-CITE-
26 USC CHAPTER 24 - COLLECTION OF INCOME TAX AT SOURCE ON
WAGES 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle C - Employment Taxes
CHAPTER 24 - COLLECTION OF INCOME TAX AT SOURCE ON WAGES
-HEAD-
CHAPTER 24 - COLLECTION OF INCOME TAX AT SOURCE ON WAGES
-MISC1-
Sec.
3401. Definitions.
3402. Income tax collected at source.
3403. Liability for tax.
3404. Return and payment by governmental employer.
3405. Special rules for pensions, annuities, and certain
other deferred income.(!1)
3406. Backup withholding.
AMENDMENTS
1983 - Pub. L. 98-67, title I, Secs. 102(a), 104(d)(4), Aug. 5,
1983, 97 Stat. 369, 380, added item 3406 and repealed amendments
made by Pub. L. 97-248. See 1982 Amendment note below.
1982 - Pub. L. 97-248, title III, Secs. 307(b)(4), 308(a), Sept.
3, 1982, 96 Stat. 590, 591, provided that, applicable to payments
of interest, dividends, and patronage dividends paid or credited
after June 30, 1983, the caption of chapter 24 is amended by
striking out "ON WAGES", items for subchapters A and B are added in
analysis, and heading "Subchapter A - Withholding From Wages" is
added. Section 102(a), (b) of Pub. L. 98-67, title I, Aug. 5, 1983,
97 Stat. 369, repealed subtitle A (Secs. 301-308) of title III of
Pub. L. 97-248 as of the close of June 30, 1983, and provided that
the Internal Revenue Code of 1954 [now 1986] [this title] shall be
applied and administered (subject to certain exceptions) as if such
subtitle A (and the amendments made by such subtitle A) had not
been enacted.
-SECREF-
CHAPTER REFERRED TO IN OTHER SECTIONS
This chapter is referred to in sections 31, 274, 280F, 3121,
3231, 3306, 3502, 3507, 3509, 6011, 6013, 6051, 6103, 6302, 6414,
6501, 6513, 6682, 7654, 7872 of this title; title 5 section 5901;
title 10 section 1174; title 42 sections 409, 653a; title 48
section 1421i.
-FOOTNOTE-
(!1) Editorially supplied. Section 3405 added by Pub. L. 97-248
without corresponding amendment of analysis.
-End-
-CITE-
26 USC Sec. 3401 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle C - Employment Taxes
CHAPTER 24 - COLLECTION OF INCOME TAX AT SOURCE ON WAGES
-HEAD-
Sec. 3401. Definitions
-STATUTE-
(a) Wages
For purposes of this chapter, the term "wages" means all
remuneration (other than fees paid to a public official) for
services performed by an employee for his employer, including the
cash value of all remuneration (including benefits) paid in any
medium other than cash; except that such term shall not include
remuneration paid -
(1) for active service performed in a month for which such
employee is entitled to the benefits of section 112 (relating to
certain combat zone compensation of members of the Armed Forces
of the United States) to the extent remuneration for such service
is excludable from gross income under such section; or
(2) for agricultural labor (as defined in section 3121(g))
unless the remuneration paid for such labor is wages (as defined
in section 3121(a)); or
(3) for domestic service in a private home, local college club,
or local chapter of a college fraternity or sorority; or
(4) for service not in the course of the employer's trade or
business performed in any calendar quarter by an employee, unless
the cash remuneration paid for such service is $50 or more and
such service is performed by an individual who is regularly
employed by such employer to perform such service. For purposes
of this paragraph, an individual shall be deemed to be regularly
employed by an employer during a calendar quarter only if -
(A) on each of some 24 days during such quarter such
individual performs for such employer for some portion of the
day service not in the course of the employer's trade or
business; or
(B) such individual was regularly employed (as determined
under subparagraph (A)) by such employer in the performance of
such service during the preceding calendar quarter; or
(5) for services by a citizen or resident of the United States
for a foreign government or an international organization; or
(6) for such services, performed by a nonresident alien
individual, as may be designated by regulations prescribed by the
Secretary; or
[(7) Repealed. Pub. L. 89-809, title I, Sec. 103(k), Nov. 13,
1966, 80 Stat. 1554]
(8)(A) for services for an employer (other than the United
States or any agency thereof) -
(i) performed by a citizen of the United States if, at the
time of the payment of such remuneration, it is reasonable to
believe that such remuneration will be excluded from gross
income under section 911; or
(ii) performed in a foreign country or in a possession of the
United States by such a citizen if, at the time of the payment
of such remuneration, the employer is required by the law of
any foreign country or possession of the United States to
withhold income tax upon such remuneration; or
(B) for services for an employer (other than the United States
or any agency thereof) performed by a citizen of the United
States within a possession of the United States (other than
Puerto Rico), if it is reasonable to believe that at least 80
percent of the remuneration to be paid to the employee by such
employer during the calendar year will be for such services; or
(C) for services for an employer (other than the United States
or any agency thereof) performed by a citizen of the United
States within Puerto Rico, if it is reasonable to believe that
during the entire calendar year the employee will be a bona fide
resident of Puerto Rico; or
(D) for services for the United States (or any agency thereof)
performed by a citizen of the United States within a possession
of the United States to the extent the United States (or such
agency) withholds taxes on such remuneration pursuant to an
agreement with such possession; or
(9) for services performed by a duly ordained, commissioned, or
licensed minister of a church in the exercise of his ministry or
by a member of a religious order in the exercise of duties
required by such order; or
(10)(A) for services performed by an individual under the age
of 18 in the delivery or distribution of newspapers or shopping
news, not including delivery or distribution to any point for
subsequent delivery or distribution; or
(B) for services performed by an individual in, and at the time
of, the sale of newspapers or magazines to ultimate consumers,
under an arrangement under which the newspapers or magazines are
to be sold by him at a fixed price, his compensation being based
on the retention of the excess of such price over the amount at
which the newspapers or magazines are charged to him, whether or
not he is guaranteed a minimum amount of compensation for such
services, or is entitled to be credited with the unsold
newspapers or magazines turned back; or
(11) for services not in the course of the employer's trade or
business, to the extent paid in any medium other than cash; or
(12) to, or on behalf of, an employee or his beneficiary -
(A) from or to a trust described in section 401(a) which is
exempt from tax under section 501(a) at the time of such
payment unless such payment is made to an employee of the trust
as remuneration for services rendered as such employee and not
as a beneficiary of the trust; or
(B) under or to an annuity plan which, at the time of such
payment, is a plan described in section 403(a); or
(C) for a payment described in section 402(h)(1) and (2) if,
at the time of such payment, it is reasonable to believe that
the employee will be entitled to an exclusion under such
section for payment; or
(D) under an arrangement to which section 408(p) applies; or
(E) under or to an eligible deferred compensation plan which,
at the time of such payment, is a plan described in section
457(b) which is maintained by an eligible employer described in
section 457(e)(1)(A),(!1) or
(13) pursuant to any provision of law other than section 5(c)
or 6(1) of the Peace Corps Act, for service performed as a
volunteer or volunteer leader within the meaning of such Act; or
(14) in the form of group-term life insurance on the life of an
employee; or
(15) to or on behalf of an employee if (and to the extent that)
at the time of the payment of such remuneration it is reasonable
to believe that a corresponding deduction is allowable under
section 217 (determined without regard to section 274(n)); or
(16)(A) as tips in any medium other than cash;
(B) as cash tips to an employee in any calendar month in the
course of his employment by an employer unless the amount of such
cash tips is $20 or more; (!2)
(17) for service described in section 3121(b)(20); (!2)
(18) for any payment made, or benefit furnished, to or for the
benefit of an employee if at the time of such payment or such
furnishing it is reasonable to believe that the employee will be
able to exclude such payment or benefit from income under section
127, 129, or 134(b)(4); (!2)
(19) for any benefit provided to or on behalf of an employee if
at the time such benefit is provided it is reasonable to believe
that the employee will be able to exclude such benefit from
income under section 74(c), 117, or 132; (!2)
(20) for any medical care reimbursement made to or for the
benefit of an employee under a self-insured medical reimbursement
plan (within the meaning of section 105(h)(6)); (!2)
(21) for any payment made to or for the benefit of an employee
if at the time of such payment it is reasonable to believe that
the employee will be able to exclude such payment from income
under section 106(b); or
(22) any payment made to or for the benefit of an employee if
at the time of such payment it is reasonable to believe that the
employee will be able to exclude such payment from income under
section 106(d).
(b) Payroll period
For purposes of this chapter, the term "payroll period" means a
period for which a payment of wages is ordinarily made to the
employee by his employer, and the term "miscellaneous payroll
period" means a payroll period other than a daily, weekly,
biweekly, semimonthly, monthly, quarterly, semiannual or annual
payroll period.
(c) Employee
For purposes of this chapter, the term "employee" includes an
officer, employee, or elected official of the United States, a
State, or any political subdivision thereof, or the District of
Columbia, or any agency or instrumentality of any one or more of
the foregoing. The term "employee" also includes an officer of a
corporation.
(d) Employer
For purposes of this chapter, the term "employer" means the
person for whom an individual performs or performed any service, of
whatever nature, as the employee of such person, except that -
(1) if the person for whom the individual performs or performed
the services does not have control of the payment of the wages
for such services, the term "employer" (except for purposes of
subsection (a)) means the person having control of the payment of
such wages, and
(2) in the case of a person paying wages on behalf of a
nonresident alien individual, foreign partnership, or foreign
corporation, not engaged in trade or business within the United
States, the term "employer" (except for purposes of subsection
(a)) means such person.
(e) Number of withholding exemptions claimed
For purposes of this chapter, the term "number of withholding
exemptions claimed" means the number of withholding exemptions
claimed in a withholding exemption certificate in effect under
section 3402(f), or in effect under the corresponding section of
prior law, except that if no such certificate is in effect, the
number of withholding exemptions claimed shall be considered to be
zero.
(f) Tips
For purposes of subsection (a), the term "wages" includes tips
received by an employee in the course of his employment. Such wages
shall be deemed to be paid at the time a written statement
including such tips is furnished to the employer pursuant to
section 6053(a) or (if no statement including such tips is so
furnished) at the time received.
[(g) Repealed. Pub. L. 101-140, title II, Sec. 203(a)(2), Nov. 8,
1989, 103 Stat. 830]
(h) Crew leader rules to apply
Rules similar to the rules of section 3121(o) shall apply for
purposes of this chapter.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 455; Aug. 9, 1955, ch. 681, 69
Stat. 616; Pub. L. 87-256, Sec. 110(g)(1), Sept. 21, 1961, 75 Stat.
537; Pub. L. 87-293, title II, Sec. 201(c), Sept. 22, 1961, 75
Stat. 625; Pub. L. 87-792, Sec. 7(l), Oct. 10, 1962, 76 Stat. 830;
Pub. L. 88-272, title II, Secs. 204(b), 213(c), Feb. 26, 1964, 78
Stat. 36, 52; Pub. L. 89-97, title III, Sec. 313(d)(1), (2), July
30, 1965, 79 Stat. 383, 384; Pub. L. 89-809, title I, Sec. 103(k),
Nov. 13, 1966, 80 Stat. 1554; Pub. L. 92-279, Sec. 2, Apr. 26,
1972, 86 Stat. 125; Pub. L. 93-406, title II, Sec. 2002(g)(7),
Sept. 2, 1974, 88 Stat. 970; Pub. L. 94-455, title XII, Sec.
1207(e)(1)(C), title XV, Sec. 1501(b)(7), title XIX, Secs. 1903(c),
1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1707, 1736, 1810, 1834; Pub.
L. 95-600, title I, Sec. 164(b)(1), Nov. 6, 1978, 92 Stat. 2813;
Pub. L. 95-615, Sec. 207(a), Nov. 8, 1978, 92 Stat. 3108; Pub. L.
96-222, title I, Sec. 103(a)(13)(A), Apr. 1, 1980, 94 Stat. 213;
Pub. L. 97-34, title I, Secs. 112(b)(5), 124(e)(2)(A), title III,
Sec. 311(h)(6), Aug. 13, 1981, 95 Stat. 195, 200, 282; Pub. L.
97-448, title I, Sec. 103(c)(12)(B), Jan. 12, 1983, 96 Stat. 2377;
Pub. L. 98-369, div. A, title IV, Sec. 491(d)(38), title V, Sec.
531(d)(4), July 18, 1984, 98 Stat. 851, 885; Pub. L. 99-514, title
I, Sec. 122(e)(4), title XII, Sec. 1272(c), Oct. 22, 1986, 100
Stat. 2112, 2594; Pub. L. 100-647, title I, Secs.
1001(g)(4)(B)(iii), 1011(f)(9), 1011B(a)(22)(D), (33), Nov. 10,
1988, 102 Stat. 3352, 3463, 3486, 3488; Pub. L. 101-140, title II,
Sec. 203(a)(2), Nov. 8, 1989, 103 Stat. 830; Pub. L. 101-239, title
VII, Sec. 7631(a), (b), Dec. 19, 1989, 103 Stat. 2378; Pub. L.
101-508, title XI, Sec. 11703(f)(1), Nov. 5, 1990, 104 Stat.
1388-517; Pub. L. 104-117, Sec. 1(c), Mar. 20, 1996, 110 Stat. 828;
Pub. L. 104-188, title I, Secs. 1421(b)(8)(D), 1704(t)(4)(C), Aug.
20, 1996, 110 Stat. 1798, 1887; Pub. L. 104-191, title III, Sec.
301(c)(2)(C), Aug. 21, 1996, 110 Stat. 2049; Pub. L. 105-206, title
VI, Sec. 6023(14), (15), July 22, 1998, 112 Stat. 825; Pub. L.
107-16, title VI, Sec. 641(a)(1)(D)(i), June 7, 2001, 115 Stat.
119; Pub. L. 108-121, title I, Sec. 106(b)(4), Nov. 11, 2003, 117
Stat. 1339; Pub. L. 108-173, title XII, Sec. 1201(d)(2)(C), Dec. 8,
2003, 117 Stat. 2477.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-REFTEXT-
REFERENCES IN TEXT
Sections 5(c) and 6(1) of the Peace Corps Act, referred to in
subsec. (a)(13), are classified to sections 2504(c) and 2505(1),
respectively, of Title 22, Foreign Relations and Intercourse.
-MISC1-
AMENDMENTS
2003 - Subsec. (a)(18). Pub. L. 108-121 substituted ", 129, or
134(b)(4)" for "or 129".
Subsec. (a)(22). Pub. L. 108-173 added par. (22).
2001 - Subsec. (a)(12)(E). Pub. L. 107-16, Secs. 641(a)(1)(D)(i),
901, temporarily added subpar. (E). See Effective and Termination
Dates of 2001 Amendment note below.
1998 - Subsec. (a)(19), (21). Pub. L. 105-206 inserted "for"
after par. designation.
1996 - Subsec. (a)(1). Pub. L. 104-188, Sec. 1704(t)(4)(C),
substituted "combat zone compensation" for "combat pay".
Pub. L. 104-117 inserted before semicolon "to the extent
remuneration for such service is excludable from gross income under
such section".
Subsec. (a)(12)(D). Pub. L. 104-188, Sec. 1421(b)(8)(D), added
subpar. (D).
Subsec. (a)(21). Pub. L. 104-191 added par. (21).
1990 - Subsec. (a)(20). Pub. L. 101-508 added par. (20).
1989 - Subsec. (a)(2). Pub. L. 101-239, Sec. 7631(a), amended
par. (2) generally. Prior to amendment, par. (2) read as follows:
"for agricultural labor (as defined in section 3121(g)); or".
Subsec. (g). Pub. L. 101-140 amended this section to read as if
amendments by Pub. L. 100-647, Sec. 1011B(a)(22)(D), had not been
enacted, see 1988 Amendment note below.
Subsec. (h). Pub. L. 101-239, Sec. 7631(b), added subsec. (h).
1988 - Subsec. (a)(12)(C). Pub. L. 100-647, Sec. 1011(f)(9),
substituted "section 402(h)(1) and (2)" for "section 219" and "an
exclusion" for "a deduction".
Subsec. (a)(15). Pub. L. 100-647, Sec. 1001(g)(4)(B)(iii),
inserted "(determined without regard to section 274(n))" after
"section 217".
Subsec. (a)(19), (20). Pub. L. 100-647, Sec. 1011B(a)(33),
redesignated par. (20) as (19) and struck out former par. (19)
which excluded medical care reimbursement made to or for benefit of
employee under self-insured medical reimbursement plan.
Subsec. (g). Pub. L. 100-647, Sec. 1011B(a)(22)(D), added subsec.
(g) relating to benefits provided under certain employee benefit
plans.
1986 - Subsec. (a)(8)(D). Pub. L. 99-514, Sec. 1272(c), added
subpar. (D).
Subsec. (a)(20). Pub. L. 99-514, Sec. 122(e)(4), inserted
reference to section 74(c).
1984 - Subsec. (a). Pub. L. 98-369, Sec. 531(d)(4)(A), inserted
"(including benefits)" in introductory provisions.
Subsec. (a)(12). Pub. L. 98-369, Sec. 491(d)(38), struck out
subpar. (C) which provided: "under or to a bond purchase plan
which, at the time of such payment, is a qualified bond purchase
plan described in section 405(a);" and redesignated subpar. (D) as
(C).
Subsec. (a)(20). Pub. L. 98-369, Sec. 531(d)(4)(B), added par.
(20).
1983 - Subsec. (a)(12)(D). Pub. L. 97-448 substituted "section
219" for "section 219(a)".
1981 - Subsec. (a)(12)(D). Pub. L. 97-34, Sec. 311(h)(6),
substituted "section 219(a)" for "section 219(a) or 220(a)".
Subsec. (a)(18). Pub. L. 97-34, Sec. 124(e)(2)(A), substituted
"section 127 or 129" for "section 127".
Pub. L. 97-34, Sec. 112(b)(5), redesignated par. (19) as (18).
Former par. (18), relating to remuneration paid to or on behalf of
an employee if (and to the extent that) at the time of the payment
of such remuneration it was reasonable to believe that a
corresponding deduction was allowable under section 913 (relating
to deduction for certain expenses of living abroad), was struck
out.
Subsec. (a)(19), (20). Pub. L. 97-34, Sec. 112(b)(5),
redesignated par. (20) as (19). Former par. (19) redesignated (18).
1980 - Subsec. (a)(18) to (20). Pub. L. 96-222 redesignated par.
(18), added by Pub. L. 95-600, as (19), in par. (19) as so
redesignated, substituted "section 127; or" for "section 124.", and
added par. (20).
1978 - Subsec. (a)(18). Pub. L. 95-615 added par. (18) relating
to payments or benefits excludable from income under section 124.
Pub. L. 95-600 added par. (18) relating to remuneration for which
a corresponding deduction is allowable under section 913.
1976 - Subsec. (a)(6). Pub. L. 94-455, Sec. 1906(b)(13)(A),
struck out "or his delegate" after "Secretary".
Subsec. (a)(12)(D). Pub. L. 94-455, Sec. 1501(b)(7), inserted "or
220(a)" after "section 219(a)".
Subsec. (a)(17). Pub. L. 94-455, Sec. 1207(e)(1)(C), added par.
(17).
Subsec. (c). Pub. L. 94-455, Sec. 1903(c), struck out "Territory"
after "a State".
1974 - Subsec. (a)(12)(D). Pub. L. 93-406 added subpar. (D).
1972 - Subsec. (a)(1). Pub. L. 92-279 struck out "as a member of
the Armed Forces of the United States" after "active service",
substituted "employee" for "member", and parenthetical text
"(relating to certain combat pay of members of the Armed Forces of
the United States)".
1966 - Subsec. (a)(6), (7). Pub. L. 89-809, Sec. 103(k), struck
out par. (6) dealing with services performed by nonresident alien
individuals other than residents of contiguous countries who enter
and leave the United States at frequent intervals, residents of
Puerto Rico if such services are performed as an employee of the
United States or any agency thereof, or individuals temporarily
present in the United States as nonimmigrants under certain
conditions, redesignated par. (7) as (6), and in par (6) as so
redesignated, struck out "who is a resident of a contiguous country
and who enters and leaves the United States at frequent intervals"
after "nonresident alien individual".
1965 - Subsec. (a)(16). Pub. L. 89-97, Sec. 313(d)(2), added par.
(16).
Subsec. (f). Pub. L. 89-97, Sec. 313(d)(1), added subsec. (f).
1964 - Subsec. (a)(14). Pub. L. 88-272, Sec. 204(b), added par.
