26 U.S.C. § 3402 — Income tax collected at source

Page 2835 TITLE 26—INTERNAL REVENUE CODE § 3402 ‘‘(1) IN GENERAL.—In the case of an individual de- scribed in paragraph (2) who is providing services as a test proctor or room supervisor by assisting in the administration of college entrance or placement ex- aminations, this section shall be applied to such serv- ices performed after December 31, 2006 (and remu- neration paid for such services) without regard to subsection (a)(3) thereof. ‘‘(2) APPLICABILITY.—An individual is described in this paragraph if the individual— ‘‘(A) is providing the services described in sub- section (a) to an organization described in section 501(c), and exempt from tax under section 501(a), of the Internal Revenue Code of 1986, and ‘‘(B) is not otherwise treated as an employee of such organization for purposes of subtitle C of such Code (relating to employment taxes).’’ [Pub. L. 109–280, title VIII, § 864(b), Aug. 17, 2006, 120 Stat. 1024, provided that: ‘‘The amendment made by this section [amending section 530 of Pub. L. 95–600, set out above] shall apply to remuneration for services per- formed after December 31, 2006.’’] [Pub. L. 104–188, title I, § 1122(b), Aug. 20, 1996, 110 Stat. 1767, provided that: [‘‘(1) IN GENERAL.—The amendment made by this sec- tion [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.’’] [Pub. L. 99–514, title XVII, § 1706(b), Oct. 22, 1986, 100 Stat. 2781, 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 serv- ices rendered after December 31, 1986.’’] § 3402. Income tax collected at source (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 Sec- retary 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 applica- ble to such periods. (2) Amount of wages For purposes of applying tables or proce- dures prescribed under paragraph (1), the term ‘‘the amount of wages’’ means the amount by which the wages exceed the taxpayer’s with- holding allowance, prorated to the payroll pe- riod. (b) Percentage method of withholding (1) If wages are paid with respect to a period which is not a payroll period, the withholding allowance allowable with respect to each pay- ment of such wages shall be the allowance al- lowed for a miscellaneous payroll period con- taining 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 allowance al- lowable with respect to each payment of such wages shall be the allowance allowed for a mis- cellaneous 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 au- thorize 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 com- puted to the nearest dollar. (c) Wage bracket withholding (1) At the election of the employer with re- spect to any employee, the employer shall de- duct 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)) de- termined 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 (in- cluding Sundays and holidays) which have elapsed since the date of the last payment of such wages by such employer during the cal- endar year, or the date of commencement of em- ployment 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 au- thorize an employer to determine the amount to be deducted and withheld under the tables appli- cable in the case of a weekly payroll period, in which case the aggregate of the wages paid to Page 2836 TITLE 26—INTERNAL REVENUE CODE § 3402 the employee during the calendar week shall be considered the weekly wages. (5) If the wages exceed the highest wage brack- et, in determining the amount to be deducted and withheld under this subsection, the wages may, at the election of the employer, be com- puted 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 pe- riod 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 em- ployer from liability for any penalties or addi- tions 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 em- ployer 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 allowance (1) In general Under rules determined by the Secretary, an employee receiving wages shall on any day be entitled to a withholding allowance deter- mined based on— (A) whether the employee is an individual for whom a deduction is allowable with re- spect to another taxpayer under section 151; (B) if the employee is married, whether the employee’s spouse is entitled to an allow- ance, or would be so 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 allowance certificate claiming such allow- ance; (C) the number of individuals with respect to whom, on the basis of facts existing at the beginning of such day, there may reasonably be expected to be allowable a credit under section 24 (determined after application of subsection (j) thereof) 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 additional amounts to which the employee elects to take into account under subsection (m), but only if the employee’s spouse does not have in effect a withholding allowance certificate making such an elec- tion; (E) the standard deduction allowable to such employee (one-half of such standard de- duction in the case of an employee who is married (as determined under section 7703) and whose spouse is an employee receiving wages subject to withholding); and (F) whether the employee has withholding allowance certificates in effect with respect to more than 1 employer. (2) Allowance certificates (A) On commencement of employment On or before the date of the commence- ment of employment with an employer, the employee shall furnish the employer with a signed withholding allowance certificate re- lating to the withholding allowance claimed by the employee, which shall in no event ex- ceed the amount to which the employee is entitled. (B) Change of status If, on any day during the calendar year, an employee’s withholding allowance is in ex- cess of the withholding allowance to which the employee would be entitled had the em- ployee submitted a true and accurate with- holding allowance certificate to the em- ployer on that day, the employee shall with- in 10 days thereafter furnish the employer with a new withholding allowance certifi- cate. If, on any day during the calendar year, an employee’s withholding allowance is greater than the withholding allowance claimed, the employee may furnish the em- ployer with a new withholding allowance certificate relating to the withholding al- lowance to which the employee is so enti- tled, which shall in no event exceed the amount to which the employee is entitled on such day. (C) Change of status which affects next cal- endar year If on any day during the calendar year the withholding allowance to which the em- ployee will be, or may reasonably be ex- pected to be, entitled at the beginning of the employee’s next taxable year under subtitle A is different from the allowance to which the employee is entitled on such day, the employee shall, in such cases and at such times as the Secretary shall by regulations prescribe, furnish the employer with a with- holding allowance certificate relating to the withholding allowance which the employee claims with respect to such next taxable year, which shall in no event exceed the withholding allowance to which the em- ployee will be, or may reasonably be ex- pected to be, so entitled. (3) When certificate takes effect (A) First certificate furnished A withholding allowance certificate fur- nished the employer in cases in which no previous such certificate is in effect shall take effect as of the beginning of the first Page 2837 TITLE 26—INTERNAL REVENUE CODE § 3402 1 See References in Text note below. 