§3102 — Title 26 Internal Revenue Code | U.S. Code

Summary

Employers must take the payroll tax out of an employee’s pay when wages are paid. Employers may also withhold that tax from certain special cash payments and from tips even if the employee’s year-to-date pay has not hit the usual dollar limits. The law lets employers withhold from some payments even when the total for the year is under the applicable dollar threshold (as defined in the law), or under $100, or under $150, and lets them withhold from tips shown on a written tip statement even if the month’s reported tips are under $20. Employers are responsible for paying the amounts they withhold to the government and are protected against other people’s claims over those payments. Only tips that the employee reports in writing to the employer can be collected by the employer, and the employer must withhold within a short time frame: by the 10th day after the calendar month (or, if allowed under special rules, by the 30th day after the year). If withholding from the employer’s controlled wages is not enough to cover tax on reported tips, the employee can pay the extra amount to the employer by that same 10th (or 30th) day. The tax on any tips the employer cannot collect must be paid by the employee. For group-term life insurance paid for periods after employment, and for wages paid for certain international-organization service transfers, the employer does not withhold; instead those payments and the tax are shown on the employee’s wage statement and the employee pays the tax. For the extra Medicare tax rule, employers only withhold on wages above $200,000 and may ignore a spouse’s wages; any part not withheld must be paid by the employee. If an employer fails to withhold that extra tax but the employee pays it, the government cannot collect that amount from the employer, though the employer can still face penalties for failing to withhold.

Title 26, §3102

Internal Revenue Code — Source: USLM XML via OLRC

(a)The tax imposed by section 3101 shall be collected by the employer of the taxpayer, by deducting the amount of the tax from the wages as and when paid. An employer who in any calendar year pays to an employee cash remuneration to which paragraph (7)(B) of section 3121(a) is applicable may deduct an amount equivalent to such tax from any such payment of remuneration, even though at the time of payment the total amount of such remuneration paid to the employee by the employer in the calendar year is less than the applicable dollar threshold (as defined in section 3121(x)) for such year; and an employer who in any calendar year pays to an employee cash remuneration to which paragraph (7)(C) or (10) of section 3121(a) is applicable may deduct an amount equivalent to such tax from any such payment of remuneration, even though at the time of payment the total amount of such remuneration paid to the employee by the employer in the calendar year is less than $100; and an employer who in any calendar year pays to an employee cash remuneration to which paragraph (8)(B) of section 3121(a) is applicable may deduct an amount equivalent to such tax from any such payment of remuneration, even though at the time of payment the total amount of such remuneration paid to the employee by the employer in the calendar year is less than $150; 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 (12)(B) of section 3121(a) is applicable may deduct an amount equivalent to such tax with respect to such tips from any wages of the employee (exclusive of 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.

(b)Every employer required so to deduct the tax shall be liable for the payment of such tax, and shall be indemnified against the claims and demands of any person for the amount of any such payment made by such employer.

(c)(1)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 collection can be made by the employer, at or after the time such statement is so furnished and before the close of the 10th day following the calendar month (or, if paragraph (3) applies, the 30th day following the year) in which the tips were deemed paid, by deducting the amount of the tax from such wages of the employee (excluding tips, but including funds turned over by the employee to the employer pursuant to paragraph (2)) as are under control of the employer.

(2)If the tax imposed by section 3101, with respect to tips which are included in written statements furnished in any month to the employer pursuant to section 6053(a), exceeds the wages of the employee (excluding tips) from which the employer is required to collect the tax under paragraph (1), the employee may furnish to the employer on or before the 10th day of the following month (or, if paragraph (3) applies, on or before the 30th day of the following year) an amount of money equal to the amount of the excess.

(3)The Secretary may, under regulations prescribed by him, authorize employers—

(A)to estimate the amount of tips that will be reported by the employee pursuant to section 6053(a) in any calendar year,

(B)to determine the amount to be deducted upon each payment of wages (exclusive of tips) during such year as if the tips so estimated constituted the actual tips so reported, and

(C)to deduct upon any payment of wages (other than tips, but including funds turned over by the employee to the employer pursuant to paragraph (2)) to such employee during such year (and within 30 days thereafter) such amount as may be necessary to adjust the amount actually deducted upon such wages of the employee during the year to the amount required to be deducted in respect of tips included in written statements furnished to the employer during the year.

(4)If the tax imposed by section 3101 with respect to tips which constitute wages exceeds the portion of such tax which can be collected by the employer from the wages of the employee pursuant to paragraph (1) or paragraph (3), such excess shall be paid by the employee.