(14).
Subsec. (a)(15). Pub. L. 88-272, Sec. 213(c), added par. (15).
1962 - Subsec. (a)(12)(B), (C). Pub. L. 87-792 substituted "is a
plan described in section 403(a)" for "meets the requirements of
section 401(a)(3), (4), (5), and (6)", in subpar. (B), and added
subpar. (C).
1961 - Subsec. (a)(6)(C). Pub. L. 87-256 added subpar. (C).
Subsec. (a)(13). Pub. L. 87-293 added par. (13).
1955 - Subsec. (a). Act Aug. 9, 1955, excluded from definition of
wages, remuneration paid for services performed in a possession of
the United States by a United States citizen if the employer is
required by the law of the possession to withhold income tax on the
remuneration.
EFFECTIVE DATE OF 2003 AMENDMENTS
Amendment by Pub. L. 108-173 applicable to taxable years
beginning after Dec. 31, 2003, see section 1201(k) of Pub. L.
108-173, set out as a note under section 62 of this title.
Amendment by Pub. L. 108-121 applicable to taxable years
beginning after Dec. 31, 2002, see section 106(c) of Pub. L.
108-121, set out as a note under section 134 of this title.
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Amendment by Pub. L. 107-16 applicable to distributions after
Dec. 31, 2001, see section 641(f)(1) of Pub. L. 107-16, set out as
a note under section 402 of this title.
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1996 AMENDMENTS
Amendment by Pub. L. 104-191 applicable to taxable years
beginning after Dec. 31, 1996, see section 301(j) of Pub. L.
104-191, set out as a note under section 62 of this title.
Amendment by section 1421(b)(8)(D) of Pub. L. 104-188 applicable
to taxable years beginning after Dec. 31, 1996, see section 1421(e)
of Pub. L. 104-188, set out as a note under section 72 of this
title.
Amendment by Pub. L. 104-117 applicable to remuneration paid
after Mar. 20, 1996, see section 1(e) of Pub. L. 104-117, set out
in a Treatment of Certain Individuals Performing Services in
Certain Hazardous Duty Areas; Effective Date note under section 112
of this title.
EFFECTIVE DATE OF 1990 AMENDMENT
Section 11703(f)(2) of Pub. L. 101-508 provided that: "The
amendment made by paragraph (1) [amending this section] shall apply
as if included in the amendments made by section 1151 of the Tax
Reform Act of 1986 [Pub. L. 99-514, see Effective Date of 1986
Amendment note set out under section 79 of this title] but shall
not apply to any amount paid before the date of the enactment of
this Act [Nov. 5, 1990] which the employer treated as wages for
purposes of chapter 24 of the Internal Revenue Code of 1986 when
paid."
EFFECTIVE DATE OF 1989 AMENDMENTS
Section 7631(c) of Pub. L. 101-239 provided that: "The amendments
made by this section [amending this section] shall apply to
remuneration paid after December 31, 1989."
Amendment by Pub. L. 101-140 effective as if included in section
1151 of Pub. L. 99-514, see section 203(c) of Pub. L. 101-140, set
out as a note under section 79 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by sections 1001(g)(4)(B)(iii), 1011(f)(9), and
1011B(a)(33) of Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
Amendment by section 1011B(a)(22)(D) of Pub. L. 100-647 not
applicable to any individual who separated from service with the
employer before Jan. 1, 1989, see section 1011B(a)(22)(F) of Pub.
L. 100-647, set out as a note under section 3121 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 122(e)(4) of Pub. L. 99-514 applicable to
prizes and awards granted after Dec. 31, 1986, see section 151(c)
of Pub. L. 99-514, set out as a note under section 1 of this title.
Amendment by section 1272(c) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, with certain
exceptions and qualifications, see section 1277 of Pub. L. 99-514,
set out as a note under section 931 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 491(d)(38) of Pub. L. 98-369 applicable to
obligations issued after Dec. 31, 1983, see section 491(f)(1) of
Pub. L. 98-369, set out as a note under section 62 of this title.
Amendment by section 531(d)(4) of Pub. L. 98-369 effective Jan.
1, 1985, see section 531(h) of Pub. L. 98-369, set out as an
Effective Date note under section 132 of this title.
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 97-448 effective, except as otherwise
provided, as if it had been included in the provision of the
Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such
amendment relates, see section 109 of Pub. L. 97-448, set out as a
note under section 1 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by section 112(b)(5) of Pub. L. 97-34 applicable with
respect to taxable years beginning after Dec. 31, 1981, see section
115 of Pub. L. 97-34, set out as a note under section 911 of this
title.
Amendment by section 124(e)(2)(A) of Pub. L. 97-34 applicable to
remuneration paid after Dec. 31, 1981, see section 124(f)(2) of
Pub. L. 97-34, set out as a note under section 21 of this title.
Amendment by section 311(h)(6) of Pub. L. 97-34 applicable to
taxable years beginning after Dec. 31, 1981, see section 311(i)(1)
of Pub. L. 97-34, set out as a note under section 219 of this
title.
EFFECTIVE DATE OF 1980 AMENDMENT
Amendment by Pub. L. 96-222 effective, except as otherwise
provided, as if it had been included in the provisions of the
Revenue Act of 1978, Pub. L. 95-600, to which such amendment
relates, see section 201 of Pub. L. 96-222, set out as a note under
section 32 of this title.
EFFECTIVE DATE OF 1978 AMENDMENTS
Amendment by Pub. L. 95-615 applicable to remuneration paid after
Nov. 8, 1978, but with taxpayers allowed to elect not to have the
amendment apply with respect to any taxable year beginning after
Dec. 31, 1977, and before Jan. 1, 1979, see section 209(b), (c) of
Pub. L. 95-615, set out as a note under section 911 of this title.
Amendment by Pub. L. 95-600 applicable with respect to taxable
years beginning after Dec. 31, 1978, see section 164(d) of Pub. L.
95-600, set out as a note under section 127 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1501(b)(7) of Pub. L. 94-455 effective for
taxable years beginning after Dec. 31, 1976, see section 1501(d) of
Pub. L. 94-455, set out as a note under section 62 of this title.
EFFECTIVE DATE OF 1974 AMENDMENT
Amendment by Pub. L. 93-406 effective on Jan. 1, 1975, see
section 2002(i)(2) of Pub. L. 93-406, set out as an Effective Date
note under section 4973 of this title.
EFFECTIVE DATE OF 1972 AMENDMENT
Section 3(b) of Pub. L. 92-279 provided that: "The amendments
made by section 2 [amending this section] shall apply to wages paid
on or after the first day of the first calendar month which begins
more than 30 days after the date of the enactment of this Act [Apr.
26, 1972]."
EFFECTIVE DATE OF 1966 AMENDMENT
Amendment by Pub. L. 89-809 applicable with respect to
remuneration paid after Dec. 31, 1966, see section 103(n)(4) of
Pub. L. 89-809, set out as a note under section 871 of this title.
EFFECTIVE DATE OF 1965 AMENDMENT
Amendment by section 313(d)(1), (2) of Pub. L. 89-97 applicable
only with respect to tips received by employees after 1965, see
section 313(f) of Pub. L. 89-97, set out as a note under section
6053 of this title.
EFFECTIVE DATE OF 1964 AMENDMENT
Amendment by section 204(b) of Pub. L. 88-272 applicable to
remuneration paid after Dec. 31, 1963, in the form of group-term
life insurance provided after such date, see section 204(d) of Pub.
L. 88-272, set out as an Effective Date note under section 79 of
this title.
Amendment by section 213(c) of Pub. L. 88-272 applicable to
remuneration paid after the seventh day following Feb. 26, 1964,
see section 213(d) of Pub. L. 88-272, set out as a note under
section 62 of this title.
EFFECTIVE DATE OF 1962 AMENDMENT
Amendment by Pub. L. 87-792 applicable to taxable years beginning
after Dec. 31, 1962, see section 8 of Pub. L. 87-792, set out as a
note under section 22 of this title.
EFFECTIVE DATE OF 1961 AMENDMENTS
Amendment by Pub. L. 87-293 applicable with respect to
remuneration paid after Sept. 22, 1961, see section 201(d) of Pub.
L. 87-293, set out as a note under section 912 of this title.
Section 110(h)(4) of Pub. L. 87-256 provided that: "The
amendments made by subsection (g) of this section [amending this
section and section 3402 of this title] shall apply with respect to
wages paid after December 31, 1961."
SHORT TITLE OF 1966 AMENDMENT
Pub. L. 89-368, Sec. 1, Mar. 15, 1966, 80 Stat. 38, provided
that: "This Act [enacting sections 276 and 6682 of this title and
section 428 of Title 42, The Public Health and Welfare, amending
sections 1402, 1403, 3402, 4061, 4251, 4253, 6015, 6154, 6211,
6412, 6654, 7205, and 7701 of this title and section 1202 of Title
19, Customs Duties, and enacting provisions set out as notes under
sections 276, 3402, 4061, 4251, 6154, and 6654 of this title and
section 428 of Title 42] may be cited as the 'Tax Adjustment Act of
1966'."
REPEALS; AMENDMENTS AND APPLICATION OF AMENDMENTS UNAFFECTED
Section 201(c) of Pub. L. 87-293, cited as a credit to this
section, was repealed by Pub. L. 89-572, Sec. 5(a), Sept. 13, 1966,
80 Stat. 765. Such repeal not deemed to affect amendments to this
section contained in such provisions, and continuation in full
force and effect until modified by appropriate authority of all
determinations, authorization, regulations, orders, contracts,
agreements, and other actions issued, undertaken, or entered into
under authority of the repealed provisions, see section 5(b) of
Pub. L. 89-572, set out as a note under former section 2515 of
Title 22, Foreign Relations and Intercourse.
NO INFERENCE TO BE DRAWN FROM AMENDMENT BY PUB. L. 108-121
No inference to be drawn from amendment to subsec. (a)(18) of
this section by section 106 of Pub. L. 108-121 with respect to tax
treatment of any amounts under program described in section
134(b)(4) of this title for any taxable year beginning before Jan.
1, 2003, see section 106(d) of Pub. L. 108-121, set out as a note
under section 134 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1998
For provisions directing that if any amendments made by subtitle
D [Secs. 1401-1465] of title I of Pub. L. 104-188 require an
amendment to any plan or annuity contract, such amendment shall not
be required to be made before the first day of the first plan year
beginning on or after Jan. 1, 1998, see section 1465 of Pub. L.
104-188, set out as a note under section 401 of this title.
CONTROVERSIES INVOLVING WHETHER INDIVIDUALS ARE EMPLOYEES FOR
PURPOSES OF EMPLOYMENT TAXES
Section 530 of Pub. L. 95-600, as amended by Pub. L. 96-167, Sec.
9(d), Dec. 29, 1979, 93 Stat. 1278; Pub. L. 96-541, Sec. 1, Dec.
17, 1980, 94 Stat. 3204; Pub. L. 97-248, title II, Sec. 269(c)(1),
(2), 96 Stat. 552; Pub. L. 99-514, Sec. 2, title XVII, Sec.
1706(a), Oct. 22, 1986, 100 Stat. 2095, 2781; Pub. L. 104-188,
title I, Sec. 1122(a), Aug. 20, 1996, 110 Stat. 1766, provided
that:
"(a) Termination of Certain Employment Tax Liability. -
"(1) In general. - If -
"(A) for purposes of employment taxes, the taxpayer did not
treat an individual as an employee for any period, and
"(B) in the case of periods after December 31, 1978, all
Federal tax returns (including information returns) required to
be filed by the taxpayer with respect to such individual for
such period are filed on a basis consistent with the taxpayer's
treatment of such individual as not being an employee,
then, for purposes of applying such taxes for such period with
respect to the taxpayer, the individual shall be deemed not to be
an employee unless the taxpayer had no reasonable basis for not
treating such individual as an employee.
"(2) Statutory standards providing one method of satisfying the
requirements of paragraph (1). - For purposes of paragraph (1), a
taxpayer shall in any case be treated as having a reasonable
basis for not treating an individual as an employee for a period
if the taxpayer's treatment of such individual for such period
was in reasonable reliance on any of the following:
"(A) judicial precedent, published rulings, technical advice
with respect to the taxpayer, or a letter ruling to the
taxpayer;
"(B) a past Internal Revenue Service audit of the taxpayer in
which there was no assessment attributable to the treatment
(for employment tax purposes) of the individuals holding
positions substantially similar to the position held by this
individual; or
"(C) long-standing recognized practice of a significant
segment of the industry in which such individual was engaged.
"(3) Consistency required in the case of prior tax treatment. -
Paragraph (1) shall not apply with respect to the treatment of
any individual for employment tax purposes for any period ending
after December 31, 1978, if the taxpayer (or a predecessor) has
treated any individual holding a substantially similar position
as an employee for purposes of the employment taxes for any
period beginning after December 31, 1977.
"(4) Refund or credit of overpayment. - If refund or credit of
any overpayment of an employment tax resulting from the
application of paragraph (1) is not barred on the date of the
enactment of this Act [Nov. 6, 1978] by any law or rule of law,
the period for filing a claim for refund or credit of such
overpayment (to the extent attributable to the application of
paragraph (1)) shall not expire before the date 1 year after the
date of the enactment of this Act.
"(b) Prohibition Against Regulations and Rulings on Employment
Status. - No regulation or Revenue Ruling shall be published on or
after the date of the enactment of this Act [Nov. 6, 1978] and
before the effective date of any law hereafter enacted clarifying
the employment status of individuals for purposes of the employment
taxes by the Department of the Treasury (including the Internal
Revenue Service) with respect to the employment status of any
individual for purposes of the employment taxes.
"(c) Definitions. - For purposes of this section -
"(1) Employment tax. - The term 'employment tax' means any tax
imposed by subtitle C of the Internal Revenue Code of 1986
[formerly I.R.C. 1954, section 3101 et seq. of this title].
"(2) Employment status. - The term 'employment status' means
the status of an individual, under the usual common law rules
applicable in determining the employer-employee relationship, as
an employee or as an independent contractor (or other individual
who is not an employee).
"(d) Exception. - This section shall not apply in the case of an
individual who, pursuant to an arrangement between the taxpayer and
another person, provides services for such other person as an
engineer, designer, drafter, computer programmer, systems analyst,
or other similarly skilled worker engaged in a similar line of
work.
"(e) Special Rules for Application of Section. -
"(1) Notice of availability of section. - An officer or
employee of the Internal Revenue Service shall, before or at the
commencement of any audit inquiry relating to the employment
status of one or more individuals who perform services for the
taxpayer, provide the taxpayer with a written notice of the
provisions of this section.
"(2) Rules relating to statutory standards. - For purposes of
subsection (a)(2) -
"(A) a taxpayer may not rely on an audit commenced after
December 31, 1996, for purposes of subparagraph (B) thereof
unless such audit included an examination for employment tax
purposes of whether the individual involved (or any individual
holding a position substantially similar to the position held
by the individual involved) should be treated as an employee of
the taxpayer,
"(B) in no event shall the significant segment requirement of
subparagraph (C) thereof be construed to require a reasonable
showing of the practice of more than 25 percent of the industry
(determined by not taking into account the taxpayer), and
"(C) in applying the long-standing recognized practice
requirement of subparagraph (C) thereof -
"(i) such requirement shall not be construed as requiring
the practice to have continued for more than 10 years, and
"(ii) a practice shall not fail to be treated as
long-standing merely because such practice began after 1978.
"(3) Availability of safe harbors. - Nothing in this section
shall be construed to provide that subsection (a) only applies
where the individual involved is otherwise an employee of the
taxpayer.
"(4) Burden of proof. -
"(A) In general. - If -
"(i) a taxpayer establishes a prima facie case that it was
reasonable not to treat an individual as an employee for
purposes of this section, and
"(ii) the taxpayer has fully cooperated with reasonable
requests from the Secretary of the Treasury or his delegate,
then the burden of proof with respect to such treatment shall be
on the Secretary.
"(B) Exception for other reasonable basis. - In the case of
any issue involving whether the taxpayer had a reasonable basis
not to treat an individual as an employee for purposes of this
section, subparagraph (A) shall only apply for purposes of
determining whether the taxpayer meets the requirements of
subparagraph (A), (B), or (C) of subsection (a)(2).
"(5) Preservation of prior period safe harbor. - If -
"(A) an individual would (but for the treatment referred to
in subparagraph (B)) be deemed not to be an employee of the
taxpayer under subsection (a) for any prior period, and
"(B) such individual is treated by the taxpayer as an
employee for employment tax purposes for any subsequent period,
then, for purposes of applying such taxes for such prior period
with respect to the taxpayer, the individual shall be deemed not
to be an employee.
"(6) Substantially similar position. - For purposes of this
section, the determination as to whether an individual holds a
position substantially similar to a position held by another
individual shall include consideration of the relationship
between the taxpayer and such individuals."
[Section 1122(b) of Pub. L. 104-188 provided that:
["(1) In general. - The amendment made by this section [amending
section 530 of Pub. L. 95-600, set out above] shall apply to
periods after December 31, 1996.
["(2) Notice by internal revenue service. - Section 530(e)(1) of
the Revenue Act of 1978 [Pub. L. 95-600] (as added by subsection
(a)) shall apply to audits which commence after December 31, 1996.
["(3) Burden of proof. -
["(A) In general. - Section 530(e)(4) of the Revenue Act of
1978 (as added by subsection (a)) shall apply to disputes
involving periods after December 31, 1996.
["(B) No inference. - Nothing in the amendments made by this
section shall be construed to infer the proper treatment of the
burden of proof with respect to disputes involving periods before
January 1, 1997."]
[Section 1706(b) of Pub. L. 99-514 provided that: "The amendment
made by this section [amending section 530 of Pub. L. 95-600, set
out above] shall apply to remuneration paid and services rendered
after December 31, 1986."]
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 41, 275, 3402, 3507,
3509, 4999, 6014, 6051, 6053, 6103, 6331 of this title; title 42
section 653a.
-FOOTNOTE-
(!1) So in original. The comma probably should be a semicolon.
(!2) So in original. Probably should be followed by "or".
-End-
-CITE-
26 USC Sec. 3402 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle C - Employment Taxes
CHAPTER 24 - COLLECTION OF INCOME TAX AT SOURCE ON WAGES
-HEAD-
Sec. 3402. Income tax collected at source
-STATUTE-
(a) Requirement of withholding
(1) In general
Except as otherwise provided in this section, every employer
making payment of wages shall deduct and withhold upon such wages
a tax determined in accordance with tables or computational
procedures prescribed by the Secretary. Any tables or procedures
prescribed under this paragraph shall -
(A) apply with respect to the amount of wages paid during
such periods as the Secretary may prescribe, and
(B) be in such form, and provide for such amounts to be
deducted and withheld, as the Secretary determines to be most
appropriate to carry out the purposes of this chapter and to
reflect the provisions of chapter 1 applicable to such periods.
(2) Amount of wages
For purposes of applying tables or procedures prescribed under
paragraph (1), the term "the amount of wages" means the amount by
which the wages exceed the number of withholding exemptions
claimed multiplied by the amount of one such exemption. The
amount of each withholding exemption shall be equal to the amount
of one personal exemption provided in section 151(b), prorated to
the payroll period. The maximum number of withholding exemptions
permitted shall be calculated in accordance with regulations
prescribed by the Secretary under this section, taking into
account any reduction in withholding to which an employee is
entitled under this section.
(b) Percentage method of withholding
(1) If wages are paid with respect to a period which is not a
payroll period, the withholding exemption allowable with respect to
each payment of such wages shall be the exemption allowed for a
miscellaneous payroll period containing a number of days (including
Sundays and holidays) equal to the number of days in the period
with respect to which such wages are paid.
(2) In any case in which wages are paid by an employer without
regard to any payroll period or other period, the withholding
exemption allowable with respect to each payment of such wages
shall be the exemption allowed for a miscellaneous payroll period
containing a number of days equal to the number of days (including
Sundays and holidays) which have elapsed since the date of the last
payment of such wages by such employer during the calendar year, or
the date of commencement of employment with such employer during
such year, or January 1 of such year, whichever is the later.
(3) In any case in which the period, or the time described in
paragraph (2), in respect of any wages is less than one week, the
Secretary, under regulations prescribed by him, may authorize an
employer to compute the tax to be deducted and withheld as if the
aggregate of the wages paid to the employee during the calendar
week were paid for a weekly payroll period.
(4) In determining the amount to be deducted and withheld under
this subsection, the wages may, at the election of the employer, be
computed to the nearest dollar.