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 cer- tificate (i) In general Except as provided in clauses (ii) and (iii), a withholding allowance certificate furnished to the employer in cases in which a previous such certificate is in ef- fect 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 cer- tificate described in clause (i) may be made effective beginning with any pay- ment 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 cal- endar year in which the certificate is fur- nished. (4) Period during which certificate remains in effect A withholding allowance certificate which takes effect under this subsection, or which on December 31, 1954, was in effect under the cor- responding subsection of prior law, shall con- tinue in effect with respect to the employer until another such certificate takes effect under this subsection. (5) Form and contents of certificate Withholding allowance 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) 1 ) shall be entitled to only one with- holding exemption. (7) Allowance where certificate with another employer is in effect If a withholding allowance certificate is in effect with respect to one employer, an em- ployee shall not be entitled under a certificate in effect with any other employer to any with- holding allowance 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 pay- roll 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 per- son 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 allowance allowed to the employee in any calendar year shall approximate the withholding allowance allowable with respect to an annual payroll period. (h) Alternative methods of computing amount to be withheld The Secretary may, under regulations pre- scribed 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 de- ducted 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 pay- ment 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 employ- ee’s wages for a payroll period by the num- ber of such payroll periods in the calendar year, (B) determining the amount of tax which would be required to be deducted and with- held upon the amount determined under sub- paragraph (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. Page 2838 TITLE 26—INTERNAL REVENUE CODE § 3402 (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 ag- gregate 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 sub- paragraph (B)) had been paid to the em- ployee for the number of payroll periods to which the aggregate amount of wages (com- puted 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 de- ducted and withheld by applying subsection (a) or (c), either with respect to a payroll pe- riod 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 re- quired to be deducted and withheld under this chapter. (j) Noncash remuneration to retail commission salesman In the case of remuneration paid in any me- dium 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 re- muneration solely by way of cash commission an employer shall not be required to deduct or withhold any tax under this subchapter with re- spect to such remuneration, provided that such employer files with the Secretary such informa- tion 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 fur- nished 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 in- cluding 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 (re- ceived 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 con- trol, even though at the time such statement is furnished the total amount of the tips included in statements furnished to the employer as hav- ing been received by the employee in such cal- endar 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 sec- tion 3202(a) to be collected from such wages and funds. (l) Determination and disclosure of marital sta- tus (1) Determination of status by employer For purposes of applying the tables in sub- sections (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 allow- ance certificate furnished to the employer by the employee after the date of the enactment of this subsection indicating that the em- ployee is married. (2) Disclosure of status by employee An employee shall be entitled to furnish the employer with a withholding allowance cer- tificate indicating he is married only if, on the day of such furnishing, he is married (deter- mined 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 allowance 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 sepa- rated from his spouse under a decree of di- vorce 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 im- mediately preceding the current taxable Page 2839 TITLE 26—INTERNAL REVENUE CODE § 3402 year and, on the basis of facts existing at the beginning of such day, the employee reason- ably expects, at the close of his taxable year, to be a surviving spouse (as defined in sec- tion 2(a)). (m) Withholding allowances Under regulations prescribed by the Secretary, an employee shall be entitled to an additional withholding allowance or additional reductions in withholding under this subsection. In deter- mining the additional withholding allowance or the amount of additional reductions in with- holding 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 and the estimated deduction allowed under section 199A (other than the de- ductions 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)), (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 regula- tions. (n) Employees incurring no income tax liability Notwithstanding any other provision of this section, an employer shall not be required to de- duct 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 allowance 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 im- posed under subtitle A for his preceding tax- able 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 sub- section 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 com- pensation benefit paid to an individual, (B) any payment of an annuity to an indi- vidual, 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 (deter- mined 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 compensa- tion 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 em- ployee’s involuntary separation from em- ployment (whether or not such separation is temporary), resulting directly from a reduc- tion in