Tax withholding laws are expansive and ever changing, and the employer must apply the respective policies appropriately to ensure compliance. The Internal Revenue Service enforces federal tax withholding laws, and a state's revenue agency administrates state income tax withholding laws. An individual who wishes to learn tax withholding can draw from many sources.
Publications
IRS Circular E/Publication 15 is the Employer's Tax Guide. Each year, the IRS sends employers it has on record an updated copy. The publication is also available online. Employers are supposed to withhold federal income tax, Social Security tax and Medicare tax from employees' paychecks. IRS Circular E instructs employers on make the withholding, file tax returns and make tax deposits. In most cases, state income tax withholding is required. In addition, some cities and local governments require city and local income tax withholding. The withholding procedure varies by state. Most states have withholding publications similar to IRS Circular E, which gives withholding, tax filing and tax payment instructions. The Georgia Department of Revenue, for example, has its own Employer's Tax Guide.
Formal Training
A payroll practitioner in the early stages of her career can take a class to learn tax withholding. Accountants, bookkeepers, HR administrators and others who perform payroll duties can benefit from formal payroll training. The American Payroll Association (APA), for example, provides a three-day Payroll Practice Essentials course, which teaches withhold, pay and report payroll taxes, calculate gross to net income, understand taxable and nontaxable fringe benefits and prepare and file tax forms, such as annual W-2s and quarterly 941s. Classes are taught around the country. The price depends on whether the individual is an APA member, nonmember or colleague.
Online Tutorials
The IRS website contains payroll modules that include tutorials on federal payroll taxes. These teach the purpose of each tax, withholding, payment and reporting procedures and the importance of Form W-4. The employer can check its state revenue agency's website for tutorials on state/city/local income tax withholding. The Utah State Tax Commission, for example, has withholding tax online tutorials, which include general withholding information, tax filing due dates, tax withholding examples and year-end reporting guidelines.
Considerations
The Social Security Administration website has the tax rates and applicable withholding limits for Social Security and Medicare tax withholding. The site also has employer W-2 filing instructions. Employers that use a payroll service provider to process their payroll should understand tax withholding policies, since the IRS and some state revenue agencies penalize the employer for tax errors a third-party makes.