(c) Wage bracket withholding
(1) At the election of the employer with respect to any employee,
the employer shall deduct and withhold upon the wages paid to such
employee a tax (in lieu of the tax required to be deducted and
withheld under subsection (a)) determined in accordance with tables
prescribed by the Secretary in accordance with paragraph (6).
(2) If wages are paid with respect to a period which is not a
payroll period, the amount to be deducted and withheld shall be
that applicable in the case of a miscellaneous payroll period
containing a number of days (including Sundays and holidays) equal
to the number of days in the period with respect to which such
wages are paid.
(3) In any case in which wages are paid by an employer without
regard to any payroll period or other period, the amount to be
deducted and withheld shall be that applicable in the case of a
miscellaneous payroll period containing a number of days equal to
the number of days (including Sundays and holidays) which have
elapsed since the date of the last payment of such wages by such
employer during the calendar year, or the date of commencement of
employment with such employer during such year, or January 1 of
such year, whichever is the later.
(4) In any case in which the period, or the time described in
paragraph (3), in respect of any wages is less than one week, the
Secretary, under regulations prescribed by him, may authorize an
employer to determine the amount to be deducted and withheld under
the tables applicable in the case of a weekly payroll period, in
which case the aggregate of the wages paid to the employee during
the calendar week shall be considered the weekly wages.
(5) If the wages exceed the highest wage bracket, in determining
the amount to be deducted and withheld under this subsection, the
wages may, at the election of the employer, be computed to the
nearest dollar.
(6) In the case of wages paid after December 31, 1969, the amount
deducted and withheld under paragraph (1) shall be determined in
accordance with tables prescribed by the Secretary. In the tables
so prescribed, the amounts set forth as amounts of wages and
amounts of income tax to be deducted and withheld shall be computed
on the basis of the table for an annual payroll period prescribed
pursuant to subsection (a).
(d) Tax paid by recipient
If the employer, in violation of the provisions of this chapter,
fails to deduct and withhold the tax under this chapter, and
thereafter the tax against which such tax may be credited is paid,
the tax so required to be deducted and withheld shall not be
collected from the employer; but this subsection shall in no case
relieve the employer from liability for any penalties or additions
to the tax otherwise applicable in respect of such failure to
deduct and withhold.
(e) Included and excluded wages
If the remuneration paid by an employer to an employee for
services performed during one-half or more of any payroll period of
not more than 31 consecutive days constitutes wages, all the
remuneration paid by such employer to such employee for such period
shall be deemed to be wages; but if the remuneration paid by an
employer to an employee for services performed during more than
one-half of any such payroll period does not constitute wages, then
none of the remuneration paid by such employer to such employee for
such period shall be deemed to be wages.
(f) Withholding exemptions
(1) In general
An employee receiving wages shall on any day be entitled to the
following withholding exemptions:
(A) an exemption for himself unless he is an individual
described in section 151(d)(2);
(B) if the employee is married, any exemption to which his
spouse is entitled, or would be entitled if such spouse were an
employee receiving wages, under subparagraph (A) or (D), but
only if such spouse does not have in effect a withholding
exemption certificate claiming such exemption;
(C) an exemption for each individual with respect to whom, on
the basis of facts existing at the beginning of such day, there
may reasonably be expected to be allowable an exemption under
section 151(c) for the taxable year under subtitle A in respect
of which amounts deducted and withheld under this chapter in
the calendar year in which such day falls are allowed as a
credit;
(D) any allowance to which he is entitled under subsection
(m), but only if his spouse does not have in effect a
withholding exemption certificate claiming such allowance; and
(E) a standard deduction allowance which shall be an amount
equal to one exemption (or more than one exemption if so
prescribed by the Secretary) unless (i) he is married (as
determined under section 7703) and his spouse is an employee
receiving wages subject to withholding or (ii) he has
withholding exemption certificates in effect with respect to
more than one employer.
For purposes of this title, any standard deduction allowance
under subparagraph (E) shall be treated as if it were denominated
a withholding exemption.
(2) Exemption certificates
(A) On commencement of employment
On or before the date of the commencement of employment with
an employer, the employee shall furnish the employer with a
signed withholding exemption certificate relating to the number
of withholding exemptions which he claims, which shall in no
event exceed the number to which he is entitled.
(B) Change of status
If, on any day during the calendar year, the number of
withholding exemptions to which the employee is entitled is
less than the number of withholding exemptions claimed by the
employee on the withholding exemption certificate then in
effect with respect to him, the employee shall within 10 days
thereafter furnish the employer with a new withholding
exemption certificate relating to the number of withholding
exemptions which the employee then claims, which shall in no
event exceed the number to which he is entitled on such day.
If, on any day during the calendar year, the number of
withholding exemptions to which the employee is entitled is
greater than the number of withholding exemptions claimed, the
employee may furnish the employer with a new withholding
exemption certificate relating to the number of withholding
exemptions which the employee then claims, which shall in no
event exceed the number to which he is entitled on such day.
(C) Change of status which affects next calendar year
If on any day during the calendar year the number of
withholding exemptions to which the employee will be, or may
reasonably be expected to be, entitled at the beginning of his
next taxable year under subtitle A is different from the number
to which the employee is entitled on such day, the employee
shall, in such cases and at such times as the Secretary may by
regulations prescribe, furnish the employer with a withholding
exemption certificate relating to the number of withholding
exemptions which he claims with respect to such next taxable
year, which shall in no event exceed the number to which he
will be, or may reasonably be expected to be, so entitled.
(3) When certificate takes effect
(A) First certificate furnished
A withholding exemption certificate furnished the employer in
cases in which no previous such certificate is in effect shall
take effect as of the beginning of the first payroll period
ending, or the first payment of wages made without regard to a
payroll period, on or after the date on which such certificate
is so furnished.
(B) Furnished to take place of existing certificate
(i) In general
Except as provided in clauses (ii) and (iii), a withholding
exemption certificate furnished to the employer in cases in
which a previous such certificate is in effect shall take
effect as of the beginning of the 1st payroll period ending
(or the 1st payment of wages made without regard to a payroll
period) on or after the 30th day after the day on which such
certificate is so furnished.
(ii) Employer may elect earlier effective date
At the election of the employer, a certificate described in
clause (i) may be made effective beginning with any payment
of wages made on or after the day on which the certificate is
so furnished and before the 30th day referred to in clause
(i).
(iii) Change of status which affects next year
Any certificate furnished pursuant to paragraph (2)(C)
shall not take effect, and may not be made effective, with
respect to any payment of wages made in the calendar year in
which the certificate is furnished.
(4) Period during which certificate remains in effect
A withholding exemption certificate which takes effect under
this subsection, or which on December 31, 1954, was in effect
under the corresponding subsection of prior law, shall continue
in effect with respect to the employer until another such
certificate takes effect under this subsection.
(5) Form and contents of certificate
Withholding exemption certificates shall be in such form and
contain such information as the Secretary may by regulations
prescribe.
(6) Exemption of certain nonresident aliens
Notwithstanding the provisions of paragraph (1), a nonresident
alien individual (other than an individual described in section
3401(a)(6)(A) or (B)) shall be entitled to only one withholding
exemption.
(7) Exemption where certificate with another employer is in
effect
If a withholding exemption certificate is in effect with
respect to one employer, an employee shall not be entitled under
a certificate in effect with any other employer to any
withholding exemption which he has claimed under such first
certificate.
(g) Overlapping pay periods, and payment by agent or fiduciary
If a payment of wages is made to an employee by an employer -
(1) with respect to a payroll period or other period, any part
of which is included in a payroll period or other period with
respect to which wages are also paid to such employee by such
employer, or
(2) without regard to any payroll period or other period, but
on or prior to the expiration of a payroll period or other period
with respect to which wages are also paid to such employee by
such employer, or
(3) with respect to a period beginning in one and ending in
another calendar year, or
(4) through an agent, fiduciary, or other person who also has
the control, receipt, custody, or disposal of, or pays, the wages
payable by another employer to such employee,
the manner of withholding and the amount to be deducted and
withheld under this chapter shall be determined in accordance with
regulations prescribed by the Secretary under which the withholding
exemption allowed to the employee in any calendar year shall
approximate the withholding exemption allowable with respect to an
annual payroll period.
(h) Alternative methods of computing amount to be withheld
The Secretary may, under regulations prescribed by him, authorize
-
(1) Withholding on basis of average wages
An employer -
(A) to estimate the wages which will be paid to any employee
in any quarter of the calendar year,
(B) to determine the amount to be deducted and withheld upon
each payment of wages to such employee during such quarter as
if the appropriate average of the wages so estimated
constituted the actual wages paid, and
(C) to deduct and withhold upon any payment of wages to such
employee during such quarter (and, in the case of tips referred
to in subsection (k), within 30 days thereafter) such amount as
may be necessary to adjust the amount actually deducted and
withheld upon the wages of such employee during such quarter to
the amount required to be deducted and withheld during such
quarter without regard to this subsection.
(2) Withholding on basis of annualized wages
An employer to determine the amount of tax to be deducted and
withheld upon a payment of wages to an employee for a payroll
period by -
(A) multiplying the amount of an employee's wages for a
payroll period by the number of such payroll periods in the
calendar year,
(B) determining the amount of tax which would be required to
be deducted and withheld upon the amount determined under
subparagraph (A) if such amount constituted the actual wages
for the calendar year and the payroll period of the employee
were an annual payroll period, and
(C) dividing the amount of tax determined under subparagraph
(B) by the number of payroll periods (described in subparagraph
(A)) in the calendar year.
(3) Withholding on basis of cumulative wages
An employer, in the case of any employee who requests to have
the amount of tax to be withheld from his wages computed on the
basis of his cumulative wages, to -
(A) add the amount of the wages to be paid to the employee
for the payroll period to the total amount of wages paid by the
employer to the employee during the calendar year,
(B) divide the aggregate amount of wages computed under
subparagraph (A) by the number of payroll periods to which such
aggregate amount of wages relates,
(C) compute the total amount of tax that would have been
required to be deducted and withheld under subsection (a) if
the average amount of wages (as computed under subparagraph
(B)) had been paid to the employee for the number of payroll
periods to which the aggregate amount of wages (computed under
subparagraph (A)) relates,
(D) determine the excess, if any, of the amount of tax
computed under subparagraph (C) over the total amount of tax
deducted and withheld by the employer from wages paid to the
employee during the calendar year, and
(E) deduct and withhold upon the payment of wages (referred
to in subparagraph (A)) to the employee an amount equal to the
excess (if any) computed under subparagraph (D).
(4) Other methods
An employer to determine the amount of tax to be deducted and
withheld upon the wages paid to an employee by any other method
which will require the employer to deduct and withhold upon such
wages substantially the same amount as would be required to be
deducted and withheld by applying subsection (a) or (c), either
with respect to a payroll period or with respect to the entire
taxable year.
(i) Changes in withholding
(1) In general
The Secretary may by regulations provide for increases in the
amount of withholding otherwise required under this section in
cases where the employee requests such changes.
(2) Treatment as tax
Any increased withholding under paragraph (1) shall for all
purposes be considered tax required to be deducted and withheld
under this chapter.
(j) Noncash remuneration to retail commission salesman
In the case of remuneration paid in any medium other than cash
for services performed by an individual as a retail salesman for a
person, where the service performed by such individual for such
person is ordinarily performed for remuneration solely by way of
cash commission an employer shall not be required to deduct or
withhold any tax under this subchapter with respect to such
remuneration, provided that such employer files with the Secretary
such information with respect to such remuneration as the Secretary
may by regulation prescribe.
(k) Tips
In the case of tips which constitute wages, subsection (a) shall
be applicable only to such tips as are included in a written
statement furnished to the employer pursuant to section 6053(a),
and only to the extent that the tax can be deducted and withheld by
the employer, at or after the time such statement is so furnished
and before the close of the calendar year in which such statement
is furnished, from such wages of the employee (excluding tips, but
including funds turned over by the employee to the employer for the
purpose of such deduction and withholding) as are under the control
of the employer; and an employer who is furnished by an employee a
written statement of tips (received in a calendar month) pursuant
to section 6053(a) to which paragraph (16)(B) of section 3401(a) is
applicable may deduct and withhold the tax with respect to such
tips from any wages of the employee (excluding tips) under his
control, even though at the time such statement is furnished the
total amount of the tips included in statements furnished to the
employer as having been received by the employee in such calendar
month in the course of his employment by such employer is less than
$20. Such tax shall not at any time be deducted and withheld in an
amount which exceeds the aggregate of such wages and funds
(including funds turned over under section 3102(c)(2) or section
3202(c)(2)) minus any tax required by section 3102(a) or section
3202(a) to be collected from such wages and funds.
(l) Determination and disclosure of marital status
(1) Determination of status by employer
For purposes of applying the tables in subsections (a) and (c)
to a payment of wages, the employer shall treat the employee as a
single person unless there is in effect with respect to such
payment of wages a withholding exemption certificate furnished to
the employer by the employee after the date of the enactment of
this subsection indicating that the employee is married.
(2) Disclosure of status by employee
An employee shall be entitled to furnish the employer with a
withholding exemption certificate indicating he is married only
if, on the day of such furnishing, he is married (determined with
the application of the rules in paragraph (3)). An employee whose
marital status changes from married to single shall, at such time
as the Secretary may by regulations prescribe, furnish the
employer with a new withholding exemption certificate.
(3) Determination of marital status
For purposes of paragraph (2), an employee shall on any day be
considered -
(A) as not married, if (i) he is legally separated from his
spouse under a decree of divorce or separate maintenance, or
(ii) either he or his spouse is, or on any preceding day within
the calendar year was, a nonresident alien; or
(B) as married, if (i) his spouse (other than a spouse
referred to in subparagraph (A)) died within the portion of his
taxable year which precedes such day, or (ii) his spouse died
during one of the two taxable years immediately preceding the
current taxable year and, on the basis of facts existing at the
beginning of such day, the employee reasonably expects, at the
close of his taxable year, to be a surviving spouse (as defined
in section 2(a)).
(m) Withholding allowances
Under regulations prescribed by the Secretary, an employee shall
be entitled to additional withholding allowances or additional
reductions in withholding under this subsection. In determining the
number of additional withholding allowances or the amount of
additional reductions in withholding under this subsection, the
employee may take into account (to the extent and in the manner
provided by such regulations) -
(1) estimated itemized deductions allowable under chapter 1
(other than the deductions referred to in section 151 and other
than the deductions required to be taken into account in
determining adjusted gross income under section 62(a) (other than
paragraph (10) thereof)),
(2) estimated tax credits allowable under chapter 1, and
(3) such additional deductions (including the additional
standard deduction under section 63(c)(3) for the aged and blind)
and other items as may be specified by the Secretary in
regulations.
(n) Employees incurring no income tax liability
Notwithstanding any other provision of this section, an employer
shall not be required to deduct and withhold any tax under this
chapter upon a payment of wages to an employee if there is in
effect with respect to such payment a withholding exemption
certificate (in such form and containing such other information as
the Secretary may prescribe) furnished to the employer by the
employee certifying that the employee -
(1) incurred no liability for income tax imposed under subtitle
A for his preceding taxable year, and
(2) anticipates that he will incur no liability for income tax
imposed under subtitle A for his current taxable year.
The Secretary shall by regulations provide for the coordination of
the provisions of this subsection with the provisions of subsection
(f).
(o) Extension of withholding to certain payments other than wages
(1) General rule
For purposes of this chapter (and so much of subtitle F as
relates to this chapter) -
(A) any supplemental unemployment compensation benefit paid
to an individual,
(B) any payment of an annuity to an individual, if at the
time the payment is made a request that such annuity be subject
to withholding under this chapter is in effect, and
(C) any payment to an individual of sick pay which does not
constitute wages (determined without regard to this
subsection), if at the time the payment is made a request that
such sick pay be subject to withholding under this chapter is
in effect,
shall be treated as if it were a payment of wages by an employer
to an employee for a payroll period.
(2) Definitions
(A) Supplemental unemployment compensation benefits
For purposes of paragraph (1), the term "supplemental
unemployment compensation benefits" means amounts which are
paid to an employee, pursuant to a plan to which the employer
is a party, because of an employee's involuntary separation
from employment (whether or not such separation is temporary),
resulting directly from a reduction in force, the
discontinuance of a plant or operation, or other similar
conditions, but only to the extent such benefits are includible
in the employee's gross income.
(B) Annuity
For purposes of this subsection, the term "annuity" means any
amount paid to an individual as a pension or annuity.
(C) Sick pay
For purposes of this subsection, the term "sick pay" means
any amount which -
(i) is paid to an employee pursuant to a plan to which the
employer is a party, and
(ii) constitutes remuneration or a payment in lieu of
remuneration for any period during which the employee is
temporarily absent from work on account of sickness or
personal injuries.
(3) Amount withheld from annuity payments or sick pay
If a payee makes a request that an annuity or any sick pay be
subject to withholding under this chapter, the amount to be
deducted and withheld under this chapter from any payment to
which such request applies shall be an amount (not less than a
minimum amount determined under regulations prescribed by the
Secretary) specified by the payee in such request. The amount
deducted and withheld with respect to a payment which is greater
or less than a full payment shall bear the same relation to the
specified amount as such payment bears to a full payment.
(4) Request for withholding
A request that an annuity or any sick pay be subject to
withholding under this chapter -
(A) shall be made by the payee in writing to the person
making the payments and shall contain the social security
number of the payee,
(B) shall specify the amount to be deducted and withheld from
each full payment, and
(C) shall take effect -
(i) in the case of sick pay, with respect to payments made
more than 7 days after the date on which such request is
furnished to the payor, or
(ii) in the case of an annuity, at such time (after the
date on which such request is furnished to the payor) as the
Secretary shall by regulations prescribe.
Such a request may be changed or terminated by furnishing to the
person making the payments a written statement of change or
termination which shall take effect in the same manner as
provided in subparagraph (C). At the election of the payor, any
such request (or statement of change or revocation) may take
effect earlier than as provided in subparagraph (C).
(5) Special rule for sick pay paid pursuant to certain
collective-bargaining agreements
In the case of any sick pay paid pursuant to a
collective-bargaining agreement between employee representatives
and one or more employers which contains a provision specifying
that this paragraph is to apply to sick pay paid pursuant to such
agreement and contains a provision for determining the amount to
be deducted and withheld from each payment of such sick pay -
(A) the requirement of paragraph (1)(C) that a request for
withholding be in effect shall not apply, and
(B) except as provided in subsection (n), the amounts to be
deducted and withheld under this chapter shall be determined in
accordance with such agreement.
The preceding sentence shall not apply with respect to sick pay
paid pursuant to any agreement to any individual unless the
social security number of such individual is furnished to the
payor and the payor is furnished with such information as is
necessary to determine whether the payment is pursuant to the
agreement and to determine the amount to be deducted and
withheld.
(6) Coordination with withholding on designated distributions
under section 3405
This subsection shall not apply to any amount which is a
designated distribution (within the meaning of section
3405(e)(1)).
(p) Voluntary withholding agreements
(1) Certain Federal payments
(A) In general
If, at the time a specified Federal payment is made to any
person, a request by such person is in effect that such payment
be subject to withholding under this chapter, then for purposes
of this chapter and so much of subtitle F as relates to this
chapter, such payment shall be treated as if it were a payment
of wages by an employer to an employee.
(B) Amount withheld
The amount to be deducted and withheld under this chapter
from any payment to which any request under subparagraph (A)
applies shall be an amount equal to the percentage of such
payment specified in such request. Such a request shall apply
to any payment only if the percentage specified is 7 percent,
any percentage applicable to any of the 3 lowest income
brackets in the table under section 1(c), or such other
percentage as is permitted under regulations prescribed by the
Secretary.
(C) Specified Federal payments
For purposes of this paragraph, the term "specified Federal
payment" means -
(i) any payment of a social security benefit (as defined in
section 86(d)),
(ii) any payment referred to in the second sentence of
section 451(d) which is treated as insurance proceeds,
(iii) any amount which is includible in gross income under
section 77(a), and
(iv) any other payment made pursuant to Federal law which
is specified by the Secretary for purposes of this paragraph.
(D) Requests for withholding
Rules similar to the rules that apply to annuities under
subsection (o)(4) shall apply to requests under this paragraph
and paragraph (2).
(2) Voluntary withholding on unemployment benefits
If, at the time a payment of unemployment compensation (as
defined in section 85(b)) is made to any person, a request by
such person is in effect that such payment be subject to
withholding under this chapter, then for purposes of this chapter
and so much of subtitle F as relates to this chapter, such
payment shall be treated as if it were a payment of wages by an
employer to an employee. The amount to be deducted and withheld
under this chapter from any payment to which any request under
this paragraph applies shall be an amount equal to 10 percent of
such payment.
