allowances. For 2019, the annual value of one withholding allowance was $4,200. Employers used one of two methods from Publication 15 to calculate withholding: the Wage Bracket Method or the Percentage Method.

The Wage Bracket Method involved using IRS tables that corresponded to the employee’s pay period and allowances to find the exact tax amount to withhold. The Percentage Method required subtracting the value of withholding allowances from gross pay. For example, an employee paid biweekly with two allowances would have $161.54 subtracted from their pay. The employer then used this adjusted wage and the Percentage Method tables in Publication 15 to compute the withholding.

Employers were also responsible for the Federal Unemployment Tax Act (FUTA) tax, which was paid by the employer. The standard FUTA tax rate for 2019 was 6.0% on the first $7,000 of wages paid to each employee. However, employers could take a credit of up to 5.4% for amounts paid into state unemployment funds, which reduced the effective FUTA tax rate to 0.6% for most. Jurisdictions with outstanding federal unemployment loans could be designated as credit reduction states, which would lower this credit.

Depositing 2019 Employment Taxes

Deposit frequency depended on the employer’s tax liability during a “lookback period,” which for 2019 was July 1, 2017, through June 30, 2018. An employer was a monthly schedule depositor if their total tax liability during the lookback period was $50,000 or less. A business was a semiweekly schedule depositor if their tax liability exceeded $50,000 in the lookback period. New employers were automatically classified as monthly depositors.

A separate rule allowed employers with a tax liability of less than $2,500 for a quarter to pay the amount with their quarterly Form 941 filing instead of making deposits. For monthly depositors, taxes from a calendar month had to be deposited by the 15th day of the following month. For semiweekly depositors, if the payroll date was on a Wednesday, Thursday, or Friday, the deposit was due by the following Wednesday. If the payroll date was on a Saturday, Sunday, Monday, or Tuesday, the deposit was due by the following Friday.

For 2019, employers were required to make tax deposits electronically, primarily through the Electronic Federal Tax Payment System (EFTPS). EFTPS allowed for online or phone payments, ensuring timely and proper credit to the employer’s account.

Required 2019 Reporting Forms

Form 941, Employer’s QUARTERLY Federal Tax Return

Form 941 was the primary form for reporting payroll taxes, including federal income tax withheld and both the employee and employer shares of Social Security and Medicare taxes. Employers filed a separate Form 941 for each quarter. The form was used to calculate total FICA tax liability by applying the 12.4% Social Security rate and 2.9% Medicare rate to taxable wages. The form reconciled the total taxes owed with the total deposits made during the quarter to determine if there was a balance due or an overpayment. Semiweekly schedule depositors also attached Schedule B, which provided a day-by-day breakdown of their tax liability.

Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return

Form 940 was filed annually to report an employer’s Federal Unemployment (FUTA) tax liability. The 2019 form required the employer to list total wages paid and then subtract any payments exempt from FUTA tax or payments exceeding the $7,000 wage base per employee. After determining total taxable FUTA wages, the employer calculated the gross FUTA tax. The form then guided the employer through adjustments, the most significant being the credit for state unemployment taxes paid. The final calculated FUTA tax was then reconciled with deposits made during the year.

Form W-2, Wage and Tax Statement

The year-end Form W-2 reported an employee’s total annual earnings and taxes withheld to both the employee and the Social Security Administration (SSA). Specific boxes on the 2019 form reported the following:

• Box 1 showed the total taxable wages for federal income tax purposes.
• Box 2 reported the total federal income tax withheld.
• Boxes 3 and 5 showed the wages subject to Social Security and Medicare taxes.
• Boxes 4 and 6 reported the amount of Social Security and Medicare taxes withheld.
• Other boxes were used for state and local tax information, retirement plan contributions, and the value of certain fringe benefits.

Filing and Furnishing 2019 Tax Forms

For Form 941, the due dates were the last day of the month following the end of each quarter: April 30, July 31, October 31, and January 31, 2020. If an employer made timely deposits for the full amount of their tax liability for the quarter, they were granted a 10-day filing extension.

The annual Form 940 for the 2019 tax year was due by January 31, 2020. The deadline for furnishing Form W-2 to employees and filing the accompanying Form W-3, Transmittal of Wage and Tax Statements, with the SSA was also January 31, 2020.

Employers could file forms by mail or electronically. The IRS e-file system was available for Forms 940 and 941, offering faster processing and receipt confirmation.