What can be done if an employer will not withhold income taxes,
social security, and Medicare from my pay?
Generally, if an employer does not withhold income taxes, social security,
and Medicare from your pay, you are being treated as an independent contractor
(self-employed person). If you believe an employee relationship exists and
you cannot resolve this matter with your employer, you should submit a Form SS-8 (PDF), Determination of Employee Work Status
for Purposes of Federal Employment Taxes and Income Tax Withholding.
The factors used to determine if an employer-employee relationship exists
are covered in Chapter 2 of Publication 15-A (PDF), Employer's
Supplemental Tax Guide.
If your status as an employee is not at issue, it may be that you are in
a category of employment whose earnings are not defined as wages under U.S.
federal tax and social security law. Find out from your employer the reason
that social security and Medicare taxes and income taxes are not being withheld
from your pay. If you have further questions, contact the IRS at 800-829-1040
or visit an IRS walk-in office for assistance.
Are partners considered employees of a partnership or are they self-employed?
Partners are considered to be self-employed. If you are a member of a partnership
that carries on a trade or business, your distributive share of its income
or loss from that trade or business is net earnings from self-employment.
Limited partners are subject to self-employment tax only on guaranteed payments,
such as salary and professional fees for services rendered.
As an employer, do I have any liability if my employees receive
tips but don't report them to me?
Employees who customarily receive tips are required to report their cash
tips to their employers at least monthly, if they receive $20 or more in the
month. Cash tips are tips received directly in cash or by check, and charged
tips. You have a liability to withhold and pay Social Security and Medicare
tax on your employees' reported tips, to the extent that wages or other employee
funds are available. If the employee does not report tips to you, it places
you at risk of possible assessment of the employer's share of the Social Security
and Medicare taxes on the unreported tips. If you are a large food or beverage
establishment (more than 10 employees on a typical day and food or beverages
consumed on the premises), you are required to allocate tips if the total
tips reported to you are less than 8% of gross sales. Report the allocated
amount on the employee's W-2 at the end of the year.
If the reported tips from employees are more than 8% of sales, must
an employer still allocate tips to the employees?
No. Tip allocation is required when the amount of tips reported by employees
of a large food or beverage establishment is less than 8% (or an approved
lower rate) of the gross receipts, other than nonallocable receipts, for the
given period. If the employees are reporting more than the 8%, there would
be no allocated tip amount. However, the employer must still file Form 8027 (PDF), Employer's Annual Information Return
of Tip Income and Allocated Tips.
Can an employer take out taxes if a Form W-4 was never filed?
Yes, the employer is required to withhold income taxes. Chapter 9 of Publication 15, Circular E, Employer's Tax Guide, states that if an employee
does not give you a completed Form W-4 (PDF), Employee's
Withholding Allowance Certificate, withhold tax as if he or she is single,
with no withholding allowances.
The employer is also required to withhold social security and Medicare
If an employee claims more than 10 exemptions on their Form W-4,
does the employer have to report this to the IRS?
No, this requirement has been eliminated. In the past, employers had to
routinely send the IRS any Form W-4 (PDF), Employee's
Withholding Allowance Certificate, claiming more than 10 allowances or
claiming complete exemption from withholding if $200 or more in weekly wages
was expected. However, Forms W-4 are still subject to review. Employers may
be directed (in a written notice or in future published guidance) to send
certain Forms W-4 to the IRS. The IRS also will be reviewing employee withholding
compliance and you may be required to withhold income tax at a higher rate
if notified to do so by the IRS.
We are about to hire employees and need to know how much tax to
take out and where to send this money?
You will need to secure a completed Form W-4 (PDF), Employee's
Withholding Allowance Certificate, from each employee. You will need Publication 15, Circular E, Employer's Tax Guide, and Publication 15-A (PDF), Employer's Supplemental Tax Guide, to determine
the amount of withholding and for directions on depositing the withholding
amounts and other employment taxes.
Generally, employers will quarterly file Form 941 (PDF), Employer's Quarterly Federal Tax Return, and annually
file Form 940 (PDF), Employer's Annual Federal
Unemployment Tax Return (FUTA), and Form W-2 (PDF), Wage
and Tax Statement, with Form W-3 (PDF), Transmittal
of Income and Tax Statements.
We hired a nanny to look after our baby while we work. How do we
pay her social security taxes and properly report her income?
A nanny is considered a household employee. A household employer only has
to pay social security and Medicare tax only for the employee(s) that receive
cash wages that exceed the threshold amount for the year. If the amount paid
is less than the threshold, no social security or Medicare tax is owed. If
social security and Medicare tax must be paid, you will need to file Form 1040, Schedule H (PDF), Household Employment Taxes.
You must withhold the employee's portion of the social security and Medicare
unless the employer chooses to pay both the employee's share and the employer's
The taxes are 15.3% of cash wages. Your share is 7.65% and the employee's
share is 7.65%. You may also be responsible for paying federal unemployment
taxes. For directions on household employees, refer to Publication 926, Household
Employer's Tax Guide.
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