(3) Authority for other voluntary withholding
The Secretary is authorized by regulations to provide for
withholding -
(A) from remuneration for services performed by an employee
for the employee's employer which (without regard to this
paragraph) does not constitute wages, and
(B) from any other type of payment with respect to which the
Secretary finds that withholding would be appropriate under the
provisions of this chapter,
if the employer and employee, or the person making and the person
receiving such other type of payment, agree to such withholding.
Such agreement shall be in such form and manner as the Secretary
may by regulations prescribe. For purposes of this chapter (and
so much of subtitle F as relates to this chapter), remuneration
or other payments with respect to which such agreement is made
shall be treated as if they were wages paid by an employer to an
employee to the extent that such remuneration is paid or other
payments are made during the period for which the agreement is in
effect.
(q) Extension of withholding to certain gambling winnings
(1) General rule
Every person, including the Government of the United States, a
State, or a political subdivision thereof, or any
instrumentalities of the foregoing, making any payment of
winnings which are subject to withholding shall deduct and
withhold from such payment a tax in an amount equal to the
product of the third lowest rate of tax applicable under section
1(c) and such payment.
(2) Exemption where tax otherwise withheld
In the case of any payment of winnings which are subject to
withholding made to a nonresident alien individual or a foreign
corporation, the tax imposed under paragraph (1) shall not apply
to any such payment subject to tax under section 1441(a)
(relating to withholding on nonresident aliens) or tax under
section 1442(a) (relating to withholding on foreign
corporations).
(3) Winnings which are subject to withholding
For purposes of this subsection, the term "winnings which are
subject to withholding" means proceeds from a wager determined in
accordance with the following:
(A) In general
Except as provided in subparagraphs (B) and (C), proceeds of
more than $5,000 from a wagering transaction, if the amount of
such proceeds is at least 300 times as large as the amount
wagered.
(B) State-conducted lotteries
Proceeds of more than $5,000 from a wager placed in a lottery
conducted by an agency of a State acting under authority of
State law, but only if such wager is placed with the State
agency conducting such lottery, or with its authorized
employees or agents.
(C) Sweepstakes, wagering pools, certain parimutuel pools, jai
alai, and lotteries
Proceeds of more than $5,000 from -
(i) a wager placed in a sweepstakes, wagering pool, or
lottery (other than a wager described in subparagraph (B)),
or
(ii) a wagering transaction in a parimutuel pool with
respect to horse races, dog races, or jai alai if the amount
of such proceeds is at least 300 times as large as the amount
wagered.
(4) Rules for determining proceeds from a wager
For purposes of this subsection -
(A) proceeds from a wager shall be determined by reducing the
amount received by the amount of the wager, and
(B) proceeds which are not money shall be taken into account
at their fair market value.
(5) Exception for bingo, keno, and slot machines
The tax imposed under paragraph (1) shall not apply to winnings
from a slot machine, keno, and bingo.
(6) Statement by recipient
Every person who is to receive a payment of winnings which are
subject to withholding shall furnish the person making such
payment a statement, made under the penalties of perjury,
containing the name, address, and taxpayer identification number
of the person receiving the payment and of each person entitled
to any portion of such payment.
(7) Coordination with other sections
For purposes of sections 3403 and 3404 and for purposes of so
much of subtitle F (except section 7205) as relates to this
chapter, payments to any person of winnings which are subject to
withholding shall be treated as if they were wages paid by an
employer to an employee.
(r) Extension of withholding to certain taxable payments of Indian
casino profits
(1) In general
Every person, including an Indian tribe, making a payment to a
member of an Indian tribe from the net revenues of any class II
or class III gaming activity conducted or licensed by such tribe
shall deduct and withhold from such payment a tax in an amount
equal to such payment's proportionate share of the annualized
tax.
(2) Exception
The tax imposed by paragraph (1) shall not apply to any payment
to the extent that the payment, when annualized, does not exceed
an amount equal to the sum of -
(A) the basic standard deduction (as defined in section
63(c)) for an individual to whom section 63(c)(2)(C) (!1)
applies, and
(B) the exemption amount (as defined in section 151(d)).
(3) Annualized tax
For purposes of paragraph (1), the term "annualized tax" means,
with respect to any payment, the amount of tax which would be
imposed by section 1(c) (determined without regard to any rate of
tax in excess of the fourth lowest rate of tax applicable under
section 1(c)) on an amount of taxable income equal to the excess
of -
(A) the annualized amount of such payment, over
(B) the amount determined under paragraph (2).
(4) Classes of gaming activities, etc.
For purposes of this subsection, terms used in paragraph (1)
which are defined in section 4 of the Indian Gaming Regulatory
Act (25 U.S.C. 2701 et seq.), as in effect on the date of the
enactment of this subsection, shall have the respective meanings
given such terms by such section.
(5) Annualization
Payments shall be placed on an annualized basis under
regulations prescribed by the Secretary.
(6) Alternate withholding procedures
At the election of an Indian tribe, the tax imposed by this
subsection on any payment made by such tribe shall be determined
in accordance with such tables or computational procedures as may
be specified in regulations prescribed by the Secretary (in lieu
of in accordance with paragraphs (2) and (3)).
(7) Coordination with other sections
For purposes of this chapter and so much of subtitle F as
relates to this chapter, payments to any person which are subject
to withholding under this subsection shall be treated as if they
were wages paid by an employer to an employee.
(s) Exemption from withholding for any vehicle fringe benefit
(1) Employer election not to withhold
The employer may elect not to deduct and withhold any tax under
this chapter with respect to any vehicle fringe benefit provided
to any employee if such employee is notified by the employer of
such election (at such time and in such manner as the Secretary
shall by regulations prescribe). The preceding sentence shall not
apply to any vehicle fringe benefit unless the amount of such
benefit is included by the employer on a statement timely
furnished under section 6051.
(2) Employer must furnish W-2
Any vehicle fringe benefit shall be treated as wages from which
amounts are required to be deducted and withheld under this
chapter for purposes of section 6051.
(3) Vehicle fringe benefit
For purposes of this subsection, the term "vehicle fringe
benefit" means any fringe benefit -
(A) which constitutes wages (as defined in section 3401), and
(B) which consists of providing a highway motor vehicle for
the use of the employee.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 457; Aug. 9, 1955, ch. 666, Sec.
2, 69 Stat. 605; Pub. L. 87-256, Sec. 110(g)(2), Sept. 21, 1961, 75
Stat. 537; Pub. L. 88-272, title III, Sec. 302(a), (b), Feb. 26,
1964, 78 Stat. 140; Pub. L. 89-97, title III, Sec. 313(d)(3)-(5),
July 30, 1965, 79 Stat. 384; Pub. L. 89-212, Sec. 2(c), Sept. 29,
1965, 79 Stat. 859; Pub. L. 89-368, title I, Sec. 101(a)-(e)(3),
Mar. 15, 1966, 80 Stat. 38-61; Pub. L. 90-364, title I, Sec.
102(c), June 28, 1968, 82 Stat. 256; Pub. L. 91-36, Sec. 2(a), June
30, 1969, 83 Stat. 42; Pub. L. 91-53, Sec. 6(a), Aug. 7, 1969, 83
Stat. 96; Pub. L. 91-172, title VIII, Sec. 805(a)-(e), (f)(1), (g),
Dec. 30, 1969, 83 Stat. 686, 704-708; Pub. L. 92-178, title II,
Sec. 208(a), (b)(1), (c)-(h)(1), Dec. 10, 1971, 85 Stat. 512-517;
Pub. L. 94-12, title II, Secs. 202(b), 205, Mar. 29, 1975, 89 Stat.
29, 32; Pub. L. 94-164, Secs. 2(b)(2), 5(a)(1), Dec. 23, 1975, 89
Stat. 971, 975; Pub. L. 94-331, Sec. 3(a)(1), June 30, 1976, 90
Stat. 782; Pub. L. 94-396, Sec. 2(a)(1), Sept. 3, 1976, 90 Stat.
1201; Pub. L. 94-414, Sec. 3(a)(1), Sept. 17, 1976, 90 Stat. 1273;
Pub. L. 94-455, title IV, Sec. 401(d), title V, Secs. 502(b),
504(c)(3), title XII, Sec. 1207(d), title XIX, Secs. 1903(a)(17),
1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1557, 1559, 1566, 1705,
1810, 1834; Pub. L. 95-30, title I, Sec. 105, title IV, Sec.
405(a), May 23, 1977, 91 Stat. 140, 156; Pub. L. 95-600, title I,
Secs. 101(e), 102(c), title VI, Sec. 601(b)(2), Nov. 6, 1978, 92
Stat. 2770, 2771, 2896; Pub. L. 96-601, Sec. 4(a)-(d), Dec. 24,
1980, 94 Stat. 3496, 3497; Pub. L. 97-34, title I, Sec. 101(e),
Aug. 13, 1981, 95 Stat. 184; Pub. L. 97-248, title III, Secs.
317(a), 334(d), Sept. 3, 1982, 96 Stat. 607, 627; Pub. L. 98-67,
title I, Sec. 104(d)(3), Aug. 5, 1983, 97 Stat. 380; Pub. L. 99-44,
Sec. 3, May 24, 1985, 99 Stat. 77; Pub. L. 99-514, title I, Sec.
104(b)(15), title XIII, Secs. 1301(j)(8), 1303(b)(4), title XV,
Sec. 1581(b), Oct. 22, 1986, 100 Stat. 2106, 2658, 2766; Pub. L.
100-203, title X, Sec. 10302(a), Dec. 22, 1987, 101 Stat. 1330-429;
Pub. L. 100-647, title I, Sec. 1003(a)(2), Nov. 10, 1988, 102 Stat.
3382; Pub. L. 101-508, title XI, Sec. 11801(a)(41), Nov. 5, 1990,
104 Stat. 1388-521; Pub. L. 102-318, title V, Sec. 522(b)(2)(D),
July 3, 1992, 106 Stat. 314; Pub. L. 102-486, title XIX, Secs.
1934(a), 1942(a), Oct. 24, 1992, 106 Stat. 3031, 3036; Pub. L.
103-465, title VII, Secs. 701(a), 702(a), Dec. 8, 1994, 108 Stat.
4995, 4996; Pub. L. 107-16, title I, Sec. 101(c)(6)-(9), June 7,
2001, 115 Stat. 43, 44.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-REFTEXT-
REFERENCES IN TEXT
The date of the enactment of this subsection, referred to in
subsec. (l)(1), is the date of enactment of Pub. L. 89-368, which
was approved Mar. 15, 1966.
Section 63(c)(2)(C), referred to in subsec. (r)(2)(A), was
redesignated section 63(c)(2)(D), and a new section 63(c)(2)(C) was
added, by Pub. L. 107-147, title IV, Sec. 411(e)(1)(C), (D), Mar.
9, 2002, 116 Stat. 46.
Section 4 of the Indian Gaming Regulatory Act, referred to in
subsec. (r)(4), is classified to section 2703 of Title 25, Indians.
The date of the enactment of this subsection, referred to in
subsec. (r)(4), is the date of enactment of Pub. L. 103-465, which
was approved Dec. 8, 1994.
-MISC1-
AMENDMENTS
2001 - Subsec. (p)(1)(B). Pub. L. 107-16, Secs. 101(c)(6), 901,
temporarily substituted "7 percent, any percentage applicable to
any of the 3 lowest income brackets in the table under section
1(c)," for "7, 15, 28, or 31 percent". See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (p)(2). Pub. L. 107-16, Secs. 101(c)(7), 901, temporarily
substituted "10 percent" for "15 percent". See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (q)(1). Pub. L. 107-16, Secs. 101(c)(8), 901, temporarily
substituted "equal to the product of the third lowest rate of tax
applicable under section 1(c) and such payment" for "equal to 28
percent of such payment". See Effective and Termination Dates of
2001 Amendment note below.
Subsec. (r)(3). Pub. L. 107-16, Secs. 101(c)(9), 901, temporarily
substituted "the fourth lowest rate of tax applicable under section
1(c)" for "31 percent" in introductory provisions. See Effective
and Termination Dates of 2001 Amendment note below.
1994 - Subsec. (p). Pub. L. 103-465, Sec. 702(a), reenacted
heading without change and amended text of subsec. (p) generally.
Prior to amendment, text read as follows: "The Secretary is
authorized by regulations to provide for withholding -
"(1) from remuneration for services performed by an employee
for his employer which (without regard to this subsection) does
not constitute wages, and
"(2) from any other type of payment with respect to which the
Secretary finds that withholding would be appropriate under the
provisions of this chapter,
if the employer and the employee, or in the case of any other type
of payment the person making and the person receiving the payment,
agree to such withholding. Such agreement shall be made in such
form and manner as the Secretary may by regulations provide. For
purposes of this chapter (and so much of subtitle F as relates to
this chapter) remuneration or other payments with respect to which
such agreement is made shall be treated as if they were wages paid
by an employer to an employee to the extent that such remuneration
is paid or other payments are made during the period for which the
agreement is in effect."
Subsec. (r). Pub. L. 103-465, Sec. 701(a), added subsec. (r).
1992 - Subsec. (o)(6). Pub. L. 102-318 substituted "3405(e)(1)"
for "3405(d)(1)".
Subsec. (q)(1). Pub. L. 102-486, Sec. 1934(a), substituted "28
percent" for "20 percent".
Subsec. (q)(3)(A), (C). Pub. L. 102-486, Sec. 1942(a),
substituted "$5,000" for "$1,000".
1990 - Subsec. (a)(3). Pub. L. 101-508 struck out par. (3) which
read as follows: "Notwithstanding the provisions of this
subsection, the Secretary shall modify the tables and procedures
under paragraph (1) to reflect -
"(A) the amendments made by section 101(b) of the Economic
Recovery Tax Act of 1981, and such modification shall take effect
on October 1, 1981, as if such amendments made a 5-percent
reduction effective on such date, and
"(B) the amendments made by section 101(a) of such Act, and
such modifications shall take effect -
"(i) on July 1, 1982, as if the reductions in the rate of tax
under section 1 (as amended by such section) were attributable
to a 10-percent reduction effective on such date, and
"(ii) on July 1, 1983, as if such reductions were
attributable to a 10-percent reduction effective on such date."
1988 - Subsec. (m)(1). Pub. L. 100-647 substituted "section 62(a)
(other than paragraph (10) thereof))" for "section 62) (other than
paragraph (13) thereof)".
1987 - Subsec. (f)(3)(B). Pub. L. 100-203 amended subpar. (B)
generally. Prior to amendment, subpar. (B) read as follows: "A
withholding exemption certificate furnished the employer in cases
in which a previous such certificate is in effect shall take effect
with respect to the first payment of wages made on or after the
first status determination date which occurs at least 30 days from
the date on which such certificate is so furnished, except that at
the election of the employer such certificate may be made effective
with respect to any payment of wages made on or after the date on
which such certificate is so furnished; but a certificate furnished
pursuant to paragraph (2)(C) shall not take effect, and may not be
made effective, with respect to any payment of wages made in the
calendar year in which the certificate is furnished. For purposes
of this subparagraph the term 'status determination date' means
January 1, May 1, July 1, and October 1 of each year."
1986 - Subsec. (f)(1). Pub. L. 99-514, Sec. 104(b)(15)(F),
substituted "standard deduction" for "zero bracket" and
"subparagraph (E)" for "subparagraph (G)" in last sentence.
Subsec. (f)(1)(A). Pub. L. 99-514, Sec. 104(b)(15)(B), inserted
"unless he is an individual described in section 151(d)(2)" after
"himself".
Subsec. (f)(1)(B). Pub. L. 99-514, Sec. 104(b)(15)(A),
redesignated subpar. (D) as (B) and struck out former subpar. (B)
which read as follows: "one additional exemption for himself if, on
the basis of facts existing at the beginning of such day, there may
reasonably be expected to be allowable an exemption under section
151(c)(1) (relating to old age) for the taxable year under subtitle
A in respect of which amounts deducted and withheld under this
chapter in the calendar year in which such day falls are allowed as
a credit;".
Pub. L. 99-514, Sec. 104(b)(15)(C), which directed that
"subparagraph (A) or (D)" be substituted for "subparagraph (A),
(B), (C), or (F)" was executed by making the substitution for
"subparagraph (A), (B), or (C)", as the probable intent of
Congress.
Subsec. (f)(1)(C). Pub. L. 99-514, Sec. 104(b)(15)(A), (D),
redesignated subpar. (E) as (C), substituted "section 151(c)" for
"section 151(e)", and struck out former subpar. (C) which read as
follows: "one additional exemption for himself if, on the basis of
facts existing at the beginning of such day, there may reasonably
be expected to be allowable an exemption under section 151(d)(1)
(relating to the blind) for the taxable year under subtitle A in
respect of which amounts deducted and withheld under this chapter
in the calendar year in which such day falls are allowed as a
credit;".
Subsec. (f)(1)(D). Pub. L. 99-514, Sec. 104(b)(15)(A),
redesignated subpar. (F) as (D). Former subpar. (D) redesignated
(B).
Subsec. (f)(1)(E). Pub. L. 99-514, Sec. 104(b)(15)(A), (E),
redesignated subpar. (G) as (E) and substituted "standard
deduction" for "zero bracket". Former subpar. (E) redesignated (C).
Pub. L. 99-514, Sec. 1301(j)(8), substituted "section 7703" for
"section 143".
Subsec. (f)(1)(F), (G). Pub. L. 99-514, Sec. 104(b)(15)(A),
redesignated subpars. (F) and (G) as (D) and (E), respectively.
Subsec. (i)(1). Pub. L. 99-514, Sec. 1581(b), struck out "or
decreases" after "increases".
Subsec. (m)(3). Pub. L. 99-514, Sec. 104(b)(15)(G), inserted
"(including the additional standard deduction under section
63(c)(3) for the aged and blind)".
Subsec. (r). Pub. L. 99-514, Sec. 1303(b)(4), struck out subsec.
(r) which provided for extension of withholding to GSOC
distributions.
1985 - Subsec. (s). Pub. L. 99-44 added subsec. (s).
1983 - Subsec. (s). Pub. L. 98-67 struck out subsec. (s) which
related to extension of withholding to certain payments where
identifying number was not furnished or was inaccurate. See section
3406 of this title.
1982 - Subsec. (o)(6). Pub. L. 97-248, Sec. 334(d), added par.
(6).
Subsec. (s). Pub. L. 97-248, Sec. 317(a), added subsec. (s).
1981 - Subsec. (a). Pub. L. 97-34, Sec. 101(e)(1), revised
subsec. (a) generally to provide for a 5-percent reduction in
income tax withholding rates on Oct. 1, 1981, a further 10-percent
reduction on July 1, 1982, and a final 10-percent reduction on July
1, 1983.
Subsec. (b)(1). Pub. L. 97-34, Sec. 101(e)(2)(A), redesignated
par. (2) as (1). Former par. (1), which set out a table for
determining amount of one withholding exemption for each of the
various payroll periods, was struck out.
Subsec. (b)(2). Pub. L. 97-34, Sec. 101(e)(2)(A), redesignated
par. (3) as (2). Former par. (2) redesignated (1).
Subsec. (b)(3). Pub. L. 97-34, Sec. 101(e)(2)(A), (B),
redesignated par. (4) as (3) and substituted provisions relating to
an employer's computation of the tax to be deducted and withheld as
if the aggregate of the wages paid to the employee during the
calendar week were paid for a weekly payroll period, for provisions
relating to an employer's computation of the tax to be deducted and
withheld using the excess of the aggregate of the wages paid to the
employee during the calendar week over the withholding exemption
allowed by this subsection for a weekly payroll period. Former par.
(3) redesignated (2).
Subsec. (b)(4), (5). Pub. L. 97-34, Sec. 101(e)(2)(A),
redesignated par. (5) as (4). Former par. (4) redesignated (3).
Subsec. (f)(1)(G). Pub. L. 97-34, Sec. 101(e)(3), inserted "(or
more than one exemption if so prescribed by the Secretary)" after
"an amount equal to one exemption".
Subsec. (i). Pub. L. 97-34, Sec. 101(e)(4), substituted
provisions authorizing the Secretary by regulations to provide for
increases or decreases in the amount of withholding otherwise
required under this section in cases where the employee requests
the changes, for provisions under which the Secretary was
authorized to provide withholding in addition to that otherwise
required under this section in cases in which the employer and the
employee agreed to such additional withholding.