force, the discontinuance of a plant or operation, or other similar conditions, but only to the extent such benefits are in- cludible in the employee’s gross income. (B) Annuity For purposes of this subsection, the term ‘‘annuity’’ means any amount paid to an in- dividual 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 pay- ment in lieu of remuneration for any pe- riod during which the employee is tempo- rarily 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 pay- ment to which such request applies shall be an amount (not less than a minimum amount de- termined under regulations prescribed by the Secretary) specified by the payee in such re- quest. The amount deducted and withheld with respect to a payment which is greater or less than a full payment shall bear the same rela- tion 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 de- ducted 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 fur- nished 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 pay- ments a written statement of change or termi- nation which shall take effect in the same Page 2840 TITLE 26—INTERNAL REVENUE CODE § 3402 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 em- ployers 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 ac- cordance 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 fur- nished to the payor and the payor is furnished with such information as is necessary to deter- mine whether the payment is pursuant to the agreement and to determine the amount to be deducted and withheld. (6) Coordination with withholding on des- ignated 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 per- son is in effect that such payment be subject to withholding under this chapter, then for purposes of this chapter and so much of sub- title F as relates to this chapter, such pay- ment 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 per- centage 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),1 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 ben- efit (as defined in section 86(d)), (ii) any payment referred to in the sec- ond sentence of section 451(d) 1 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 Sec- retary for purposes of this paragraph. (D) Requests for withholding Rules similar to the rules that apply to an- nuities 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 pur- poses 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 pay- ment. (3) Authority for other voluntary withholding The Secretary is authorized by regulations to provide for withholding— (A) from remuneration for services per- formed 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 em- ployer to an employee to the extent that such remuneration is paid or other payments are made during the period for which the agree- ment 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 sub- division 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 sec- tion 1(c) 1 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 cor- Page 2841 TITLE 26—INTERNAL REVENUE CODE § 3402 poration, the tax imposed under paragraph (1) shall not apply to any such payment subject to tax under section 1441(a) (relating to with- holding on nonresident aliens) or tax under section 1442(a) (relating to withholding on for- eign 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, wa- gering pool, or lottery (other than a wager described in subparagraph (B)), or (ii) a wagering transaction in a pari- mutuel 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 deter- mined 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) Exemption for bingo, keno, and slot ma- chines 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 per- jury, containing the name, address, and tax- payer identification number of the person re- ceiving the payment and of each person enti- tled 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 sec- tion 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 de- fined 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) 1 (determined without regard to any rate of tax in excess of the fourth lowest rate of tax applicable under sec- tion 1(c) 1 ) on an amount of taxable income equal to the excess of— (A) the annualized amount of such pay- ment, over (B) the amount determined under para- graph (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 Sec- retary. (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 ac- cordance with such tables or computational procedures as may be specified in regulations prescribed by the Secretary (in lieu of in ac- cordance 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 with- holding 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 re- Page 2842 TITLE 26—INTERNAL REVENUE CODE § 3402 spect 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 fur- nished 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 ben- efit— (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. (t) Rate of withholding for certain stock In the case of any qualified stock (as defined in section 83(i)(2)) with respect to which an elec- tion is made under section 83(i)— (1) the rate of tax under subsection (a) shall not be less than the maximum rate of tax in effect under section 1, and (2) such stock shall be treated for purposes of section 3501(b) in the same manner as a non- cash fringe benefit. (Aug. 16, 1954, ch. 736, 68A Stat. 457; Aug. 9, 1955, ch. 666, § 2, 69 Stat. 605; Pub. L. 87–256, § 110(g)(2), Sept. 21, 1961, 75 Stat. 537; Pub. L. 88–272, title III, § 302(a), (b), Feb. 26, 1964, 78 Stat. 140; Pub. L. 89–97, title III, § 313(d)(3)–(5), July 30, 1965, 79 Stat. 384; Pub. L. 89–212, § 2(c), Sept. 29, 1965, 79 Stat. 859; Pub. L. 89–368, title I, § 101(a)–(e)(3), Mar. 15, 1966, 80 Stat. 38–61; Pub. L. 90–364, title I, § 102(c), June 28, 1968, 82 Stat. 256; Pub. L. 91–36, § 2(a), June 30, 1969, 83 Stat. 42; Pub. L. 91–53, § 6(a), Aug. 7, 1969, 83 Stat. 96; Pub. L. 91–172, title VIII, § 805(a)–(e), (f)(1), (g), Dec. 30, 1969, 83 Stat. 686, 704–708; Pub. L. 92–178, title II, § 208(a), (b)(1), (c)–(h)(1), Dec. 10, 1971, 85 Stat. 512–517; Pub. L. 94–12, title II, §§ 202(b), 205, Mar. 29, 1975, 89 Stat. 29, 32; Pub. L. 94–164, §§ 2(b)(2), 5(a)(1), Dec. 23, 1975, 89 Stat. 971, 975; Pub. L. 94–331, § 3(a)(1), June 30, 1976, 90 Stat. 782; Pub. L. 94–396, § 2(a)(1), Sept. 3, 1976, 90 Stat. 1201; Pub. L. 94–414, § 3(a)(1), Sept. 17, 1976, 90 Stat. 1273; Pub. L. 94–455, title IV, § 401(d), title V, §§ 502(b), 504(c)(3), title XII, § 1207(d), title XIX, §§ 1903(a)(17), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1557, 1559, 1566, 1705, 1810, 1834; Pub. L. 95–30, title I, § 105, title IV, § 405(a), May 23, 1977, 91 Stat. 140, 156; Pub. L. 95–600, title I, §§ 101(e), 102(c), title VI, § 601(b)(2), Nov. 6, 1978, 92 Stat. 2770, 2771, 2896; Pub. L. 96–601, § 4(a)–(d), Dec. 24, 1980, 94 Stat. 3496, 3497; Pub. L. 97–34, title I, § 101(e), Aug. 13, 1981, 95 Stat. 