(d)(1)In the case of any payment for group-term life insurance to which this subsection applies—

(A)subsection (a) shall not apply,

(B)the employer shall separately include on the statement required under section 6051—

(i)the portion of the wages which consists of payments for group-term life insurance to which this subsection applies, and

(ii)the amount of the tax imposed by section 3101 on such payments, and

(C)the tax imposed by section 3101 on such payments shall be paid by the employee.

(2)This subsection shall apply to any payment for group-term life insurance to the extent—

(A)such payment constitutes wages, and

(B)such payment is for coverage for periods during which an employment relationship no longer exists between the employee and the employer.

(e)In the case of any payments of wages for service performed in the employ of an international organization pursuant to a transfer to which the provisions of section 3121(y) are applicable—

(1)subsection (a) shall not apply,

(2)the head of the Federal agency from which the transfer was made shall separately include on the statement required under section 6051—

(A)the amount determined to be the amount of the wages for such service, and

(B)the amount of the tax imposed by section 3101 on such payments, and

(3)the tax imposed by section 3101 on such payments shall be paid by the employee.

(f)(1)In the case of any tax imposed by section 3101(b)(2), subsection (a) shall only apply to the extent to which the taxpayer receives wages from the employer in excess of $200,000, and the employer may disregard the amount of wages received by such taxpayer’s spouse.

(2)To the extent that the amount of any tax imposed by section 3101(b)(2) is not collected by the employer, such tax shall be paid by the employee.

(3)If an employer, in violation of this chapter, fails to deduct and withhold the tax imposed by section 3101(b)(2) and thereafter the tax is paid by the employee, the tax so required to be deducted and withheld shall not be collected from the employer, but this paragraph shall in no case relieve the employer from liability for any penalties or additions to tax otherwise applicable in respect of such failure to deduct and withhold.

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Editorial Notes

Amendments

2010—Subsec. (f). Pub. L. 111–148 added subsec. (f). 2004—Subsec. (a). Pub. L. 108–203 struck out “and the employee has not performed agricultural labor for the employer on 20 days or more in the calendar year for cash remuneration computed on a time basis” after “less than $150”. 1994—Subsec. (a). Pub. L. 103–387 in second sentence substituted “An employer who in any calendar year” for “An employer who in any calendar quarter” and “remuneration paid to the employee by the employer in the calendar year is less than the applicable dollar threshold (as defined in section 3121(x)) for such year” for “remuneration paid to the employee by the employer in the calendar quarter is less than $50”. Subsec. (e). Pub. L. 103–296 added subsec. (e). 1990—Subsec. (d). Pub. L. 101–508 added subsec. (d). 1977—Subsec. (a). Pub. L. 95–216, § 355(a), substituted “cash remuneration to which paragraph (7)(B) of section 3121(a) is applicable” for “cash remuneration to which paragraph (7)(B) or (C) or (10) of section 3121(a) is applicable” and inserted “and an employer who in any calendar year pays to an employee cash remuneration to which paragraph (7)(C) or (10) of section 3121(a) is applicable may deduct an amount equivalent to such tax from any such payment of remuneration, even though at the time of payment the total amount of such remuneration paid to the employee by the employer in the calendar year is less than $100;”. Subsec. (c)(1), (2). Pub. L. 95–216, § 355(b)(1), substituted “year” for “quarter” wherever appearing. Subsec. (c)(3)(A). Pub. L. 95–216, § 355(b)(2)(A), substituted “in any calendar year” for “in any quarter of the calendar year”. Subsec. (c)(3)(B), (C). Pub. L. 95–216, § 355(b)(2)(B), substituted “year” for “quarter” wherever appearing. 1976—Subsec. (c)(3). Pub. L. 94–455 struck out “or his delegate” after “Secretary”. 1965—Subsec. (a). Pub. L. 89–97, § 313(c)(2), inserted provisions at end of second sentence allowing a deduction from any wages of an employee of an amount equivalent to the tax on tips when an employer is furnished with a written statement of tips received by an employee. Subsec. (c). Pub. L. 89–97, § 313(c)(1), added subsec. (c). 1956—Subsec. (a). Act Aug. 1, 1956, substituted “$150 and the employee has not performed agricultural labor for the employer on 20 days or more in the calendar year for cash remuneration computed on a time basis” for “$100”. 1954—Subsec. (a). Act Sept. 1, 1954, inserted last sentence permitting in certain instances an employer to deduct employee tax even though payment to employee is less than $50 for calendar quarter or $100 for calendar year.

Statutory Notes and Related Subsidiaries

Title 26, §3102

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