Subsec. (m). Pub. L. 97-34, Sec. 101(e)(5), revised provisions
respecting additional withholding allowances for anticipated excess
itemized deductions and tax credits claimed in accordance with
Treasury regulations and Treasury statutory authority to provide
additional withholding allowances for any additional items
specified in Treasury regulations.
1980 - Subsec. (o)(1)(C). Pub. L. 96-601, Sec. 4(a), added
subpar. (C).
Subsec. (o)(2)(B). Pub. L. 96-601, Sec. 4(d), struck out ", but
only to the extent that the amount is includible in the gross
income of such individual" after "pension or annuity".
Subsec. (o)(2)(C). Pub. L. 96-601, Sec. 4(c), added subpar. (C).
Subsec. (o)(3). Pub. L. 96-601, Sec. 4(b), substituted provision
authorizing amount to be withheld from annuity payments or sick pay
for provision relating to request for withholding. See subsec.
(o)(4) of this section.
Subsec. (o)(4), (5). Pub. L. 96-601, Sec. 4(b), added pars. (4)
and (5).
1978 - Subsec. (a). Pub. L. 95-600, Sec. 101(e)(1), substituted
"With respect to wages paid after December 31, 1978, the tables so
prescribed shall be the same as the tables prescribed under this
subsection which were in effect on January 1, 1975, except that
such tables shall be modified to the extent necessary to reflect
the amendments made by sections 101 and 102 of the Tax Reduction
and Simplification Act of 1977 and the amendments made by section
101 of the Revenue Act of 1978." for "With respect to wages paid
after May 31, 1977, and before January 1, 1979, the tables so
prescribed shall be the same as the tables prescribed under this
subsection which were in effect on January 1, 1976; except that
such tables shall be modified to the extent necessary so that, had
they been in effect for all of 1977, they would reflect the full
year effect of the amendments made by sections 101 and 102 of the
Tax Reduction and Simplification Act of 1977. With respect to wages
paid after December 31, 1978, the tables so prescribed shall be the
same as the tables prescribed under this subsection which were in
effect on January 1, 1975, except that such tables shall be
modified to the extent necessary to reflect the amendments made by
sections 101 and 102 of the Tax Reduction and Simplification Act of
1977.".
Subsec. (b)(1). Pub. L. 95-600, Sec. 102(c)(1), increased the
amounts set out in the table for one withholding exemption for each
of the payroll period categories from $14.40, $28.80, $31.30,
$62.50, $187.50, $375.00, $750.00 and $2.10 to $19.23, $38.46,
$41.66, $83.33, $250.00, $500.00, $1,000.00 and $2.74,
respectively.
Subsec. (m)(1). Pub. L. 95-600, Secs. 101(e)(2), 102(c)(2),
substituted "$1,000" for "$750", "$3,400" for "$3,200" and "$2,300"
for "$2,200".
Subsec. (r). Pub. L. 95-600, Sec. 601(b)(2), added subsec. (r).
1977 - Subsec. (a). Pub. L. 95-30, Sec. 105(a), substituted "With
respect to wages paid after May 31, 1977, and before January 1,
1979, the tables so prescribed shall be the same as the tables
prescribed under this subsection which were in effect on January 1,
1976; except that such tables shall be modified to the extent
necessary so that, had they been in effect for all of 1977, they
would reflect the full year effect of the amendments made by
sections 101 and 102 of the Tax Reduction and Simplification Act of
1977. With respect to wages paid after December 31, 1978, the
tables so prescribed shall be the same as the tables prescribed
under this subsection which were in effect on January 1, 1975,
except that such tables shall be modified to the extent necessary
to reflect the amendments made by sections 101 and 102 of the Tax
Reduction and Simplification Act of 1977" for "With respect to
wages paid prior to January 1, 1978, the tables so prescribed shall
be the same as the tables prescribed under this section which were
in effect on January 1, 1976. With respect to wages paid after
December 31, 1977, the Secretary shall prescribe new tables which
shall be the same as the tables prescribed under this subsection
which were in effect on January 1, 1975, except that such tables
shall be modified to the extent necessary to reflect the amendments
made to subsections (b) and (c) of section 141 by the Tax Reform
Act of 1976".
Subsec. (f)(1). Pub. L. 95-30, Sec. 105(b)(1), substituted "zero
bracket" for "standard deduction" in subpar. (G) and in provisions
following subpar. (G).
Subsec. (m)(1)(B). Pub. L. 95-30, Sec. 105(b)(2), substituted "an
amount equal to $3,200 ($2,200" for "an amount equal to the lesser
of (i) 16 percent of his estimated wages, or (ii) $2,800 ($2,400".
Subsec. (m)(2)(A). Pub. L. 95-30, Sec. 105(b)(3)(A), (B),
substituted "section 151" for "sections 141 and 151" and "(or the
zero bracket amount (within the meaning of section 63(d)))" for
"(or the amount of the standard deduction)".
Subsec. (m)(2)(C). Pub. L. 95-30, Sec. 105(b)(3)(C), substituted
"(or the zero bracket amount)" for "(or the standard deduction)".
Subsec. (q)(3)(C). Pub. L. 95-30, Sec. 405(a), inserted reference
to certain parimutuel pools and jai alai in heading and, in text,
designated existing provisions as cl. (i) and added cl. (ii).
1976 - Subsec. (a). Pub. L. 94-455, Secs. 401(d)(1), 1906
(b)(13)(A), struck out "or his delegate" after "Secretary",
inserted "With respect to wages paid prior to January 1, 1978"
after "by the Secretary", as amended, and substituted "prescribed
under this section which were" for "contained in this subsection
as" after "same as the tables", "1976" for "1975" after "January
1", and "With respect to wages paid after December 31, 1977, the
Secretary shall prescribe new tables which shall be the same as the
tables prescribed under this subsection which were in effect on
January 1, 1975, except that such tables shall be modified to the
extent necessary to reflect the amendments made to subsections (b)
and (c) of section 141 by the Tax Reform Act of 1976" for "except
that the amounts set forth as amounts of income tax to be withheld
with respect to wages paid after April 30, 1975, and before January
1, 1976, shall reflect the full calendar year effect for 1975 of
the amendments made by sections 201, 202, 203, and 204 of the Tax
Reduction Act of 1975" after "effect on January 1, 1976", as
amended.
Pub. L. 94-414 substituted "October 1, 1976" for "September 15,
1976".
Pub. L. 94-396 substituted "September 15, 1976" for "September 1,
1976".
Pub. L. 94-331 substituted "September 1, 1976" for "July 1,
1976".
Subsec. (c)(4). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out
"or his delegate" after "Secretary".
Subsec. (c)(6). Pub. L. 94-455, Secs. 401(d)(2), 1906(b)(13)(A),
substituted "the table for an annual payroll period prescribed
pursuant to subsection (a)" for "table 7 contained in subsection
(a)" after "basis of the", as subsec. (c)(6) was in effect on the
day before the date of enactment of the Tax Reduction Act of 1975,
Pub. L. 94-12, which was approved on Mar. 29, 1975, and struck out
"or his delegate" after "Secretary".
Subsecs. (f), (h), (i), (j). Pub. L. 94-455, Sec. 1906(b)(13)(A),
struck out "or his delegate" after "Secretary".
Subsec. (l). Pub. L. 94-455, Sec. 1903(a)(17), substituted
"section 2(a)" for "section 2(b)" after "as defined in".
Subsec. (m)(1)(B). Pub. L. 94-455, Sec. 401(d)(3), reenacted
subpar. (B) without change.
Subsec. (m)(2)(A). Pub. L. 94-455, Sec. 502(b), inserted "(other
than paragraph (13) thereof)" after "under section 62".
Subsec. (m)(2)(D), (3)(B). Pub. L. 94-455, Sec. 1906(b)(13)(A),
struck out "or his delegate" after "Secretary".
Subsec. (m)(4). Pub. L. 94-455, Sec. 504(c)(3), added subpar.
(C). Sec. 1906(b)(13)(A) struck out "or his delegate" after
"Secretary".
Subsecs. (n), (p). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck
out "or his delegate" after "Secretary" wherever appearing.
Subsec. (q). Pub. L. 94-455, Sec. 1207(d), added subsec. (q).
1975 - Subsec. (a). Pub. L. 94-164, Sec. 5(a)(1), inserted
provision that the tables prescribed with respect to wages paid
after Dec. 31, 1975, and before July 1, 1976, shall be the same as
the tables prescribed under this subsection which were in effect on
Dec. 10, 1975.
Pub. L. 94-12, Sec. 205(a), substituted provisions directing the
Secretary to prescribe new withholding tables setting changed
withholding rates for wages paid during the period May 1, 1975, to
Dec. 31, 1975, so as to reflect the full calendar year effect for
1975 of the amendments to the minimum standard deduction, the
percentage standard deduction, the earned income credit, and the
additional tax credit by sections 201, 202, 203, and 204 of the Tax
Reduction Act of 1975, Pub. L. 94-12, for provisions setting out 8
tables to be followed by employers in withholding taxes on wages
paid.
Subsec. (c)(6). Pub. L. 94-12, Sec. 205(b), substituted "the
table for an annual payroll period prescribed pursuant to
subsection (a)" for "table 7 contained in subsection (a)". See 1976
Amendment note set out above.
Subsec. (m)(1)(B). Pub. L. 94-164, Sec. 2(b)(2), substituted
"$2,800" and "$2,400" for "$2,600" and "$2,300" respectively in cl.
(ii).
Pub. L. 94-12, Sec. 202(b), substituted "the lesser of (i) 16
percent of his estimated wages, or (ii) $2,600 ($2,300 in the case
of an individual who is not married (within the meaning of section
143) and who is not a surviving spouse (as defined in section
2(a)))" for "the lesser of (i) $2,000 or (ii) 15 percent of his
estimated wages".
1971 - Subsec. (a). Pub. L. 92-178, Sec. 208(a), substituted new
sets of tables 1 to 8 applicable (under Sec. 208(i)(1)) with
respect to wages paid after Jan. 15, 1972, for the tables
applicable in the case of wages paid as provided in former: par.
(1) after Dec. 31, 1969, and before July 1, 1970; par. (2) after
June 30, 1970, and before Jan. 1, 1971; par. (3) after Dec. 31,
1970, and before Jan. 1, 1972; par. (4) after Dec. 31, 1971, and
before Jan. 1, 1973; and par. (5) after Dec. 31, 1972. Pub. L.
92-178, Sec. 208(h)(1), made provisions of par. (3) applicable
(under section 208(i)(2)) with respect to wages paid after Dec. 31,
1971, and before Jan. 16, 1972.
Subsec. (b)(1). Pub. L. 92-178, Sec. 208(b)(1), revised
withholding rates upwards, substituting 14.40; 28.80; 31.30; 62.50;
187.50; 375.00; 750.00; and 2.10 for 12.50; 25.00 27.10; 54.20;
162.50; 325.00; 650.00; and 1.80, respectively, to be effective
with respect to wages paid after Jan. 15, 1972. Pub. L. 92-178,
Sec. 208(h)(2), in amending Pub. L. 91-172, Sec. 805(b)(1),
extended application of such former withholding rates to wages paid
after June 30, 1970, and before Jan. 16, 1972, previously
applicable to wages paid before Jan. 1, 1972.
Subsec. (c)(6). Pub. L. 92-178, Sec. 208(g), substituted "table 7
contained in subsection (a)" for "table 7 contained in paragraph
(1), (2), (3), (4), or (5) (whichever is applicable) of subsection
(a)".
Subsec. (f)(1)(G). Pub. L. 92-178, Sec. 208(c), added subpar.
(G).
Subsec. (f)(7). Pub. L. 92-178, Sec. 208(d), added par. (7).
Subsec. (m)(1)(B). Pub. L. 92-178, Sec. 208(e), substituted "an
amount equal to the lesser of (i) $2,000 or (ii) 15 percent of his
estimated wages" for "an amount equal to 15 percent of his
estimated wages".
Subsec. (m)(2)(A). Pub. L. 92-178, Sec. 208(f)(1), inserted "or
(if such a return has not been filed for such preceding taxable
year at the time the withholding exemption certificate is furnished
the employer) the second taxable year preceding the estimation
year" after "for the taxable year preceding the estimation year".
Subsec. (m)(2)(D). Pub. L. 92-178, Sec. 208(f)(2), substituted as
definition of "estimation year" the calendar year in which the
wages are paid for prior provision defining term as meaning "(i)
with respect to payments of wages after April 30 and on or before
December 31 of any calendar year, such calendar year, and (ii) with
respect to payments of wages on or after January 1 and before May 1
of any calendar year, the preceding calendar year (except that with
respect to an exemption certificate furnished by an employee after
he has filed his return for the preceding calendar year, such term
means the current calendar year)."
Subsec. (m)(3)(B) to (E). Pub. L. 92-178, Sec. 208(f)(3), struck
out subpars. (B) and (C) providing that only one certificate be in
effect and for termination of effectiveness of certificate and
redesignated subpars. (D) and (E) as (B) and (C), respectively.
1969 - Subsec. (a)(1). Pub. L. 91-172, Sec. 805(a), (b)(2),
substituted new sets of tables 1 to 8 for application to wages paid
after Dec. 31, 1969, and before July 1, 1970, and after June 30,
1970, and before January 1, 1972, for the tables applicable to
wages paid before July 13, 1968, and after Dec. 31, 1969.
Pub. L. 91-53, Sec. 6(a)(1), substituted "December 31, 1969" for
"July 31, 1969".
Pub. L. 91-36, Sec. 2(a)(1), substituted "July 31, 1969" for
"June 30, 1969".
Subsec. (a)(2). Pub. L. 91-172, Sec. 805(a), substituted a set of
tables 1 to 8 for application to wages paid after June 30, 1970,
and before Jan. 1, 1971, for the tables applicable to wages paid
after June 30, 1970, and before Jan. 1, 1970.
Pub. L. 91-53, Sec. 6(a)(2), substituted "January 1, 1970" for
"August 1, 1969".
Pub. L. 91-36, Sec. 2(a)(2), substituted "August 1, 1969" for
"July 1, 1969".
Subsec. (a)(3) to (5). Pub. L. 91-172, Sec. 805(a), added sets of
tables applicable, respectively, to wages paid after Dec. 31, 1970,
and before Jan. 1, 1972, after Dec. 31, 1971, and before Jan. 1,
1973, and after Dec. 31, 1972.
Subsec. (b)(1). Pub. L. 91-172, Sec. 805(b)(1)-(4), revised
withholding rates effective with respect to wages paid after Dec.
31, 1969, and before July 1, 1970, for the period after June 30,
1970, and before Jan. 1, 1972, during 1972, and after 1972.
Subsec. (c)(1). Pub. L. 91-172, Sec. 805(c)(1), substituted
provisions authorizing employer to deduct and withhold tax
determinable according to tables prescribed by the Secretary or his
delegate for provisions under which the employer was authorized to
deduct and withhold tax only according to tables set out.
Subsec. (c)(6). Pub. L. 91-172, Sec. 805(c)(2), substituted
provisions for determination of amount deductible according to
tables prescribed by the Secretary or his delegate and for
computation of wages and amounts of income tax after Dec. 31, 1969,
for provisions for determination of such wages and amounts of
income tax after July 13, 1968, and before Jan. 1, 1970.
Pub. L. 91-53, Sec. 6(a)(3), substituted "January 1, 1970" for
"August 1, 1969".
Pub. L. 91-36, Sec. 2(a)(3), substituted "August 1, 1969" for
"July 1, 1969".
Subsec. (h). Pub. L. 91-172, Sec. 805(d), redesignated existing
pars. (1) to (3) as subpars. (A) to (C) of par. (1), and added
pars. (2) to (4).
Subsec. (m)(1). Pub. L. 91-172, Sec. 805(e)(2), substituted $750
for $700 in the material preceding subpar. (A) and in subpar. (B)
substituted 15 per cent for 10 per cent of the first $7,500 and 17
per cent of remainder of the estimated wages.
Subsec. (m)(2)(A). Pub. L. 91-172, Sec. 805(e)(2), inserted
amount of standard deduction as an alternative limit in cl. (i),
and substituted the determinable additional deductions for
provisions referring to an employee who did not show such
deductions on his return.
Subsec. (m)(2)(B). Pub. L. 91-172, Sec. 805(e)(2), struck out
limit on aggregate amount.
Subsec. (m)(2)(C), (D). Pub. L. 91-172, Sec. 805(e)(1), (2),
added subpar. (C). Former subpar. (C) redesignated (D)
Subsec. (n). Pub. L. 91-172, Sec. 805(f)(1), added subsec. (n).
Subsecs. (o), (p). Pub. L. 91-172, Sec. 805(g), added subsecs.
(o) and (p).
1968 - Subsec. (a). Pub. L. 90-364, Sec. 102(c)(1), designated
existing Tables 1 to 8 as constituting par. (1), inserted
provisions preceding existing Table 1-8 so as to limit their
application to the case of wages paid on or before the 15th day
after the date of the enactment of the Revenue and Expenditure
Control Act of 1968 or after June 30, 1969, and added par. (2).
Subsec. (c)(6). Pub. L. 90-364, Sec. 102(c)(2), added par. (6).
1966 - Subsec. (a). Pub. L. 89-368, Sec. 101(a), struck out
reference to subsections (j) and (k) and substituted provisions
establishing separate tables for single persons and for married
persons in each of eight payroll period categories each containing
six graduated withholding rates ranging from 14 to 30 percent for
provisions placing the rate at a fixed 14 percent.
Subsec. (b)(1). Pub. L. 89-368, Sec. 101(b), increased amounts
set out for one withholding exemption for each of the payroll
period categories from "$13.00", $26.00", "$28.00", "$56.00",
"$167.00", "$333.00", "$667.00", and "$1.80" to "$13.50", "$26.90",
"$29.20", "$58.30", "$175.00", "$350.00", "$700.00", and "$1.90"
respectively.
Subsec. (c)(1). Pub. L. 89-368, Sec. 101(c), replaced existing
tables with separate tables for employees who are married and for
employees who are not married covering weekly, biweekly,
semimonthly, monthly, and daily or miscellaneous pay periods and
reflecting increased and graduated withholding rates.
Subsec. (f)(1)(F), (3)(B). Pub. L. 89-368, Sec. 101(e)(1), (3),
added par. (1)(F) and, in par. (3)(B), changed definition of
"status determination date" from January 1 and July 1 of each year
to January 1, May 1, July 1, and October 1 of each year.
Subsec. (l). Pub. L. 89-368, Sec. 101(d), added subsec. (l).
Subsec. (m). Pub. L. 89-368, Sec. 101(e)(2), added subsec. (m).
1965 - Subsec. (a). Pub. L. 89-97, Sec. 313(d)(3), substituted
"subsections (j) and (k)" for "subsection (j)".
Subsec. (h)(3). Pub. L. 89-97, Sec. 313(d)(4), inserted "(and, in
the case of tips referred to in subsection (k), within 30 days
thereafter)" after "quarter" first place it appears.
Subsec. (k). Pub. L. 89-212 inserted "or section 3202 (c)(2)" and
"or section 3202(a)".
Pub. L. 89-97, Sec. 313(d)(5), added subsec. (k).
1964 - Subsec. (a). Pub. L. 88-272, Sec. 302(a), reduced tax from
18% to 14%.
Subsec. (c)(1). Pub. L. 88-272, Sec. 302(b), substituted new
tables reflecting lowered withholding rates.
1961 - Subsec. (f)(6). Pub. L. 87-256 added par. (6).
1955 - Subsec. (a). Act Aug. 9, 1955, Sec. 2(a), inserted
"(except as provided in subsection (j))" after "upon such wages".
Subsec. (j). Act Aug. 9, 1955, Sec. 2(b), added subsec. (j).
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Amendment by Pub. L. 107-16 applicable to amounts paid after the
60th day after June 7, 2001, and references to income brackets and
rates of tax in such amendment to be applied without regard to
section 1(i)(1)(D) of this title, see section 101(d)(2) of Pub. L.
107-16, set out as a note under section 1 of this title.
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1994 AMENDMENT
Section 701(b) of Pub. L. 103-465 provided that: "The amendment
made by this section [amending this section] shall apply to
payments made after December 31, 1994."
Amendment by section 702(a) of Pub. L. 103-465 applicable to
payments made after Dec. 31, 1996, see section 702(d) of Pub. L.
103-465, set out as a note under section 3304 of this title.