184; Pub. L. 97–248, title III, §§ 317(a), 334(d), Sept. 3, 1982, 96 Stat. 607, 627; Pub. L. 98–67, title I, § 104(d)(3), Aug. 5, 1983, 97 Stat. 380; Pub. L. 99–44, § 3, May 24, 1985, 99 Stat. 77; Pub. L. 99–514, title I, § 104(b)(15), title XIII, §§ 1301(j)(8), 1303(b)(4), title XV, § 1581(b), Oct. 22, 1986, 100 Stat. 2106, 2658, 2766; Pub. L. 100–203, title X, § 10302(a), Dec. 22, 1987, 101 Stat. 1330–429; Pub. L. 100–647, title I, § 1003(a)(2), Nov. 10, 1988, 102 Stat. 3382; Pub. L. 101–508, title XI, § 11801(a)(41), Nov. 5, 1990, 104 Stat. 1388–521; Pub. L. 102–318, title V, § 522(b)(2)(D), July 3, 1992, 106 Stat. 314; Pub. L. 102–486, title XIX, §§ 1934(a), 1942(a), Oct. 24, 1992, 106 Stat. 3031, 3036; Pub. L. 103–465, title VII, §§ 701(a), 702(a), Dec. 8, 1994, 108 Stat. 4995, 4996; Pub. L. 107–16, title I, § 101(c)(6)–(9), June 7, 2001, 115 Stat. 43, 44; Pub. L. 109–222, title V, § 511(a), May 17, 2006, 120 Stat. 364; Pub. L. 112–56, title I, § 102(a), Nov. 21, 2011, 125 Stat. 712; Pub. L. 115–97, title I, §§ 11011(b)(4), 11041(c)(1), (2)(B)–(E), 11051(b)(2)(B), 13603(b)(2), Dec. 22, 2017, 131 Stat. 2070, 2082–2084, 2089, 2163; Pub. L. 117–2, title IX, § 9611(b)(3), Mar. 11, 2021, 135 Stat. 149.) Editorial Notes REFERENCES IN TEXT Paragraph (6) of section 3401(a), referred to in subsec. (f)(6), was struck out and a new paragraph (6) was added by Pub. L. 89–809, title I, § 103(k), Nov. 13, 1966, 80 Stat. 1554. 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 1(c), referred to in subsecs. (p)(1)(B), (q)(1), and (r)(3), to be treated, for purposes of the rate of tax, as a reference to the corresponding rate bracket under section 1(j)(2)(C) of this title, with additional exception for reference in subsec. (q)(1), see section 1(j)(2)(F) of this title. Section 451(d), referred to in subsec. (p)(1)(C)(ii), was redesignated section 451(f) by Pub. L. 115–97, title I, § 13221(a), (b), Dec. 22, 2017, 131 Stat. 2113, 2115. 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, § 411(e)(1)(C), (D), Mar. 9, 2002, 116 Stat. 46. Section 4 of the Indian Gaming Regulatory Act, re- ferred 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. AMENDMENTS 2021—Subsec. (f)(1)(C). Pub. L. 117–2 substituted ‘‘sec- tion 24 (determined after application of subsection (j) thereof)’’ for ‘‘section 24(a)’’. 2017—Subsec. (a)(2). Pub. L. 115–97, § 11041(c)(1), sub- stituted ‘‘means the amount by which the wages exceed the taxpayer’s withholding allowance, prorated to the payroll period.’’ for ‘‘means the amount by which the wages exceed the number of withholding exemptions claimed multiplied by the amount of one such exemp- tion. The amount of each withholding exemption shall be equal to the amount of one personal exemption pro- vided in section 151(b), prorated to the payroll period. The maximum number of withholding exemptions per- mitted shall be calculated in accordance with regula- tions prescribed by the Secretary under this section, taking into account any reduction in withholding to which an employee is entitled under this section.’’ Subsec. (b)(1), (2). Pub. L. 115–97, § 11041(c)(2)(C), sub- stituted ‘‘allowance’’ for ‘‘exemption’’ in two places. Subsec. (f). Pub. L. 115–97, § 11041(c)(2)(D), substituted ‘‘allowance’’ for ‘‘exemptions’’ in heading. Subsec. (f)(1), (2). Pub. L. 115–97, § 11041(c)(2)(B), amended pars. (1) and (2) generally. Prior to amend- ment, pars. (1) and (2) related to allowed withholding exemptions and withholding exemption certificates, re- spectively. Subsec. (f)(3) to (5). Pub. L. 115–97, § 11041(c)(2)(C), sub- stituted ‘‘allowance’’ for ‘‘exemption’’ wherever ap- pearing. Page 2843 TITLE 26—INTERNAL REVENUE CODE § 3402 Subsec. (f)(7). Pub. L. 115–97, § 11041(c)(2)(C), which di- rected substitution of ‘‘allowance’’ for ‘‘exemption’’ in heading, was executed by substituting ‘‘Allowance’’ for ‘‘Exemption’’ to reflect the probable intent of Congress. Pub. L. 115–97, § 11041(c)(2)(C), substituted ‘‘allow- ance’’ for ‘‘exemption’’ in two places. Subsec. (g). Pub. L. 115–97, § 11041(c)(2)(C), which di- rected amendment of par. (4) of subsec. (g) by sub- stituting ‘‘allowance’’ for ‘‘exemption’’ wherever ap- pearing, was executed to concluding provisions of sub- sec. (g) in two places to reflect the probable intent of Congress. Subsec. (l)(1), (2). Pub. L. 115–97, § 11041(c)(2)(C), sub- stituted ‘‘allowance’’ for ‘‘exemption’’ wherever ap- pearing. Subsec. (m). Pub. L. 115–97, § 11041(c)(2)(E), sub- stituted ‘‘an additional withholding allowance or addi- tional reductions in withholding under this subsection. In determining the additional withholding allowance’’ for ‘‘additional withholding allowances or additional reductions in withholding under this subsection. In de- termining the number of additional withholding allow- ances’’. Subsec. (m)(1). Pub. L. 115–97, § 11051(b)(2)(B), struck out ‘‘(other than paragraph (10) thereof)’’ after ‘‘section 62(a)’’. Pub. L. 115–97, § 11011(b)(4), inserted ‘‘and the esti- mated deduction allowed under section 199A’’ after ‘‘chapter 1’’. Subsec. (n). Pub. L. 115–97, § 11041(c)(2)(C), substituted ‘‘allowance’’ for ‘‘exemption’’ in introductory provi- sions. Subsec. (t). Pub. L. 115–97, § 13603(b)(2), added subsec. (t). 2011—Subsec. (t). Pub. L. 112–56 struck out subsec. (t) which related to extension of 3 percent withholding to certain payments made by Government entities for property or services. 2006—Subsec. (t). Pub. L. 109–222 added subsec. (t). 2001—Subsec. (p)(1)(B). Pub. L. 107–16, § 101(c)(6), sub- stituted ‘‘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’’. Subsec. (p)(2). Pub. L. 107–16, § 101(c)(7), substituted ‘‘10 percent’’ for ‘‘15 percent’’. Subsec. (q)(1). Pub. L. 107–16, § 101(c)(8), substituted ‘‘equal to the product of the third lowest rate of tax ap- plicable under section 1(c) and such payment’’ for ‘‘equal to 28 percent of such payment’’. Subsec. (r)(3). Pub. L. 107–16, § 101(c)(9), substituted ‘‘the fourth lowest rate of tax applicable under section 1(c)’’ for ‘‘31 percent’’ in introductory provisions. 1994—Subsec. (p). Pub. L. 103–465, § 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 per- son receiving the payment, agree to such withholding. Such agreement shall be made in such form and man- ner 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 pay- ments with respect to which such agreement is made shall be treated as if they were wages paid by an em- ployer to an employee to the extent that such remu- neration is paid or other payments are made during the period for which the agreement is in effect.’’ Subsec. (r). Pub. L. 103–465, § 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, § 1934(a), substituted ‘‘28 percent’’ for ‘‘20 percent’’. Subsec. (q)(3)(A), (C). Pub. L. 102–486, § 1942(a), sub- stituted ‘‘$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 ta- bles 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 modi- fication 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 effec- tive on such date, and ‘‘(ii) on July 1, 1983, as if such reductions were at- tributable to a 10-percent reduction effective on such date.’’ 1988—Subsec. (m)(1). Pub. L. 100–647 substituted ‘‘sec- tion 62(a) (other than paragraph (10) thereof))’’ for ‘‘sec- tion 62) (other than paragraph (13) thereof)’’. 1987—Subsec. (f)(3)(B). Pub. L. 100–203 amended sub- par. (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 re- spect 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 em- ployer such certificate may be made effective with re- spect 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 re- spect 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, § 104(b)(15)(F), sub- stituted ‘‘standard deduction’’ for ‘‘zero bracket’’ and ‘‘subparagraph (E)’’ for ‘‘subparagraph (G)’’ in last sen- tence. Subsec. (f)(1)(A). Pub. L. 99–514, § 104(b)(15)(B), in- serted ‘‘unless he is an individual described in section 151(d)(2)’’ after ‘‘himself’’. Subsec. (f)(1)(B). Pub. L. 99–514, § 104(b)(15)(A), redes- ignated subpar. (D) as (B) and struck out former sub- par. (B) which read as follows: ‘‘one additional exemp- tion for himself if, on the basis of facts existing at the beginning of such day, there may reasonably be ex- pected 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, § 104(b)(15)(C), which directed that ‘‘subparagraph (A) or (D)’’ be substituted for ‘‘subpara- graph (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, § 104(b)(15)(A), (D), re- designated subpar. (E) as (C), substituted ‘‘section 151(c)’’ for ‘‘section 151(e)’’, and struck out former sub- par. (C) which read as follows: ‘‘one additional exemp- tion for himself if, on the basis of facts existing at the beginning of such day, there may reasonably be ex- pected 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, § 104(b)(15)(A), redes- ignated subpar. (F) as (D). Former subpar. (D) redesig- nated (B). Subsec. (f)(1)(E). Pub. L. 99–514, § 104(b)(15)(A), (E), re- designated subpar. (G) as (E) and substituted ‘‘standard Page 2844 TITLE 26—INTERNAL REVENUE CODE § 3402 deduction’’ for ‘‘zero bracket’’. Former subpar. (E) re- designated (C). Pub. L. 99–514, § 1301(j)(8), substituted ‘‘section 7703’’ for ‘‘section 143’’. Subsec. (f)(1)(F), (G). Pub. L. 99–514, § 104(b)(15)(A), re- designated subpars. (F) and (G) as (D) and (E), respec- tively. Subsec. (i)(1). Pub. L. 99–514, § 1581(b), struck out ‘‘or decreases’’ after ‘‘increases’’. Subsec. (m)(3). Pub. L. 99–514, § 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, § 1303(b)(4), struck out sub- sec. (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, § 334(d), added par. (6). Subsec. (s). Pub. L. 97–248, § 317(a), added subsec. (s). 1981—Subsec. (a). Pub. L. 97–34, § 101(e)(1), revised sub- sec. (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-per- cent reduction on July 1, 1983. Subsec. (b)(1). Pub. L. 97–34, § 101(e)(2)(A), redesig- nated par. (2) as (1). Former par. (1), which set out a table for determining amount of one withholding ex- emption for each of the various payroll periods, was struck out. Subsec. (b)(2). Pub. L. 97–34, § 101(e)(2)(A), redesig- nated par. (3) as (2). Former par. (2) redesignated (1). Subsec. (b)(3). Pub. L. 97–34, § 101(e)(2)(A), (B), redesig- nated 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 em- ployer’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, § 101(e)(2)(A), redesig- nated par. (5) as (4). Former par. (4) redesignated (3). Subsec. (f)(1)(G). Pub. L. 97–34, § 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, § 101(e)(4), substituted provi- sions authorizing the Secretary by regulations to pro- vide for increases or decreases in the amount of with- holding otherwise required under this section in cases where the employee requests the changes, for provi- sions under which the Secretary was authorized to pro- vide 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, § 101(e)(5), revised provi- sions 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 speci- fied in Treasury regulations. 1980—Subsec. (o)(1)(C). Pub. L. 96–601, § 4(a), added subpar. (C). Subsec. (o)(2)(B). Pub. L. 96–601, § 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, § 4(c), added subpar. (C). Subsec. (o)(3). Pub. L. 96–601, § 4(b), substituted provi- sion 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, § 4(b), added pars. (4) and (5). 1978—Subsec. (a). Pub. L. 95–600, § 101(e)(1), sub- stituted ‘‘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; ex- cept 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 amend- ments made by sections 101 and 102 of the Tax Reduc- tion and Simplification Act of 1977. With respect to wages paid after December 31, 1978, the tables so pre- scribed 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, § 102(c)(1), increased the amounts set out in the table for one withholding ex- emption 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, §§ 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, § 601(b)(2), added subsec. (r). 1977—Subsec. (a). Pub. L. 95–30, § 105(a), substituted ‘‘With respect to wages paid after May 31, 1977, and be- fore 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 Sim- plification 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 De- cember 31, 1977, the Secretary shall prescribe new ta- bles 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, § 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, § 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, § 105(b)(3)(A), (B), sub- stituted ‘‘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 de- duction)’’. Subsec. (m)(2)(C). Pub. L. 95–30, § 105(b)(3)(C), sub- stituted ‘‘(or the zero bracket amount)’’ for ‘‘(or the standard deduction)’’. Subsec. (q)(3)(C). Pub. L. 95–30, § 405(a), inserted ref- erence to certain parimutuel pools and jai alai in head- Page 2845 TITLE 26—INTERNAL REVENUE CODE § 3402 ing and, in text, designated existing provisions as cl. (i) and added cl. (ii). 