The IRS has issued the final versions of Publication 15 (Circular E, Employer’s Tax Guide) and Publication 15-T (Federal Income Tax Withholding Methods) for use in the 2023 tax year.
Publication 15: This publication explains the tax responsibilities as an employer regarding the requirements for withholding, depositing, reporting, paying, and correcting employment taxes. The publication also explains the forms an employer must give to its employees, those employees must provide, and those the employer must send to the IRS and the Social Security Administration (SSA).
Publication 15-T: Publication 15-T supplements Publication 15 and Publication 51 (Agricultural Employer’s Tax Guide). It describes how to figure withholdings using the wage bracket method or percentage method.
Qualified sick/family leave in 2023: Publication 15 notes that the rate of Social Security tax on taxable wages, including qualified sick leave wages and qualified family leave wages paid in 2023 for leave taken between March 31, 2021 – October 1, 2021, is 6.2% each for the employer and employee or 12.4% for both.
However, qualified sick leave wages and qualified family leave wages paid in 2023 for leave taken between March 31, 2020 -April 1, 2021, are not subject to the employer share of Social Security tax; therefore, the tax rate on these wages is 6.2%. The 2023 Social Security wage base limit is $160,200.
Payroll research tax credit: For tax years beginning before January 1, 2023, a qualified small business may elect to claim up to $250,000 of its credit for increasing research activities as a payroll tax credit. The Inflation Reduction Act of 2022 (the IRA) increased the election amount to $500,000 for tax years beginning after December 31, 2022.
The election and determination of the credit amount that will be used against the employer’s payroll taxes are made on Form 6765 (Credit for Increasing Research Activities). The amount from Form 6765, line 44, must then be reported on Form 8974 (Qualified Small Business Payroll Tax Credit for Increasing Research Activities).
Starting in the first quarter of 2023, the payroll tax credit is first used to reduce the employer share of Social Security tax up to $250,000 per quarter and any remaining credit reduces the employer share of Medicare tax for the quarter (any remaining credit is carried forward to the next quarter).
Forms and publications discontinued forms after 2023: Form 941-SS (Employer’s Quarterly Federal Tax Return) and Publications 80 and 179.
Source: Thomson Reuters