EFFECTIVE DATE OF 1992 AMENDMENTS
Section 1934(b) of Pub. L. 102-486 provided that: "The amendment
made by this section [amending this section] applies to payments
received after December 31, 1992."
Section 1942(b) of Pub. L. 102-486 provided that: "The amendments
made by subsection (a) [amending this section] shall apply to
payments of winnings after December 31, 1992."
Amendment by Pub. L. 102-318 applicable, except as otherwise
provided, to distributions after Dec. 31, 1992, see section 522(d)
of Pub. L. 102-318, set out as a note under section 401 of this
title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1987 AMENDMENT
Section 10302(b) of Pub. L. 100-203 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
certificates furnished after the day 30 days after the date of the
enactment of this Act [Dec. 22, 1987]."
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 104(b)(15) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, see section 151(a) of
Pub. L. 99-514, set out as a note under section 1 of this title.
Amendment by section 1301(j)(8) of Pub. L. 99-514 applicable to
bonds issued after Aug. 15, 1986, except as otherwise provided, see
sections 1311 to 1318 of Pub. L. 99-514, set out as an Effective
Date; Transitional Rules note under section 141 of this title.
Amendment by section 1303(b)(4) of Pub. L. 99-514 effective Oct.
22, 1986, see section 1311(f) of Pub. L. 99-514, as amended, set
out as an Effective Date; Transitional Rules note under section 141
of this title.
EFFECTIVE DATE OF 1985 AMENDMENT
Section 6(d) of Pub. L. 99-44 provided that: "The amendment made
by section 3 [amending this section] shall take effect on January
1, 1985."
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 98-67 applicable with respect to payments
made after Dec. 31, 1983, see section 110(a) of Pub. L. 98-67, set
out as a note under section 31 of this title.
EFFECTIVE DATE OF 1982 AMENDMENT
Section 317(b) of Pub. L. 97-248 provided: "The amendments made
by subsection (a) [amending this section] shall apply to payments
made after December 31, 1983."
Amendment by section 334(d) of Pub. L. 97-248 applicable to
payments or other distributions made after Dec. 31, 1982, see
section 334(e) of Pub. L. 97-248, set out as an Effective Date note
under section 3405 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Section 101(f)(2) of Pub. L. 97-34 provided that: "The amendments
made by subsection (e) [amending this section] shall apply to
remuneration paid after September 30, 1981; except that the
amendment made by subsection (e)(5) [amending this section] shall
apply to remuneration paid after December 31, 1981."
EFFECTIVE DATE OF 1980 AMENDMENT
Section 4(f) of Pub. L. 96-601 provided that: "The amendments
made by this section [amending this section and section 6051 of
this title] shall apply to payments made on or after the first day
of the first calendar month beginning more than 120 days after the
date of the enactment of this Act [Dec. 24, 1980]."
EFFECTIVE DATE OF 1978 AMENDMENT
Section 101(f)(2) of Pub. L. 95-600 provided that: "The
amendments made by subsection (e) [amending this section] shall
apply to remuneration paid after December 31, 1978."
Section 102(d)(2) of Pub. L. 95-600 provided that: "The
amendments made by subsection (c) [amending this section] shall
apply with respect to remuneration paid after December 31, 1978."
Amendment by section 601(b)(2) of Pub. L. 95-600 applicable with
respect to corporations chartered after Dec. 31, 1978, and before
Jan. 1, 1984, see section 601(d) of Pub. L. 95-600, set out as a
note under section 172 of this title.
EFFECTIVE DATE OF 1977 AMENDMENT
Section 106(b) of Pub. L. 95-30 provided that: "The amendments
made by section 105 [amending this section] shall apply to wages
paid after April 30, 1977."
Section 405(b) of Pub. L. 95-30 provided that: "The amendments
made by this section [amending this section] apply to payments made
after April 30, 1977."
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 401(d) of Pub. L. 94-455 applicable to wages
paid after Sept. 14, 1976, see section 401(e) of Pub. L. 94-455,
set out as a note under section 32 of this title.
Section 1207(f)(3) of Pub. L. 94-455 provided that: "The
amendments made by subsection (d) [amending this section] shall
apply to payments of winnings made after the 90th day after the
date of the enactment of this Act [Oct. 4, 1976]."
EFFECTIVE AND TERMINATION DATES OF 1975 AMENDMENTS
Amendment by section 2(b)(2) of Pub. L. 94-164 applicable to
taxable years ending after Dec. 31, 1975 and before Jan. 1, 1977,
see section 2(g) of Pub. L. 94-164, set out as an Effective Date of
1975 Amendment note under section 32 of this title.
Section 209(c) of Pub. L. 94-12, as amended by Pub. L. 94-164,
Sec. 5(a)(2); Pub. L. 94-331, Sec. 3(a)(2); Pub. L. 94-396, Sec.
2(b); Pub. L. 94-414, Sec. 3(a)(2), provided that: "The amendments
made by sections 202(b) and 205 [amending this section] shall apply
to wages paid after April 30, 1975, and before October 1, 1976."
EFFECTIVE DATE OF 1971 AMENDMENT
Section 208(i) of Pub. L. 92-178 provided that:
"(1) The amendments made by this section [amending this
section] (other than subsection (h)) shall apply with respect to
wages paid after January 15, 1972.
"(2) The amendments made by subsection (h) [amending this
section] shall apply with respect to wages paid after December
31, 1971, and before January 16, 1972."
EFFECTIVE DATE OF 1969 AMENDMENTS
Section 805(h) of Pub. L. 91-172, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) The amendments made by subsections (a), (b), (c), (d), and
(e) [amending this section] shall apply with respect to
remuneration paid after December 31, 1969.
"(2) The amendment made by subsection (f) [amending this section
and section 6051 of this title] applies to wages paid after April
30, 1970.
"(3) Subsection (o) of section 3402 of the Internal Revenue Code
of 1986 [formerly I.R.C. 1954], added by subsection (g) of this
subsection, shall apply to payments made after December 31, 1970.
Subsection (p) of such section 3402, added by subsection (g) of
this section, shall apply to payments made after June 30, 1970."
Section 6(b) of Pub. L. 91-53 provided that: "The amendments made
by this section [amending this section] shall apply with respect to
wages paid after July 31, 1969, and before January 1, 1970."
Section 2(b) of Pub. L. 91-36 provided that: "The amendments made
by subsection (a) [amending this section] shall apply with respect
to wages paid after June 30, 1969."
EFFECTIVE DATE OF 1966 AMENDMENT
Section 101(e)(6) of Pub. L. 89-368 provided that: "The
amendments made by paragraphs (1) and (2) of this subsection
[amending this section] shall apply only with respect to
remuneration paid after December 31, 1966, but only with respect to
withholding exemptions based on estimation years beginning after
such date."
Section 101(g) of Pub. L. 89-368 provided that: "The amendments
made by this section (other than subsection (e) [amending this
section]) shall apply only with respect to remuneration paid after
April 30, 1966."
EFFECTIVE DATE OF 1965 AMENDMENTS
Amendment by Pub. L. 89-212 effective only with respect to tips
received after 1965, see section 6 of Pub. L. 89-212, set out as a
note under section 3201 of this title.
Amendment by Pub. L. 89-97 applicable only with respect to tips
received by employees after 1965, see section 313(f) of Pub. L.
89-97, set out as an Effective Date note under section 6053 of this
title.
EFFECTIVE DATE OF 1964 AMENDMENT
Section 302(d) of Pub. L. 88-272 provided that: "The amendments
made by subsections (a) and (b) of this section [amending this
section] shall apply with respect to remuneration paid after the
seventh day following the date of the enactment of this Act [Feb.
26, 1964]. The amendment made by subsection (c) of this section
[amending section 1441 of this title] shall apply with respect to
payments made after the seventh day following the date of the
enactment of this Act."
EFFECTIVE DATE OF 1961 AMENDMENT
Amendment by Pub. L. 87-256 applicable with respect to wages paid
after Dec. 31, 1961, see section 110(h)(4) of Pub. L. 87-256, set
out as a note under section 3401 of this title.
EFFECTIVE DATE OF 1955 AMENDMENT
Section 3 of act Aug. 9, 1955, provided that: "The amendment made
by section 2 [amending this section] shall be applicable only with
respect to remuneration paid after the date of enactment of this
Act [Aug. 9, 1955]."
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1994
For provisions directing that if any amendments made by subtitle
B [Secs. 521-523] of title V of Pub. L. 102-318 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1994, see section 523 of Pub. L. 102-318, set out as a note under
section 401 of this title.
WITHHOLDING ALLOWANCES TO REFLECT NEW RATE SCHEDULES
Section 1581(a) of Pub. L. 99-514 provided that: "The Secretary
of the Treasury or his delegate shall modify the withholding
schedules and withholding exemption certificates under section 3402
of the Internal Revenue Code of 1954 [now 1986] to better
approximate actual tax liability under the amendments made by this
Act [see Tables for classification]."
EMPLOYER'S RESPONSIBILITY UPON FAILURE OF EMPLOYEE TO FILE REVISED
WITHHOLDING ALLOWANCE CERTIFICATE BEFORE OCT. 1, 1987
Section 1581(c) of Pub. L. 99-514, as amended by Pub. L. 100-647,
title I, Sec. 1015(p), Nov. 10, 1988, 102 Stat. 3572, provided
that: "If an employee has not filed a revised withholding allowance
certificate before October 1, 1987, the employer shall withhold
income taxes from the employee's wages -
"(1) as if the employee claimed 1 withholding allowance, if the
employee checked the 'single' box on the employee's previous
withholding allowance certificate, or
"(2) as if the employee claimed 2 withholding allowances, if
the employee checked the 'married' box on the employee's previous
withholding allowance certificate.
The preceding sentence shall not apply if its application would
result in an increase in the number of withholding allowances for
the employee."
FAILURE TO DEDUCT AND WITHHOLD UNDER A DUTY CREATED OR INCREASED BY
TAX REFORM ACT OF 1976
Section 304 of Pub. L. 95-30, as amended by Pub. L. 99-514, Sec.
2, Oct. 22, 1986, 100 Stat. 2095, provided that: "No person shall
be liable in respect of any failure to deduct and withhold under
section 3402 of the Internal Revenue Code of 1986 [formerly I.R.C.
1954] (relating to income tax collected at source) on remuneration
paid before January 1, 1977, to the extent that the duty to deduct
and withhold was created or increased by any provision of the Tax
Reform Act of 1976 [Pub. L. 94-455]."
WAGES PAID DURING 1972 AND AFTER 1972
Section 805(b)(3), (4) of Pub. L. 91-172, title VIII, Dec. 30,
1969, 83 Stat. 704, which provided for section 3402(b)(1)
withholding rates of 13.50; 26.90; 29.20; 58.30; 175.00; 350.00;
700.00; and 1.90, effective with respect to wages during 1972, and
withholding rates of 14.40; 28.80; 31.30; 62.50; 187.50; 375.00;
750.00; and 2.10, effective with respect to wages paid after 1972,
was repealed by section 208(b)(2) of Pub. L. 92-178.
TRANSITIONAL DETERMINATION STATUS DATE
Section 101(f) of Pub. L. 89-368, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"Notwithstanding section 3402(f)(3)(B) of the Internal Revenue Code
of 1986 [formerly I.R.C. 1954], a withholding exemption certificate
furnished the employer after the date of the enactment of this Act
[Mar. 15, 1966] and before May 1, 1966, shall take effect with
respect to the first payment of wages made on or after May 1, 1966,
or the 10th day after the date on which such certificate is
furnished to the employer, whichever is later, and at the election
of the employer such certificate may be made effective with respect
to any payment of wages made on or after the date on which such
certificate is furnished."
MEANING OF TERMS
Section 1 of act Aug. 9, 1955, provided that: "The terms used in
this Act [amending subsecs. (a) and (j) of this section] shall have
the same meaning as when used in the Internal Revenue Code."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 31, 275, 3401, 3405,
3406, 3505, 3507, 3509, 3510, 4999, 6040, 6051, 6205, 6413, 6682,
7205 of this title; title 25 section 2719; title 42 sections 407,
659.
-FOOTNOTE-
(!1) See References in Text note below.
-End-
-CITE-
26 USC Sec. 3403 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle C - Employment Taxes
CHAPTER 24 - COLLECTION OF INCOME TAX AT SOURCE ON WAGES
-HEAD-
Sec. 3403. Liability for tax
-STATUTE-
The employer shall be liable for the payment of the tax required
to be deducted and withheld under this chapter, and shall not be
liable to any person for the amount of any such payment.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 469; Pub. L. 97-248, title III,
Secs. 307(a)(2), 308(a), Sept. 3, 1982, 96 Stat. 589, 591; Pub. L.
98-67, title I, Sec. 102(a), Aug. 5, 1983, 97 Stat. 369.)
-MISC1-
AMENDMENTS
1983 - Pub. L. 98-67 repealed amendments made by Pub. L. 97-248.
See 1982 Amendment note below.
1982 - Pub. L. 97-248 provided that, applicable to payments of
interest, dividends, and patronage dividends paid or credited after
June 30, 1983, this section is amended by striking out "this
chapter" and inserting in lieu thereof "this subchapter". Section
102(a), (b) of Pub. L. 98-67, title I, Aug. 5, 1983, 97 Stat. 369,
repealed subtitle A (Secs. 301-308) of title III of Pub. L. 97-248
as of the close of June 30, 1983, and provided that the Internal
Revenue Code of 1954 [now 1986] [this title] shall be applied and
administered (subject to certain exceptions) as if such subtitle A
(and the amendments made by such subtitle A) had not been enacted.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 3402, 3505 of this title.
-End-
-CITE-
26 USC Sec. 3404 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle C - Employment Taxes
CHAPTER 24 - COLLECTION OF INCOME TAX AT SOURCE ON WAGES
-HEAD-
Sec. 3404. Return and payment by governmental employer
-STATUTE-
If the employer is the United States, or a State, or political
subdivision thereof, or the District of Columbia, or any agency or
instrumentality of any one or more of the foregoing, the return of
the amount deducted and withheld upon any wages may be made by any
officer or employee of the United States, or of such State, or
political subdivision, or of the District of Columbia, or of such
agency or instrumentality, as the case may be, having control of
the payment of such wages, or appropriately designated for that
purpose.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 469; Pub. L. 94-455, title XIX,
Sec. 1903(c), Oct. 4, 1976, 90 Stat. 1810.)
-MISC1-
AMENDMENTS
1976 - Pub. L. 94-455 struck out "Territory" after "or a State"
and "of such State".
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 3402 of this title.
-End-
-CITE-
26 USC Sec. 3405 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle C - Employment Taxes
CHAPTER 24 - COLLECTION OF INCOME TAX AT SOURCE ON WAGES
-HEAD-
Sec. 3405. Special rules for pensions, annuities, and certain other
deferred income
-STATUTE-
(a) Periodic payments
(1) Withholding as if payment were wages
The payor of any periodic payment (as defined in subsection
(e)(2)) shall withhold from such payment the amount which would
be required to be withheld from such payment if such payment were
a payment of wages by an employer to an employee for the
appropriate payroll period.
(2) Election of no withholding
An individual may elect to have paragraph (1) not apply with
respect to periodic payments made to such individual. Such an
election shall remain in effect until revoked by such individual.
(3) When election takes effect
Any election under this subsection (and any revocation of such
an election) shall take effect as provided by subsection (f)(3)
of section 3402 for withholding exemption certificates.
(4) Amount withheld where no withholding exemption certificate in
effect
In the case of any payment with respect to which a withholding
exemption certificate is not in effect, the amount withheld under
paragraph (1) shall be determined by treating the payee as a
married individual claiming 3 withholding exemptions.
(b) Nonperiodic distribution
(1) Withholding
The payor of any nonperiodic distribution (as defined in
subsection (e)(3)) shall withhold from such distribution an
amount equal to 10 percent of such distribution.
(2) Election of no withholding
(A) In general
An individual may elect not to have paragraph (1) apply with
respect to any nonperiodic distribution.
(B) Scope of election
An election under subparagraph (A) -
(i) except as provided in clause (ii), shall be on a
distribution-by-distribution basis, or
(ii) to the extent provided in regulations, may apply to
subsequent nonperiodic distributions made by the payor to the
payee under the same arrangement.
(c) Eligible rollover distributions
(1) In general
In the case of any designated distribution which is an eligible
rollover distribution -
(A) subsections (a) and (b) shall not apply, and
(B) the payor of such distribution shall withhold from such
distribution an amount equal to 20 percent of such
distribution.
(2) Exception
Paragraph (1)(B) shall not apply to any distribution if the
distributee elects under section 401(a)(31)(A) to have such
distribution paid directly to an eligible retirement plan.
(3) Eligible rollover distribution
For purposes of this subsection, the term "eligible rollover
distribution" has the meaning given such term by section
402(f)(2)(A).
(d) Liability for withholding
(1) In general
Except as provided in paragraph (2), the payor of a designated
distribution (as defined in subsection (e)(1)) shall withhold,
and be liable for, payment of the tax required to be withheld
under this section.
(2) Plan administrator liable in certain cases
(A) In general
In the case of any plan to which this paragraph applies,
paragraph (1) shall not apply and the plan administrator shall
withhold, and be liable for, payment of the tax unless the plan
administrator -
(i) directs the payor to withhold such tax, and
(ii) provides the payor with such information as the
Secretary may require by regulations.
(B) Plans to which paragraph applies
This paragraph applies to any plan described in, or which at
any time has been determined to be described in -
(i) section 401(a),
(ii) section 403(a),
(iii) section 301(d) of the Tax Reduction Act of 1975, or
(iv) section 457(b) and which is maintained by an eligible
employer described in section 457(e)(1)(A).
(e) Definitions and special rules
For purposes of this section -
(1) Designated distribution
(A) In general
Except as provided in subparagraph (B), the term "designated
distribution" means any distribution or payment from or under -
(i) an employer deferred compensation plan,
(ii) an individual retirement plan (as defined in section
7701(a)(37)), or
(iii) a commercial annuity.
(B) Exceptions
The term "designated distribution" shall not include -
(i) any amount which is wages without regard to this
section,
(ii) the portion of a distribution or payment which it is
reasonable to believe is not includible in gross income, and
(iii) any amount which is subject to withholding under
subchapter A of chapter 3 (relating to withholding of tax on
nonresident aliens and foreign corporations) by the person
paying such amount or which would be so subject but for a tax
treaty, or
(iv) any distribution described in section 404(k)(2).
For purposes of clause (ii), any distribution or payment from
or under an individual retirement plan (other than a Roth IRA)
shall be treated as includible in gross income.
(2) Periodic payment
The term "periodic payment" means a designated distribution
which is an annuity or similar periodic payment.
(3) Nonperiodic distribution
The term "nonperiodic distribution" means any designated
distribution which is not a periodic payment.
[(4) Repealed. Pub. L. 102-318, title V, Sec. 521(b)(38), July 3,
1992, 106 Stat. 312]
(5) Employer deferred compensation plan
The term "employer deferred compensation plan" means any
pension, annuity, profit-sharing, or stock bonus plan or other
plan deferring the receipt of compensation.
(6) Commercial annuity
The term "commercial annuity" means an annuity, endowment, or
life insurance contract issued by an insurance company licensed
to do business under the laws of any State.
(7) Plan administrator
The term "plan administrator" has the meaning given such term
by section 414(g).
(8) Maximum amount withheld
The maximum amount to be withheld under this section on any
designated distribution shall not exceed the sum of the amount of
money and the fair market value of other property (other than
securities of the employer corporation) received in the
distribution. No amount shall be required to be withheld under
this section in the case of any designated distribution which
consists only of securities of the employer corporation and cash
(not in excess of $200) in lieu of financial shares. For purposes
of this paragraph, the term "securities of the employer
corporation" has the meaning given such term by section
402(e)(4)(E).
(9) Separate arrangements to be treated separately
If the payor has more than 1 arrangement under which designated
distributions may be made to any individual, each such
arrangement shall be treated separately.
(10) Time and manner of election
(A) In general
Any election and any revocation under this section shall be
made at such time and in such manner as the Secretary shall
prescribe.
(B) Payor required to notify payee of rights to elect
(i) Periodic payments
The payor of any periodic payment -
(I) shall transmit to the payee notice of the right to
make an election under subsection (a) not earlier than 6
months before the first of such payments and not later than
when making the first of such payments,
(II) if such a notice is not transmitted under subclause
(I) when making such first payment, shall transmit such a
notice when making such first payment, and
(III) shall transmit to payees, not less frequently than
once each calendar year, notice of their rights to make
elections under subsection (a) and to revoke such
elections.