1976—Subsec. (a). Pub. L. 94–455, §§ 401(d)(1), 1906 (b)(13)(A), struck out ‘‘or his delegate’’ after ‘‘Sec- retary’’, 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 ‘‘ex- cept 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 Reduc- tion Act of 1975’’ after ‘‘effect on January 1, 1976’’, as amended. Pub. L. 94–414 substituted ‘‘October 1, 1976’’ for ‘‘Sep- tember 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, § 1906(b)(13)(A), struck out ‘‘or his delegate’’ after ‘‘Secretary’’. Subsec. (c)(6). Pub. L. 94–455, §§ 401(d)(2), 1906(b)(13)(A), substituted ‘‘the table for an annual payroll period pre- scribed pursuant to subsection (a)’’ for ‘‘table 7 con- tained in subsection (a)’’ after ‘‘basis of the’’, as subsec. (c)(6) was in effect on the day before the date of enact- ment 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, § 1906(b)(13)(A), struck out ‘‘or his delegate’’ after ‘‘Secretary’’. Subsec. (l). Pub. L. 94–455, § 1903(a)(17), substituted ‘‘section 2(a)’’ for ‘‘section 2(b)’’ after ‘‘as defined in’’. Subsec. (m)(1)(B). Pub. L. 94–455, § 401(d)(3), reenacted subpar. (B) without change. Subsec. (m)(2)(A). Pub. L. 94–455, § 502(b), inserted ‘‘(other than paragraph (13) thereof)’’ after ‘‘under sec- tion 62’’. Subsec. (m)(2)(D), (3)(B). Pub. L. 94–455, § 1906(b)(13)(A), struck out ‘‘or his delegate’’ after ‘‘Sec- retary’’. Subsec. (m)(4). Pub. L. 94–455, § 504(c)(3), added subpar. (C). § 1906(b)(13)(A) struck out ‘‘or his delegate’’ after ‘‘Secretary’’. Subsecs. (n), (p). Pub. L. 94–455, § 1906(b)(13)(A), struck out ‘‘or his delegate’’ after ‘‘Secretary’’ wherever ap- pearing. Subsec. (q). Pub. L. 94–455, § 1207(d), added subsec. (q). 1975—Subsec. (a). Pub. L. 94–164, § 5(a)(1), inserted pro- vision 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, § 205(a), substituted provisions directing the Secretary to prescribe new withholding tables set- ting 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 provi- sions setting out 8 tables to be followed by employers in withholding taxes on wages paid. Subsec. (c)(6). Pub. L. 94–12, § 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, § 2(b)(2), substituted ‘‘$2,800’’ and ‘‘$2,400’’ for ‘‘$2,600’’ and ‘‘$2,300’’ respec- tively in cl. (ii). Pub. L. 94–12, § 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, § 208(a), substituted new sets of tables 1 to 8 applicable (under § 208(i)(1)) with respect to wages paid after Jan. 15, 1972, for the ta- bles 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, § 208(h)(1), made provisions of par. (3) applicable (under section 208(i)(2)) with respect to wages paid after Dec. 31, 1971, and be- fore Jan. 16, 1972. Subsec. (b)(1). Pub. L. 92–178, § 208(b)(1), revised with- holding 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, § 208(h)(2), in amending Pub. L. 91–172, § 805(b)(1), extended application of such former with- holding rates to wages paid after June 30, 1970, and be- fore Jan. 16, 1972, previously applicable to wages paid before Jan. 1, 1972. Subsec. (c)(6). Pub. L. 92–178, § 208(g), substituted ‘‘table 7 contained in subsection (a)’’ for ‘‘table 7 con- tained in paragraph (1), (2), (3), (4), or (5) (whichever is applicable) of subsection (a)’’. Subsec. (f)(1)(G). Pub. L. 92–178, § 208(c), added subpar. (G). Subsec. (f)(7). Pub. L. 92–178, § 208(d), added par. (7). Subsec. (m)(1)(B). Pub. L. 92–178, § 208(e), substituted ‘‘an amount equal to the lesser of (i) $2,000 or (ii) 15 per- cent of his estimated wages’’ for ‘‘an amount equal to 15 percent of his estimated wages’’. Subsec. (m)(2)(A). Pub. L. 92–178, § 208(f)(1), inserted ‘‘or (if such a return has not been filed for such pre- ceding taxable year at the time the withholding exemp- tion 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, § 208(f)(2), sub- stituted as definition of ‘‘estimation year’’ the calendar year in which the wages are paid for prior provision de- fining 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 re- spect to payments of wages on or after January 1 and before May 1 of any calendar year, the preceding cal- endar 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, § 208(f)(3), struck out subpars. (B) and (C) providing that only one certificate be in effect and for termination of effective- ness of certificate and redesignated subpars. (D) and (E) as (B) and (C), respectively. 1969—Subsec. (a)(1). Pub. L. 91–172, § 805(a), (b)(2), sub- stituted 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, § 6(a)(1), substituted ‘‘December 31, 1969’’ for ‘‘July 31, 1969’’. Pub. L. 91–36, § 2(a)(1), substituted ‘‘July 31, 1969’’ for ‘‘June 30, 1969’’. Subsec. (a)(2). Pub. L. 91–172, § 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, § 6(a)(2), substituted ‘‘January 1, 1970’’ for ‘‘August 1, 1969’’. Pub. L. 91–36, § 2(a)(2), substituted ‘‘August 1, 1969’’ for ‘‘July 1, 1969’’. Page 2846 TITLE 26—INTERNAL REVENUE CODE § 3402 Subsec. (a)(3) to (5). Pub. L. 91–172, § 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, § 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, § 805(c)(1), substituted provisions authorizing employer to deduct and with- hold tax determinable according to tables prescribed by the Secretary or his delegate for provisions under which the employer was authorized to deduct and with- hold tax only according to tables set out. Subsec. (c)(6). Pub. L. 91–172, § 805(c)(2), substituted provisions for determination of amount deductible ac- cording to tables prescribed by the Secretary or his del- egate and for computation of wages and amounts of in- come tax after Dec. 31, 1969, for provisions for deter- mination of such wages and amounts of income tax after July 13, 1968, and before Jan. 1, 1970. Pub. L. 91–53, § 6(a)(3), substituted ‘‘January 1, 1970’’ for ‘‘August 1, 1969’’. Pub. L. 91–36, § 2(a)(3), substituted ‘‘August 1, 1969’’ for ‘‘July 1, 1969’’. Subsec. (h). Pub. L. 91–172, § 805(d), redesignated exist- ing 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, § 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 esti- mated wages. Subsec. (m)(2)(A). Pub. L. 91–172, § 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, § 805(e)(2), struck out limit on aggregate amount. Subsec. (m)(2)(C), (D). Pub. L. 91–172, § 805(e)(1), (2), added subpar. (C). Former subpar. (C) redesignated (D) Subsec. (n). Pub. L. 91–172, § 805(f)(1), added subsec. (n). Subsecs. (o), (p). Pub. L. 91–172, § 805(g), added subsecs. (o) and (p). 1968—Subsec. (a). Pub. L. 90–364, § 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 Rev- enue and Expenditure Control Act of 1968 or after June 30, 1969, and added par. (2). Subsec. (c)(6). Pub. L. 90–364, § 102(c)(2), added par. (6). 1966—Subsec. (a). Pub. L. 89–368, § 101(a), struck out reference to subsections (j) and (k) and substituted pro- visions 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 plac- ing the rate at a fixed 14 percent. Subsec. (b)(1). Pub. L. 89–368, § 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’’ re- spectively. Subsec. (c)(1). Pub. L. 89–368, § 101(c), replaced existing tables with separate tables for employees who are mar- ried 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, § 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 Oc- tober 1 of each year. Subsec. (l). Pub. L. 89–368, § 101(d), added subsec. (l). Subsec. (m). Pub. L. 89–368, § 101(e)(2), added subsec. (m). 1965—Subsec. (a). Pub. L. 89–97, § 313(d)(3), substituted ‘‘subsections (j) and (k)’’ for ‘‘subsection (j)’’. Subsec. (h)(3). Pub. L. 89–97, § 313(d)(4), inserted ‘‘(and, in the case of tips referred to in subsection (k), within 30 days thereafter)’’ after ‘‘quarter’’ first place it ap- pears. Subsec. (k). Pub. L. 89–212 inserted ‘‘or section 3202 (c)(2)’’ and ‘‘or section 3202(a)’’. Pub. L. 89–97, § 313(d)(5), added subsec. (k). 