(ii) Nonperiodic distributions
The payor of any nonperiodic distribution shall transmit to
the payee notice of the right to make any election provided
in subsection (b) at the time of the distribution (or at such
earlier time as may be provided in regulations).
(iii) Notice
Any notice transmitted pursuant to this subparagraph shall
be in such form and contain such information as the Secretary
shall prescribe.
(11) Withholding includes deduction
The terms "withholding", "withhold", and "withheld" include
"deducting", "deduct", and "deducted".
(12) Failure to provide correct TIN
If -
(A) a payee fails to furnish his TIN to the payor in the
manner required by the Secretary, or
(B) the Secretary notifies the payor before any payment or
distribution that the TIN furnished by the payee is incorrect,
no election under subsection (a)(2) or (b)(2) shall be treated as
in effect and subsection (a)(4) shall not apply to such payee.
(13) Election may not be made with respect to certain payments
outside the United States or its possessions
(A) In general
Except as provided in subparagraph (B), in the case of any
periodic payment or nonperiodic distribution which is to be
delivered outside of the United States and any possession of
the United States, no election may be made under subsection
(a)(2) or (b)(2) with respect to such payment.
(B) Exception
Subparagraph (A) shall not apply if the recipient certifies
to the payor, in such manner as the Secretary may prescribe,
that such person is not -
(i) a United States citizen or a resident alien of the
United States, or
(ii) an individual to whom section 877 applies.
(f) Withholding to be treated as wage withholding under section
3402 for other purposes
For purposes of this chapter (and so much of subtitle F as
relates to this chapter) -
(1) any designated distribution (whether or not an election
under this section applies to such distribution) shall be treated
as if it were wages paid by an employer to an employee with
respect to which there has been withholding under section 3402,
and
(2) in the case of any designated distribution not subject to
withholding under this section by reason of an election under
this section, the amount withheld shall be treated as zero.
-SOURCE-
(Added Pub. L. 97-248, title III, Sec. 334(a), Sept. 3, 1982, 96
Stat. 623; amended Pub. L. 98-369, div. A, title V, Sec. 542(c),
title VII, Secs. 714(j)(1), (4), (5), 722(h)(4)(A), July 18, 1984,
98 Stat. 891, 962, 963, 976; Pub. L. 99-514, title XI, Sec.
1102(e)(1), title XII, Sec. 1234(b)(1), title XVIII, Sec.
1875(c)(10), Oct. 22, 1986, 100 Stat. 2416, 2566, 2895; Pub. L.
100-647, title I, Sec. 1012(bb)(2)(A)-(C), Nov. 10, 1988, 102 Stat.
3534; Pub. L. 102-318, title V, Secs. 521(b)(36)-(40),
522(b)(1)-(2)(C), July 3, 1992, 106 Stat. 312-314; Pub. L. 104-188,
title I, Sec. 1704(t)(71), Aug. 20, 1996, 110 Stat. 1891; Pub. L.
106-554, Sec. 1(a)(7) [title III, Sec. 314(b)], Dec. 21, 2000, 114
Stat. 2763, 2763A-643; Pub. L. 107-16, title VI, Sec.
641(a)(1)(D)(ii), (iii), June 7, 2001, 115 Stat. 119.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-REFTEXT-
REFERENCES IN TEXT
Section 301(d) of the Tax Reduction Act of 1975, referred to in
subsec. (d)(2)(B)(iii), is section 301(d) of Pub. L. 94-12, Mar.
29, 1975, 89 Stat. 26, relating to plan requirements for taxpayers
electing additional credits, which was set out as a note under
section 46 of this title and was repealed by Pub. L. 95-600, title
I, Sec. 141(f)(1), Nov. 6, 1978, 92 Stat. 2795.
-MISC1-
AMENDMENTS
2001 - Subsec. (c)(3). Pub. L. 107-16, Secs. 641(a)(1)(D)(ii),
901, temporarily reenacted heading without change and amended text
of par. (3) generally. Prior to amendment, text read as follows:
"For purposes of this subsection, the term 'eligible rollover
distribution' has the meaning given such term by section
402(f)(2)(A) (or in the case of an annuity contract under section
403(b), a distribution from such contract described in section
402(f)(2)(A))." See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (d)(2)(B)(iv). Pub. L. 107-16, Secs. 641(a)(1)(D)(iii),
901, temporarily added cl. (iv). See Effective and Termination
Dates of 2001 Amendment note below.
2000 - Subsec. (e)(1)(B). Pub. L. 106-554 inserted "(other than a
Roth IRA)" after "individual retirement plan" in concluding
provisions.
1996 - Subsec. (e)(12). Pub. L. 104-188 substituted "(b)(2)" for
"(b)(3)" in closing provisions.
1992 - Subsec. (a). Pub. L. 102-318, Sec. 521(b)(36), substituted
"Periodic payments" for "Pensions, annuities, etc." in heading.
Subsec. (a)(1). Pub. L. 102-318, Sec. 522(b)(2)(A), substituted
"subsection (e)(2)" for "subsection (d)(2)".
Subsec. (b)(1). Pub. L. 102-318, Secs. 521(b)(37)(A),
522(b)(2)(B), substituted "subsection (e)(3)" for "subsection
(d)(3)" and "an amount equal to 10 percent of such distribution"
for "the amount determined under paragraph (2)".
Subsec. (b)(2), (3). Pub. L. 102-318, Sec. 521(b)(37)(B),
redesignated par. (3) as (2) and struck out former par. (2) which
related to amount of withholding.
Subsec. (c). Pub. L. 102-318, Sec. 522(b)(1), added subsec. (c).
Former subsec. (c) redesignated (d).
Subsec. (d). Pub. L. 102-318, Sec. 522(b)(1), (2)(C),
redesignated subsec. (c) as (d) and substituted "subsection (e)(1)"
for "subsection (d)(1)" in par. (1). Former subsec. (d)
redesignated (e).
Pub. L. 102-318, Sec. 521(b)(40), substituted "(b)(2)" for
"(b)(3)" in par. (13)(A).
Pub. L. 102-318, Sec. 521(b)(39), amended par. (8) generally.
Prior to amendment, par. (8) read as follows: "The maximum amount
to be withheld under this section on any designated distribution
shall not exceed the sum of the amount of money and the fair market
value of other property (other than employer securities of the
employer corporation (within the meaning of section 402(a)(3)))
received in the distribution. No amount shall be required to be
withheld under this section in the case of any designated
distribution which consists only of employer securities of the
employer corporation (within the meaning of section 402(a)(3)) and
cash (not in excess of $200) in lieu of fractional shares."
Pub. L. 102-318, Sec. 521(b)(38), struck out par. (4) which
defined "qualified total distribution" and provided special rule
for accumulated deductible employee contributions in determining
qualified total distribution.
Subsecs. (e), (f). Pub. L. 102-318, Sec. 522(b)(1), redesignated
subsecs. (d) and (e) as (e) and (f), respectively.
1988 - Subsec. (d)(13). Pub. L. 100-647, Sec. 1012(bb)(2)(C),
substituted "United States or its possessions" for "United States"
in heading.
Subsec. (d)(13)(A). Pub. L. 100-647, Sec. 1012(bb)(2)(A),
substituted "the United States and any possession of the United
States" for "the United States".
Subsec. (d)(13)(B)(i). Pub. L. 100-647, Sec. 1012(bb)(2)(B),
amended cl. (i) generally, substituting "or a resident alien of the
United States" for "who is a bona fide resident of a foreign
country".
1986 - Subsec. (d)(1)(B). Pub. L. 99-514, Sec. 1102(e)(1),
inserted last sentence for "For purposes of clause (ii), any
distribution or payment from or under an individual retirement plan
shall be treated as includible in gross income."
Subsec. (d)(1)(B)(iii), (iv). Pub. L. 99-514, Sec. 1875(c)(10),
reenacted cl. (iii) relating to amounts subject to withholding
under subchapter A of chapter 3 as cl. (iii) and reenacted cl.
(iii) relating to distribution described in section 404(k)(2) as
cl. (iv).
Subsec. (d)(13). Pub. L. 99-514, Sec. 1234(b)(1), added par.
(13).
1984 - Subsec. (b)(2)(C). Pub. L. 98-369, Sec. 714(j)(1),
substituted "nonperiodic distribution" for "distribution described
in subparagraph (B)" and "subparagraph (A) or (B) (as the case may
be) shall be applied by taking into account" for "the Secretary, in
prescribing tables or procedures under paragraph (1), shall take
into account", designated phrase "which is made by reason of a
participant's death" as cl. (i) and added cl. (ii).
Subsec. (d)(1)(B)(iii). Pub. L. 98-369, Sec. 714(j)(4), added cl.
(iii) relating to amounts subject to withholding under subchapter A
of chapter 3.
Pub. L. 98-369, Sec. 542(c), added cl. (iii) relating to
distributions described in section 404(k)(2). Directory language
that section (d)(1)(B) be amended by striking out "and" at end of
cl. (i) and substituting ", or" for the period at end of cl. (ii)
could not be executed in view of prior amendment by section
714(j)(4) of Pub. L. 98-369, which struck out "and" at end of cl.
(i) and substituted ", and" for the period at end of cl. (ii).
Subsec. (d)(8). Pub. L. 98-369, Sec. 714(j)(5), freed from
withholding requirement any designated distribution which consists
only of employer securities of the employer corporation (within the
meaning of section 402(a)(3)) and cash (not in excess of $200) in
lieu of fractional shares.
Subsec. (d)(12). Pub. L. 98-369, Sec. 722(h)(4), added par. (12).
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Amendment by Pub. L. 107-16 applicable to distributions after
Dec. 31, 2001, see section 641(f)(1) of Pub. L. 107-16, set out as
a note under section 402 of this title.
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 2000 AMENDMENT
Amendment by Pub. L. 106-554 effective as if included in the
provisions of the Taxpayer Relief Act of 1997, Pub. L. 105-34, to
which such amendment relates, see section 1(a)(7) [title III, Sec.
314(g)] of Pub. L. 106-554, set out as a note under section 56 of
this title.
EFFECTIVE DATE OF 1992 AMENDMENT
Amendment by section 521(b)(36)-(40) of Pub. L. 102-318
applicable to distributions after Dec. 31, 1992, see section 521(e)
of Pub. L. 102-318, set out as a note under section 402 of this
title.
Amendment by section 522(b)(1)-(2)(C) of Pub. L. 102-318
applicable, except as otherwise provided, to distributions after
Dec. 31, 1992, see section 522(d) of Pub. L. 102-318, set out as a
note under section 401 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Section 1012(bb)(2)(D) of Pub. L. 100-647 provided that: "The
amendments made by this paragraph [amending this section] shall
apply to distributions made after the date of the enactment of this
Act [Nov. 10, 1988]."
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 1102(e)(1) of Pub. L. 99-514 applicable to
contributions and distributions for taxable years beginning after
Dec. 31, 1986, see section 1102(g) of Pub. L. 99-514, set out as a
note under section 219 of this title.
Section 1234(b)(2) of Pub. L. 99-514 provided that: "The
amendment made by this subsection [amending this section] shall
apply to payments after December 31, 1986."
Amendment by section 1875(c)(10) of Pub. L. 99-514 effective,
except as otherwise provided, as if included in the provisions of
the Tax Reform Act of 1984, Pub. L. 98-369, div. A, to which such
amendment relates, see section 1881 of Pub. L. 99-514, set out as a
note under section 48 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 542(c) of Pub. L. 98-369 applicable to
taxable years beginning after July 18, 1984, see section 542(d) of
Pub. L. 98-369, set out as a note under section 404 of this title.
Amendment by section 714(j)(1), (4), (5) of Pub. L. 98-369
effective as if included in the provision of the Tax Equity and
Fiscal Responsibility Act of 1982, Pub. L. 97-248, to which such
amendment relates, see section 715 of Pub. L. 98-369, set out as a
note under section 31 of this title.
Amendment by section 722(h)(4)(A) of Pub. L. 98-369 applicable to
payments or distributions after Dec. 31, 1984, unless the payor
elects to have such amendment apply to payments or distributions
before Jan. 1, 1985, see section 722(h)(5)(B) of Pub. L. 98-369,
set out as a note under section 643 of this title.
EFFECTIVE DATE
Section 334(e) of Pub. L. 97-248, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) Amendment made by subsections (a) and (d). - Except as
provided in paragraph (4), the amendment made by subsections (a)
[enacting this section] and (d) [amending section 3402 of this
title] shall apply to payments or other distributions made after
December 31, 1982.
"(2) Amendments made by subsection (b). - Except as provided in
paragraph (4), the amendments made by subsection (b) [amending
section 6047 of this title] shall take effect on January 1, 1983.
"(3) Amendments made by subsection (c). - The amendments made by
subsection (c) [enacting section 6704 of this title] shall take
effect on January 1, 1985.
"(4) Periodic payments beginning before january 1, 1983. - For
purposes of section 3405(a) of the Internal Revenue Code of 1986
[formerly I.R.C. 1954], in the case of periodic payments beginning
before January 1, 1983, the first periodic payment after December
31, 1982, shall be treated as the first such periodic payment.
"(5) Delay in application. - The Secretary of the Treasury shall
prescribe such regulations which delay (but not beyond June 30,
1983) the application of some or all of the amendments made by this
section with respect to any payor until such time as such payor is
able to comply without undue hardship with the requirements of such
provisions.
"(6) Waiver of penalty. - No penalty shall be assessed under
section 6672 with respect to any failure to withhold as required by
the amendments made by this section if such failure was before July
1, 1983, and if the person made a good faith effort to comply with
such withholding requirements."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1994
For provisions directing that if any amendments made by subtitle
B [Secs. 521-523] of title V of Pub. L. 102-318 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1994, see section 523 of Pub. L. 102-318, set out as a note under
section 401 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 3402, 5891, 6047, 6652 of
this title; title 5 section 8348.
-End-
-CITE-
26 USC Sec. 3406 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle C - Employment Taxes
CHAPTER 24 - COLLECTION OF INCOME TAX AT SOURCE ON WAGES
-HEAD-
Sec. 3406. Backup withholding
-STATUTE-
(a) Requirement to deduct and withhold
(1) In general
In the case of any reportable payment, if -
(A) the payee fails to furnish his TIN to the payor in the
manner required,
(B) the Secretary notifies the payor that the TIN furnished
by the payee is incorrect,
(C) there has been a notified payee underreporting described
in subsection (c), or
(D) there has been a payee certification failure described in
subsection (d),
then the payor shall deduct and withhold from such payment a tax
equal to the product of the fourth lowest rate of tax applicable
under section 1(c) and such payment.
(2) Subparagraphs (C) and (D) of paragraph (1) apply only to
interest and dividend payments
Subparagraphs (C) and (D) of paragraph (1) shall apply only to
reportable interest or dividend payments.
(b) Reportable payment, etc.
For purposes of this section -
(1) Reportable payment
The term "reportable payment" means -
(A) any reportable interest or dividend payment, and
(B) any other reportable payment.
(2) Reportable interest or dividend payment
(A) In general
The term "reportable interest or dividend payment" means any
payment of a kind, and to a payee, required to be shown on a
return required under -
(i) section 6049(a) (relating to payments of interest),
(ii) section 6042(a) (relating to payments of dividends),
or
(iii) section 6044 (relating to payments of patronage
dividends) but only to the extent such payment is in money.
(B) Special rule for patronage dividends
For purposes of subparagraphs (C) and (D) of subsection
(a)(1), the term "reportable interest or dividend payment"
shall not include any payment to which section 6044 (relating
to patronage dividends) applies unless 50 percent or more of
such payment is in money.
(3) Other reportable payment
The term "other reportable payment" means any payment of a
kind, and to a payee, required to be shown on a return required
under -
(A) section 6041 (relating to certain information at source),
(B) section 6041A(a) (relating to payments of remuneration
for services),
(C) section 6045 (relating to returns of brokers),
(D) section 6050A (relating to reporting requirements of
certain fishing boat operators), but only to the extent such
payment is in money and represents a share of the proceeds of
the catch, or
(E) section 6050N (relating to payments of royalties).
(4) Whether payment is of reportable kind determined without
regard to minimum amount
The determination of whether any payment is of a kind required
to be shown on a return described in paragraph (2) or (3) shall
be made without regard to any minimum amount which must be paid
before a return is required.
(5) Exception for certain small payments
To the extent provided in regulations, the term "reportable
payment" shall not include any payment which -
(A) does not exceed $10, and
(B) if determined for a 1-year period, would not exceed $10.
(6) Other reportable payments include payments described in
section 6041(a) or 6041A(a) only where aggregate for calendar
year is $600 or more
Any payment of a kind required to be shown on a return required
under section 6041(a) or 6041A(a) which is made during any
calendar year shall be treated as a reportable payment only if -
(A) the aggregate amount of such payment and all previous
payments described in such sections by the payor to the payee
during such calendar year equals or exceeds $600,
(B) the payor was required under section 6041(a) or 6041A(a)
to file a return for the preceding calendar year with respect
to payments to the payee, or
(C) during the preceding calendar year, the payor made
reportable payments to the payee with respect to which amounts
were required to be deducted and withheld under subsection (a).
(7) Exception for certain window payments of interest, etc.
For purposes of subparagraphs (C) and (D) of subsection (a)(1),
the term "reportable interest or dividend payment" shall not
include any payment -
(A) in redemption of a coupon on a bearer instrument or in
redemption of a United States savings bond, or
(B) to the extent provided in regulations, of interest on
instruments similar to those described in subparagraph (A).
The preceding sentence shall not apply for purposes of
determining whether there is payee underreporting described in
subsection (c).
(c) Notified payee underreporting with respect to interest and
dividends
(1) Notified payee underreporting
If -
(A) the Secretary determines with respect to any payee that
there has been payee underreporting,
(B) at least 4 notices have been mailed by the Secretary to
the payee (over a period of at least 120 days) with respect to
the underreporting, and
(C) in the case of any payee who has filed a return for the
taxable year, any deficiency of tax attributable to such
failure has been assessed,
the Secretary may notify payors of reportable interest or
dividend payments with respect to such payee of the requirement
to deduct and withhold under subsection (a)(1)(C) (but not the
reasons for the withholding under subsection (a)(1)(C)).
(2) Payee underreporting defined
For purposes of this section, there has been payee
underreporting if for any taxable year the Secretary determines
that -
(A) the payee failed to include in his return of tax under
chapter 1 for such year any portion of a reportable interest or
dividend payment required to be shown on such return, or
(B) the payee may be required to file a return for such year
and to include a reportable interest or dividend payment in
such return, but failed to file such return.
(3) Determination by secretary to stop (or not to start)
withholding
(A) In general
If the Secretary determines that -
(i) there was no payee underreporting,
(ii) any payee underreporting has been corrected (and any
tax, penalty, or interest with respect to the payee
underreporting has been paid),
(iii) withholding under subsection (a)(1)(C) has caused (or
would cause) undue hardship to the payee and it is unlikely
that any payee underreporting by such payee will occur again,
or
(iv) there is a bona fide dispute as to whether there has
been any payee underreporting,
then the Secretary shall take the action described in
subparagraph (B).
(B) Secretary to take action to stop (or not to start)
withholding
For purposes of subparagraph (A), if at the time of the
Secretary's determination under subparagraph (A) -
(i) no notice has been given under paragraph (1) to any
payor with respect to the underreporting, the Secretary shall
not give any such notice, or
(ii) if such notice has been given, the Secretary shall -
(I) provide the payee with a written certification that
withholding under subsection (a)(1)(C) is to stop, and
(II) notify the applicable payors (and brokers) that such
withholding is to stop.
(C) Time for taking action where notice to payor has been given
In any case where notice has been given under paragraph (1)
to any payor with respect to any underreporting, if the
Secretary makes a determination under subparagraph (A) during
the 12-month period ending on October 15 of any calendar year -
(i) except as provided in clause (ii), the Secretary shall
take the action described in subparagraph (B)(ii) to bring
about the stopping of withholding no later than December 1 of
such calendar year, or
(ii) in the case of -
(I) a no payee underreporting determination under clause
(i) of subparagraph (A), or
(II) a hardship determination under clause (iii) of
subparagraph (A),
such action shall be taken no later than the 45th day after
the day on which the Secretary made the determination.
(D) Opportunity to request determination
The Secretary shall prescribe procedures under which -
(i) a payee may request a determination under subparagraph
(A), and
(ii) the payee may provide information with respect to such
request.
(4) Payor notifies payee of withholding because of payee
underreporting
Any payor required to withhold any tax under subsection
(a)(1)(C) shall, at the time such withholding begins, notify the
payee of such withholding.
(5) Payee may be required to notify Secretary who his payors and
brokers are
For purposes of this section, the Secretary may require any
payee of reportable interest or dividend payments who is subject
to withholding under subsection (a)(1)(C) to notify the Secretary
of -
(A) all payors from whom the payee receives reportable
interest or dividend payments, and
(B) all brokers with whom the payee has accounts which may
involve reportable interest or dividend payments.
The Secretary may notify any such broker that such payee is
subject to withholding under subsection (a)(1)(C).
(d) Interest and dividend backup withholding applies to new
accounts and instruments unless payee certifies that he is not
subject to such withholding
(1) In general
There is a payee certification failure unless the payee has
certified to the payor, under penalty of perjury, that such payee
is not subject to withholding under subsection (a)(1)(C).
(2) Special rules for readily tradable instruments
(A) In general
Subsection (a)(1)(D) shall apply to any reportable interest
or dividend payment to any payee on any readily tradable
instrument if (and only if) the payor was notified by a broker
under subparagraph (B) or no certification was provided to the
payor by the payee under paragraph (1) and -
(i) such instrument was acquired directly by the payee from
the payor, or
(ii) such instrument is held by the payor as nominee for
the payee.
(B) Broker notifies payor
If -
(i) a payee acquires any readily tradable instrument
through a broker, and
(ii) with respect to such acquisition -
(I) the payee fails to furnish his TIN to the broker in
the manner required under subsection (a)(1)(A),
(II) the Secretary notifies such broker before such
acquisition that the TIN furnished by the payee is
incorrect,
(III) the Secretary notifies such broker before such
acquisition that such payee is subject to withholding under
subsection (a)(1)(C), or
(IV) the payee does not provide a certification to such
broker under subparagraph (C),
such broker shall, within such period as the Secretary may
prescribe by regulations (but not later than 15 days after
such acquisition), notify the payor that such payee is
subject to withholding under subparagraph (A), (B), (C), or
(D) of subsection (a)(1), respectively.
(C) Time for payee to provide certification to broker
In the case of any readily tradable instrument acquired by a
payee through a broker, the certification described in
paragraph (1) may be provided by the payee to such broker -
(i) at any time after the payee's account with the broker
was established and before the acquisition of such
instrument, or
(ii) in connection with the acquisition of such instrument.
(3) Exception for existing accounts, etc.
This subsection and subsection (a)(1)(D) shall not apply to any
reportable interest or dividend payment which is paid or credited
-
(A) in the case of interest or any other amount of a kind
reportable under section 6049, with respect to any account
(whatever called) established before January 1, 1984, or with
respect to any instrument acquired before January 1, 1984,
(B) in the case of dividends or any other amount reportable
under section 6042, on any stock or other instrument acquired
before January 1, 1984, or
(C) in the case of patronage dividends or other amounts of a
kind reportable under section 6044, with respect to any
membership acquired, or contract entered into, before January
1, 1984.
(4) Exception for readily tradable instruments acquired through
existing brokerage accounts
Subparagraph (B) of paragraph (2) shall not apply with respect
to a readily tradable instrument which was acquired through an
account with a broker if -
(A) such account was established before January 1, 1984, and
(B) during 1983, such broker bought or sold instruments for
the payee (or acted as a nominee for the payee) through such
account.
The preceding sentence shall not apply with respect to any
readily tradable instrument acquired through such account after
the broker was notified by the Secretary that the payee is
subject to withholding under subsection (a)(1)(C).
(e) Period for which withholding is in effect
(1) Failure to furnish TIN
In the case of any failure by a payee to furnish his TIN to a
payor in the manner required, subsection (a) shall apply to any
reportable payment made by such payor during the period during
which the TIN has not been furnished in the manner required. The
Secretary may require that a TIN required to be furnished under
subsection (a)(1)(A) be provided under penalties of perjury only
with respect to interest, dividends, patronage dividends, and
amounts subject to broker reporting.
(2) Notification of incorrect number
In any case in which the Secretary notifies the payor that the
TIN furnished by the payee is incorrect, subsection (a) shall
apply to any reportable payment made by such payor -
(A) after the close of the 30th day after the day on which
the payor received such notification, and
(B) before the payee furnishes another TIN in the manner
required.
(3) Notified payee underreporting described in subsection (c)
(A) In general
In the case of any notified payee underreporting described in
subsection (c), subsection (a) shall apply to any reportable
interest or dividend payment made -
(i) after the close of the 30th day after the day on which
the payor received notification from the Secretary of such
underreporting, and
(ii) before the stop date.
(B) Stop date
For purposes of this subsection, the term "stop date" means
the determination effective date or, if later, the earlier of -
(i) the day on which the payor received notification from
the Secretary under subsection (c)(3)(B) to stop withholding,
or
(ii) the day on which the payor receives from the payee a
certification provided by the Secretary under subsection
(c)(3)(B).
(C) Determination effective date
For purposes of this subsection -
(i) In general
Except as provided in clause (ii), the determination
effective date of any determination under subsection
(c)(3)(A) which is made during the 12-month period ending on
October 15 of any calendar year shall be the first January 1
following such October 15.
(ii) Determination that there was no underreporting; hardship
In the case of any determination under clause (i) or (iii)
of subsection (c)(3)(A), the determination effective date
shall be the date on which the Secretary's determination is
made.
(4) Failure to provide certification that payee is not subject to
withholding
(A) In general
In the case of any payee certification failure described in
subsection (d)(1), subsection (a) shall apply to any reportable
interest or dividend payment made during the period during
which the certification described in subsection (d)(1) has not
been furnished to the payor.
(B) Special rule for readily tradable instruments acquired
through broker where notification
In the case of any readily tradable instrument acquired by
the payee through a broker, the period described in
subparagraph (A) shall start with payments to the payee made
after the close of the 30th day after the payor receives
notification from a broker under subsection (d)(2)(B).
(5) 30-day grace periods
(A) Start-up
If the payor elects the application of this subparagraph with
respect to the payee, subsection (a) shall also apply to any
reportable payment made during the 30-day period described in
paragraph (2)(A), (3)(A), or (4)(B).
(B) Stopping
Unless the payor elects not to have this subparagraph apply
with respect to the payee, subsection (a) shall also apply to
any reportable payment made after the close of the period
described in paragraph (1), (2), or (4) (as the case may be)
and before the 30th day after the close of such period. A
similar rule shall also apply with respect to the period
described in paragraph (3)(A) where the stop date is determined
under clause (i) or (ii) of paragraph (3)(B).
(C) Election of shorter grace period
The payor may elect a period shorter than the grace period
set forth in subparagraph (A) or (B), as the case may be.
(f) Confidentiality of information
(1) In general
No person may use any information obtained under this section
(including any failure to certify under subsection (d)) except
for purposes of meeting any requirement under this section or
(subject to the safeguards set forth in section 6103) for
purposes permitted under section 6103.
(2) Cross reference
For provision providing for civil damages for violation of
paragraph (1), see section 7431.
(g) Exceptions
(1) Payments to certain payees
Subsection (a) shall not apply to any payment made to -
(A) any organization or governmental unit described in
subparagraph (B), (C), (D), (E), or (F) of section 6049(b)(4),
or
(B) any other person specified in regulations.
(2) Amounts for which withholding otherwise required
Subsection (a) shall not apply to any amount for which
withholding is otherwise required by this title.
(3) Exemption while waiting for TIN
The Secretary shall prescribe regulations for exemptions from
the tax imposed by subsection (a) during the period during which
a person is waiting for receipt of a TIN.
(h) Other definitions and special rules
For purposes of this section -
(1) Obviously incorrect number
A person shall be treated as failing to furnish his TIN if the
TIN furnished does not contain the proper number of digits.
(2) Payee furnishes 2 incorrect TINs
If the payee furnishes the payor 2 incorrect TINs in any 3-year
period, the payor shall, after receiving notice of the second
incorrect TIN, treat the payee as not having furnished another
TIN under subsection (e)(2)(B) until the day on which the payor
receives notification from the Secretary that a correct TIN has
been furnished.
(3) Joint payees
Except to the extent otherwise provided in regulations, any
payment to joint payees shall be treated as if all the payment
were made to the first person listed in the payment.
(4) Payor defined
The term "payor" means, with respect to any reportable payment,
a person required to file a return described in paragraph (2) or
(3) of subsection (b) with respect to such payment.
(5) Broker
(A) In general
The term "broker" has the meaning given to such term by
section 6045(c)(1).
(B) Only 1 broker per acquisition
If, but for this subparagraph, there would be more than 1
broker with respect to any acquisition, only the broker having
the closest contact with the payee shall be treated as the
broker.
(C) Payor not treated as broker
In the case of any instrument, such term shall not include
any person who is the payor with respect to such instrument.
(D) Real estate broker not treated as a broker
Except as provided by regulations, such term shall not
include any real estate broker (as defined in section
6045(e)(2)).
(6) Readily tradable instrument
The term "readily tradable instrument" means -
(A) any instrument which is part of an issue any portion of
which is traded on an established securities market (within the
meaning of section 453(f)(5)), and
(B) except as otherwise provided in regulations prescribed by
the Secretary, any instrument which is regularly quoted by
brokers or dealers making a market.
(7) Original issue discount
To the extent provided in regulations, rules similar to the
rules of paragraph (6) of section 6049(d) shall apply.
(8) Requirement of notice to payee
Whenever the Secretary notifies a payor under paragraph (1)(B)
of subsection (a) that the TIN furnished by any payee is
incorrect, the Secretary shall at the same time furnish a copy of
such notice to the payor, and the payor shall promptly furnish
such copy to the payee.
(9) Requirement of notice to Secretary
If the Secretary notifies a payor under paragraph (1)(B) of
subsection (a) that the TIN furnished by any payee is incorrect
and such payee subsequently furnishes another TIN to the payor,
the payor shall promptly notify the Secretary of the other TIN so
furnished.
(10) Coordination with other sections
For purposes of section 31, this chapter (other than section
3402(n)), and so much of subtitle F (other than section 7205) as
relates to this chapter, payments which are subject to
withholding under this section shall be treated as if they were
wages paid by an employer to an employee (and amounts deducted
and withheld under this section shall be treated as if deducted
and withheld under section 3402).
(i) Regulations
The Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes of this section.
-SOURCE-
(Added Pub. L. 98-67, title I, Sec. 104(a), Aug. 5, 1983, 97 Stat.
371; amended Pub. L. 98-369, div. A, title I, Sec. 152(a), title
VII, Sec. 722(h)(1), (2), July 18, 1984, 98 Stat. 691, 975; Pub. L.
99-514, title XV, Secs. 1521(b), 1523(b)(1), title XVIII, Sec.
1899A(46), Oct. 22, 1986, 100 Stat. 2746, 2748, 2961; Pub. L.
100-647, title I, Sec. 1018(u)(44), Nov. 10, 1988, 102 Stat. 3592;
Pub. L. 102-486, title XIX, Sec. 1935(a), Oct. 24, 1992, 106 Stat.
3032; Pub. L. 107-16, title I, Sec. 101(c)(10), June 7, 2001, 115
Stat. 44.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-MISC1-
AMENDMENTS
2001 - Subsec. (a)(1). Pub. L. 107-16, Secs. 101(c)(10), 901,
temporarily substituted "equal to the product of the fourth lowest
rate of tax applicable under section 1(c) and such payment" for
"equal to 31 percent of such payment" in concluding provisions. See
Effective and Termination Dates of 2001 Amendment note below.
1992 - Subsec. (a)(1). Pub. L. 102-486, in closing provisions,
substituted "31 percent" for "20 percent".
1988 - Subsec. (h)(5)(D). Pub. L. 100-647 inserted period at end
of subpar. (D).
1986 - Subsec. (b)(3)(E). Pub. L. 99-514, Sec. 1523(b)(1), added
subpar. (E).
Subsec. (b)(6). Pub. L. 99-514, Sec. 1899A(46), substituted
"6041A(a)" for "6041(A)(a)" in heading.
Subsec. (h)(5)(D). Pub. L. 99-514, Sec. 1521(b), added subpar.
(D).
1984 - Subsec. (c)(1). Pub. L. 98-369, Sec. 722(h)(2),
substituted "(but not the reasons for the withholding under
subsection (a)(1)(C))" for "(but not the reasons therefor)".
Subsec. (d)(2)(A). Pub. L. 98-369, Sec. 722(h)(1)(A), inserted
"the payor was notified by a broker under subparagraph (B) or"
after "if (and only if)" in provisions preceding cl. (i), struck
out cl. (i) which read as follows: "the payor was notified by a
broker under subparagraph (B)," and redesignated cls. (ii) and
(iii) as (i) and (ii), respectively.
Subsec. (d)(2)(B). Pub. L. 98-369, Sec. 722(h)(1)(B), in amending
subpar. (B) generally, reenacted cl. (i), in cl. (ii) inserted
"with respect to such acquisition - ", added subcls. (I) and (II),
redesignated former subcls. (I) and (II) as (III) and (IV),
respectively, and in subcl. (III) substituted "the Secretary
notifies such broker" for "such broker is notified by the
Secretary", and in provisions following cl. (ii) substituted "shall
within such period as the Secretary may prescribe by regulations
(but not later than 15 days after such acquisition), notify the
payor that such payee is subject to withholding under subparagraph
(A), (B), (C) or (D) of subsection (a)(1)," for "within 15 days
after the date of the acquisition notify the payor that such payee
is subject to withholding under subsection (a)(1)(D) (or subsection
(a)(1)(C) in the case of a notification described in clause
(ii)(II)."
Subsec. (e)(1). Pub. L. 98-369, Sec. 152(a), inserted provision
that the Secretary may require that a TIN required to be furnished
under subsection (a)(1)(A) be provided under penalties of perjury
only with respect to interest, dividends, patronage dividends, and
amounts subject to broker reporting.
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Amendment by Pub. L. 107-16 applicable to amounts paid after the
60th day after June 7, 2001, and references to income brackets and
rates of tax in such amendment to be applied without regard to
section 1(i)(1)(D) of this title, see section 101(d)(2) of Pub. L.
107-16, set out as a note under section 1 of this title.
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1992 AMENDMENT
Section 1935(b) of Pub. L. 102-486 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
amounts paid after December 31, 1992."
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 1521(b) of Pub. L. 99-514 applicable to real
estate transactions closing after Dec. 31, 1986, see section
1521(c) of Pub. L. 99-514, set out as a note under section 6045 of
this title.
Amendment by section 1523(b)(1) of Pub. L. 99-514 applicable to
payments made after Dec. 31, 1986, see section 1523(d) of Pub. L.
99-514, set out as an Effective Date note under section 6050N of
this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Section 152(b) of Pub. L. 98-369 provided that: "The amendment
made by this section [amending this section] shall take effect on
the date of the enactment of this Act [July 18, 1984]."
Amendment by section 722(h)(1), (2) of Pub. L. 98-369 applicable
as if included in amendments made by Interest and Dividend Tax
Compliance Act of 1983, Pub. L. 98-67, see section 722(h)(5)(A) of
Pub. L. 98-369, set out as a note under section 643 of this title.
EFFECTIVE DATE
Section applicable with respect to payments made after Dec. 31,
1983, see section 110(a) of Pub. L. 98-67, set out as an Effective
Date of 1983 Amendment note under section 31 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1, 31, 643, 6682, 6705,
7205, 7431 of this title.
-End-
-CITE-
26 USC Secs. 3451 to 3456 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle C - Employment Taxes
CHAPTER 24 - COLLECTION OF INCOME TAX AT SOURCE ON WAGES
-HEAD-
[Secs. 3451 to 3456. Repealed. Pub. L. 98-67, title I, Sec. 102(a),
Aug. 5, 1983, 97 Stat. 369]
-MISC1-
Section 3451, Pub. L. 97-248, title III, Sec. 301, Sept. 3, 1982,
96 Stat. 576, set forth withholding requirements respecting income
tax collected at source on interest, dividends, and patronage
dividends.
Section 3452, Pub. L. 97-248, title III, Sec. 301, Sept. 3, 1982,
96 Stat. 577, related to exemptions from withholding requirements.
Section 3453, Pub. L. 97-248, title III, Sec. 301, Sept. 3, 1982,
96 Stat. 579; Pub. L. 97-354, Sec. 3(i)(1), Oct. 19, 1982, 96 Stat.
1690, defined "payor".
Section 3454, Pub. L. 97-248, title III, Sec. 301, Sept. 3, 1982,
96 Stat. 580; Pub. L. 97-354, Sec. 3(i)(2), (3), Oct. 19, 1982, 96
Stat. 1690; Pub. L. 97-424, title V, Sec. 547(b)(3), Jan. 6, 1983,
96 Stat. 2200, defined the terms "interest", "dividend", and
"patronage dividend".
Section 3455, Pub. L. 97-248, title III, Sec. 301, Sept. 3, 1982,
96 Stat. 583, set forth definitions and other special rules.
Section 3456, Pub. L. 97-248, title III, Sec. 301, Sept. 3, 1982,
96 Stat. 585, set forth administrative provisions.
EFFECTIVE DATES; SPECIAL RULES
Pub. L. 97-248, title III, Sec. 308, Sept. 3, 1982, 96 Stat. 591,
which provided that the amendments made by sections 301 to 308
[enacting subchapter B (Secs. 3451-3456) of chapter 24 of this
title and amending sections 31, 274, 275, 643, 661, 3403, 3502,
3507, 6013, 6015, 6042, 6044, 6049, 6051, 6365, 6401, 6413, 6654,
6682, 7205, 7215, 7654, and 7701 of this title] would apply to
payments of interest, dividends, and patronage dividends paid or
credited after June 30, 1983, provided for the delay in
applications for payors unable to comply with the requirements of
such provisions without undue hardship, provided a temporary rule
for certain withholding exemptions, and provided for delays in
making deposits, was repealed by Pub. L. 98-67, title I, Sec.
102(a), Aug. 5, 1983, 97 Stat. 369.
REPEAL OF WITHHOLDING ON INTEREST AND DIVIDENDS
Pub. L. 98-67, title I, Sec. 102(a)-(d), Aug. 5, 1983, 97 Stat.
369, as amended by Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat.
2095, provided that:
"(a) In General. - Subtitle A of title III of the Tax Equity and
Fiscal Responsibility Act of 1982 (relating to withholding of tax
from interest and dividends) [subtitle A (Secs. 301-308) of title
III of Pub. L. 97-248, which enacted this section and sections 3452
to 3456 of this title, amended sections 31, 274, 275, 643, 661,
3403, 3502, 3507, 6013, 6015, 6042, 6044, 6051, 6365, 6401, 6413,
6654, 6682, 7205, 7215, 7654, and 7701 of this title and enacted
provisions set out as a note above] is hereby repealed as of the
close of June 30, 1983.
"(b) Conforming Amendment. - Except as provided in this section,
the Internal Revenue Code of 1986 [formerly I.R.C. 1954] shall be
applied and administered as if such subtitle A (and the amendments
made by such subtitle A) had not been enacted.
"(c) Repeal Not To Apply to Amounts Deducted and Withheld Before
September 2, 1983. -
"(1) In general. - If, notwithstanding the repeal made by
subsection (a) (and the provisions of subsection (b)), an amount
is deducted and withheld before September 2, 1983, under
subchapter B of chapter 24 of the Internal Revenue Code of 1986
(as in effect before its repeal by subsection (a)), the repeal
made by subsection (a) (and the provisions of subsection (b))
shall not apply to the amount so deducted and withheld.
"(2) Election to have paragraph (1) not apply. - Paragraph (1)
shall not apply with respect to any payor who elects (at the time
and in the manner prescribed by the Secretary of the Treasury or
his delegate) to have paragraph (1) not apply.
"(d) Estimated Tax Payments. - For purposes of determining the
amount of any addition to tax under section 6654 of the Internal
Revenue Code of 1986 with respect to any installment required to be
paid before July 1, 1983, the amount of the credit allowed by
section 31 of such Code for any taxable year which includes any
portion of the period beginning July 1, 1983, and ending December
31, 1983, shall be increased by an amount equal to 10 percent of
the aggregate amount of payments -
"(1) which are received during the portion of such taxable year
after June 30, 1983, and before January 1, 1984, and
"(2) which (but for the repeal made by subsection (a)) would
have been subject to withholding under subchapter B of chapter 24
of such Code (determined without regard to any exemption
described in section 3452 of such subchapter B)."
-End-
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