1964—Subsec. (a). Pub. L. 88–272, § 302(a), reduced tax from 18% to 14%. Subsec. (c)(1). Pub. L. 88–272, § 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, § 2(a), inserted ‘‘(except as provided in subsection (j))’’ after ‘‘upon such wages’’. Subsec. (j). Act Aug. 9, 1955, § 2(b), added subsec. (j). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2021 AMENDMENT Amendment by Pub. L. 117–2 applicable to taxable years beginning after Dec. 31, 2020, see section 9611(c)(1) of Pub. L. 117–2, set out as a note under section 24 of this title. EFFECTIVE DATE OF 2017 AMENDMENT Amendment by section 11011(b)(4) of Pub. L. 115–97 ap- plicable to taxable years beginning after Dec. 31, 2017, see section 11011(e) of Pub. L. 115–97, set out as a note under section 62 of this title. Amendment by section 11041(c)(1), (2)(B)–(E) of Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, with allowance for Secretary of the Treas- ury to administer this section for taxable years begin- ning before Jan. 1, 2019, without regard to the amend- ments made by subsecs. (a) and (c) of Pub. L. 115–97, see section 11041(f) of Pub. L. 115–97, set out as a note under section 151 of this title. Amendment by section 11051(b)(2)(B) of Pub. L. 115–97 applicable to any divorce or separation instrument (as defined in former section 71(b)(2) of this title as in ef- fect before Dec. 22, 2017) executed after Dec. 31, 2018, and to such instruments executed on or before Dec. 31, 2018, and modified after Dec. 31, 2018, if the modifica- tion expressly provides that the amendment made by section 11051 of Pub. L. 115–97 applies to such modifica- tion, see section 11051(c) of Pub. L. 115–97, set out as a note under section 61 of this title. Amendment by section 13603(b)(2) of Pub. L. 115–97 ap- plicable to stock attributable to options exercised, or restricted stock units settled, after Dec. 31, 2017, see section 13603(f)(1) of Pub. L. 115–97, set out as a note under section 83 of this title. EFFECTIVE DATE OF 2011 AMENDMENT Pub. L. 112–56, title I, § 102(b), Nov. 21, 2011, 125 Stat. 712, provided that: ‘‘The amendment made by this sec- tion [amending this section] shall apply to payments made after December 31, 2011.’’ EFFECTIVE DATE OF 2006 AMENDMENT Pub. L. 109–222, title V, § 511(b), May 17, 2006, 120 Stat. 365, as amended by Pub. L. 111–5, div. B, title I, § 1511, Feb. 17, 2009, 123 Stat. 355, provided that: ‘‘The amend- ment made by this section [amending this section] shall apply to payments made after December 31, 2011.’’ EFFECTIVE DATE 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 an Page 2847 TITLE 26—INTERNAL REVENUE CODE § 3402 Effective and Termination Dates of 2001 Amendment note under section 1 of this title. EFFECTIVE DATE OF 1994 AMENDMENT Pub. L. 103–465, title VII, § 701(b), Dec. 8, 1994, 108 Stat. 4996, provided that: ‘‘The amendment made by this sec- tion [amending this section] shall apply to payments made after December 31, 1994.’’ Amendment by section 702(a) of Pub. L. 103–465 appli- cable 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 Pub. L. 102–486, title XIX, § 1934(b), Oct. 24, 1992, 106 Stat. 3032, provided that: ‘‘The amendment made by this section [amending this section] applies to pay- ments received after December 31, 1992.’’ Pub. L. 102–486, title XIX, § 1942(b), Oct. 24, 1992, 106 Stat. 3036, 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 Pub. L. 100–203, title X, § 10302(b), Dec. 22, 1987, 101 Stat. 1330–429, 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 ap- plicable 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 ap- plicable 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 ef- fective 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 Pub. L. 99–44, § 6(d), May 24, 1985, 99 Stat. 79, 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 Pub. L. 97–248, title III, § 317(b), Sept. 3, 1982, 96 Stat. 610, provided that: ‘‘The amendments made by sub- section (a) [amending this section] shall apply to pay- ments made after December 31, 1983.’’ Amendment by section 334(d) of Pub. L. 97–248 appli- cable 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 Pub. L. 97–34, title I, § 101(f)(2), Aug. 13, 1981, 95 Stat. 185, provided that: ‘‘The amendments made by sub- section (e) [amending this section] shall apply to remu- neration paid after September 30, 1981; except that the amendment made by subsection (e)(5) [amending this section] shall apply to remuneration paid after Decem- ber 31, 1981.’’ EFFECTIVE DATE OF 1980 AMENDMENT Pub. L. 96–601, § 4(f), Dec. 24, 1980, 94 Stat. 3498, pro- vided 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 Pub. L. 95–600, title I, § 101(f)(2), Nov. 6, 1978, 92 Stat. 2771, provided that: ‘‘The amendments made by sub- section (e) [amending this section] shall apply to remu- neration paid after December 31, 1978.’’ Pub. L. 95–600, title I, § 102(d)(2), Nov. 6, 1978, 92 Stat. 2771, provided that: ‘‘The amendments made by sub- section (c) [amending this section] shall apply with re- spect to remuneration paid after December 31, 1978.’’ Amendment by section 601(b)(2) of Pub. L. 95–600 ap- plicable 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 Pub. L. 95–30, title I, § 106(b), May 23, 1977, 91 Stat. 141, provided that: ‘‘The amendments made by section 105 [amending this section] shall apply to wages paid after April 30, 1977.’’ Pub. L. 95–30, title IV, § 405(b), May 23, 1977, 91 Stat. 156, provided that: ‘‘The amendments made by this sec- tion [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 appli- cable 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. Pub. L. 94–455, title XII, § 1207(f)(3), Oct. 4, 1976, 90 Stat. 1708, 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 appli- cable to taxable years ending after Dec. 31, 1975 and be- fore 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. Pub. L. 94–12, title II, § 209(c), Mar. 29, 1975, 89 Stat. 35, as amended by Pub. L. 94–164, § 5(a)(2); Pub. L. 94–331, § 3(a)(2); Pub. L. 94–396, § 2(b); Pub. L. 94–414, § 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 Pub. L. 92–178, title II, § 208(i), Dec. 10, 1971, 85 Stat. 517, provided that: ‘‘(1) The amendments made by this section [amend- ing 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 Janu- ary 16, 1972.’’ Page 2848 TITLE 26—INTERNAL REVENUE CODE § 3402 EFFECTIVE DATE OF 1969 AMENDMENTS Pub. L. 91–172, title VIII, § 805(h), Dec. 30, 1969, 83 Stat. 709, as amended by Pub. L. 99–514, § 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) [amend- ing 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 Rev- enue Code of 1986 [formerly I.R.C. 1954], added by sub- section (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.’’ Pub. L. 91–53, § 6(b), Aug. 7, 1969, 83 Stat. 96, provided that: ‘‘The amendments made by this section [amend- ing this section] shall apply with respect to wages paid after July 31, 1969, and before January 1, 1970.’’ Pub. L. 91–36, § 2(b), June 30, 1969, 83 Stat. 42, 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 Pub. L. 89–368, title I, § 101(e)(6), Mar. 15, 1966, 80 Stat. 62, provided that: ‘‘The amendments made by para- graphs (1) and (2) of this subsection [amending this sec- tion] shall apply only with respect to remuneration paid after December 31, 1966, but only with respect to withholding exemptions based on estimation years be- ginning after such date.’’ Pub. L. 89–368, title I, § 101(g), Mar. 15, 1966, 80 Stat. 62, 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 re- spect 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 re- spect to tips received by employees after 1965, see sec- tion 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 Pub. L. 88–272, title III, § 302(d), Feb. 26, 1964, 78 Stat. 146, provided that: ‘‘The amendments made by sub- sections (a) and (b) of this section [amending this sec- tion] shall apply with respect to remuneration paid after the seventh day following the date of the enact- ment 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 enact- ment 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 Act Aug. 9, 1955, ch. 666, § 3, 69 Stat. 605, provided that: ‘‘The amendment made by section 2 [amending this section] shall be applicable only with respect to re- muneration 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 liabil- ity for tax for periods ending after Nov. 5, 1990, see sec- tion 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title. PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1994 For provisions directing that if any amendments made by subtitle B [§§ 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 Pub. L. 99–514, title XV, § 1581(a), Oct. 22, 1986, 100 Stat. 2765, provided that: ‘‘The Secretary of the Treas- ury or his delegate shall modify the withholding sched- ules and withholding exemption certificates under sec- tion 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 classi- fication].’’ EMPLOYER’S RESPONSIBILITY UPON FAILURE OF EM- PLOYEE TO FILE REVISED WITHHOLDING ALLOWANCE CERTIFICATE BEFORE OCT. 1, 1987 Pub. L. 99–514, title XV, § 1581(c), Oct. 22, 1986, 100 Stat. 2766, as amended by Pub. L. 100–647, title I, § 1015(p), Nov. 10, 1988, 102 Stat. 3572, provided that: ‘‘If an employee has not filed a revised withholding allow- ance certificate before October 1, 1987, the employer shall withhold income taxes from the employee’s wages— ‘‘(1) as if the employee claimed 1 withholding allow- ance, if the employee checked the ‘single’ box on the employee’s previous withholding allowance certifi- cate, or ‘‘(2) as if the employee claimed 2 withholding allow- ances, if the employee checked the ‘married’ box on the employee’s previous withholding allowance cer- tificate. The preceding sentence shall not apply if its applica- tion would result in an increase in the number of with- holding allowances for the employee.’’ FAILURE TO DEDUCT AND WITHHOLD UNDER A DUTY CREATED OR INCREASED BY TAX REFORM ACT OF 1976 Pub. L. 95–30, title III, § 304, May 23, 1977, 91 Stat. 152, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ‘‘No person shall be liable in re- spect of any failure to deduct and withhold under sec- tion 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 ex- tent 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 Pub. L. 91–172, title VIII, § 805(b)(3), (4), Dec. 30, 1969, 83 Stat. 704, which provided for section 3402(b)(1) with- holding 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 Pub. L. 92–178, title II, § 208(b)(2), Dec. 10, 1971, 85 Stat. 516. TRANSITIONAL DETERMINATION STATUS DATE Pub. L. 89–368, title I, § 101(f), Mar. 15, 1966, 80 Stat. 62, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ‘‘Notwithstanding section 3402(f)(3)(B) of the Internal Revenue Code of 1986 [for- merly I.R.C. 1954], a withholding exemption certificate furnished the employer after the date of the enactment Page 2849 TITLE 26—INTERNAL REVENUE CODE § 3405 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 em- ployer, 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 Act Aug. 9, 1955, ch. 666, § 1, 69 Stat. 605, 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.’’ § 3403. Liability for tax 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. (Aug. 16, 1954, ch. 736, 68A Stat. 469; Pub. L. 97–248, title III, §§ 307(a)(2), 308(a), Sept. 3, 1982, 96 Stat. 589, 591; Pub. L. 98–67, title I, § 102(a), Aug. 5, 1983, 97 Stat. 369.) Editorial Notes 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 pay- ments 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 (§§ 301–308) of title III of Pub. L. 97–248 as of the close of June 30, 1983, and provided that the Inter- nal Revenue Code of 1954 [now 1986] [this title] shall be applied and administered (subject to certain excep- tions) as if such subtitle A (and the amendments made by such subtitle A) had not been enacted. § 3404. Return and payment by governmental em- ployer If the employer is the United States, or a State, or political subdivision thereof, or the District of Columbia, or any agency or instru- mentality 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 Co- lumbia, 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. (Aug. 16, 1954, ch. 736, 68A Stat. 469; Pub. L. 94–455, title XIX, § 1903(c), Oct. 4, 1976, 90 Stat. 1810.) Editorial Notes AMENDMENTS 1976—Pub. L. 94–455 struck out ‘‘Territory’’ after ‘‘or a State’’ and ‘‘of such State’’. § 3405. Special rules for pensions, annuities, and certain other deferred income (a) Periodic payments (1) Withholding as if payment were wages The payor of any periodic payment (as de- fined in subsection (e)(2)) shall withhold from such payment the amount which would be re- quired 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 pay- ments made to such individual. Such an elec- tion 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 ef- fect as provided by subsection (f)(3) of section 3402 for withholding allowance certificates. (4) Amount withheld where no withholding al- lowance certificate in effect In the case of any payment with respect to which a withholding allowance certificate is not in effect, the amount withheld under para- graph (1) shall be determined under rules pre- scribed by the Secretary. (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 para- graph (1) apply with respect to any nonperi- odic 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 dis- tributions 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 dis- tribution if the distributee elects under sec- tion 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 mean- ing 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