26 U.S.C. § 3402 : US Code - Section 3402: Income tax collected at source

Search 26 U.S.C. § 3402 : US Code - Section 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 Secretary may prescribe, and
(B) be in such form, and provide for such amounts to be
deducted and withheld, as the Secretary determines to be most
appropriate to carry out the purposes of this chapter and to
reflect the provisions of chapter 1 applicable to such periods.
(2) Amount of wages
For purposes of applying tables or procedures prescribed under
paragraph (1), the term "the amount of wages" means the amount by
which the wages exceed the number of withholding exemptions
claimed multiplied by the amount of one such exemption. The
amount of each withholding exemption shall be equal to the amount
of one personal exemption provided in section 151(b), prorated to
the payroll period. The maximum number of withholding exemptions
permitted shall be calculated in accordance with regulations
prescribed by the Secretary under this section, taking into
account any reduction in withholding to which an employee is
entitled under this section.
(b) Percentage method of withholding
(1) If wages are paid with respect to a period which is not a
payroll period, the withholding exemption allowable with respect to
each payment of such wages shall be the exemption allowed for a
miscellaneous payroll period containing a number of days (including
Sundays and holidays) equal to the number of days in the period
with respect to which such wages are paid.
(2) In any case in which wages are paid by an employer without
regard to any payroll period or other period, the withholding
exemption allowable with respect to each payment of such wages
shall be the exemption allowed for a miscellaneous payroll period
containing a number of days equal to the number of days (including
Sundays and holidays) which have elapsed since the date of the last
payment of such wages by such employer during the calendar year, or
the date of commencement of employment with such employer during
such year, or January 1 of such year, whichever is the later.
(3) In any case in which the period, or the time described in
paragraph (2), in respect of any wages is less than one week, the
Secretary, under regulations prescribed by him, may authorize an
employer to compute the tax to be deducted and withheld as if the
aggregate of the wages paid to the employee during the calendar
week were paid for a weekly payroll period.
(4) In determining the amount to be deducted and withheld under
this subsection, the wages may, at the election of the employer, be
computed to the nearest dollar.
(c) Wage bracket withholding
(1) At the election of the employer with respect to any employee,
the employer shall deduct and withhold upon the wages paid to such
employee a tax (in lieu of the tax required to be deducted and
withheld under subsection (a)) determined in accordance with tables
prescribed by the Secretary in accordance with paragraph (6).
(2) If wages are paid with respect to a period which is not a
payroll period, the amount to be deducted and withheld shall be
that applicable in the case of a miscellaneous payroll period
containing a number of days (including Sundays and holidays) equal
to the number of days in the period with respect to which such
wages are paid.
(3) In any case in which wages are paid by an employer without
regard to any payroll period or other period, the amount to be
deducted and withheld shall be that applicable in the case of a
miscellaneous payroll period containing a number of days equal to
the number of days (including Sundays and holidays) which have
elapsed since the date of the last payment of such wages by such
employer during the calendar year, or the date of commencement of
employment with such employer during such year, or January 1 of
such year, whichever is the later.
(4) In any case in which the period, or the time described in
paragraph (3), in respect of any wages is less than one week, the
Secretary, under regulations prescribed by him, may authorize an
employer to determine the amount to be deducted and withheld under
the tables applicable in the case of a weekly payroll period, in
which case the aggregate of the wages paid to the employee during
the calendar week shall be considered the weekly wages.
(5) If the wages exceed the highest wage bracket, in determining
the amount to be deducted and withheld under this subsection, the
wages may, at the election of the employer, be computed to the
nearest dollar.
(6) In the case of wages paid after December 31, 1969, the amount
deducted and withheld under paragraph (1) shall be determined in
accordance with tables prescribed by the Secretary. In the tables
so prescribed, the amounts set forth as amounts of wages and
amounts of income tax to be deducted and withheld shall be computed
on the basis of the table for an annual payroll period prescribed
pursuant to subsection (a).
(d) Tax paid by recipient
If the employer, in violation of the provisions of this chapter,
fails to deduct and withhold the tax under this chapter, and
thereafter the tax against which such tax may be credited is paid,
the tax so required to be deducted and withheld shall not be
collected from the employer; but this subsection shall in no case
relieve the employer from liability for any penalties or additions
to the tax otherwise applicable in respect of such failure to
deduct and withhold.
(e) Included and excluded wages
If the remuneration paid by an employer to an employee for
services performed during one-half or more of any payroll period of
not more than 31 consecutive days constitutes wages, all the
remuneration paid by such employer to such employee for such period
shall be deemed to be wages; but if the remuneration paid by an
employer to an employee for services performed during more than one-
half of any such payroll period does not constitute wages, then
none of the remuneration paid by such employer to such employee for
such period shall be deemed to be wages.
(f) Withholding exemptions
(1) In general
An employee receiving wages shall on any day be entitled to the
following withholding exemptions:
(A) an exemption for himself unless he is an individual
described in section 151(d)(2);
(B) if the employee is married, any exemption to which his
spouse is entitled, or would be entitled if such spouse were an
employee receiving wages, under subparagraph (A) or (D), but
only if such spouse does not have in effect a withholding
exemption certificate claiming such exemption;
(C) an exemption for each individual with respect to whom, on
the basis of facts existing at the beginning of such day, there
may reasonably be expected to be allowable an exemption under
section 151(c) for the taxable year under subtitle A in respect
of which amounts deducted and withheld under this chapter in
the calendar year in which such day falls are allowed as a
credit;
(D) any allowance to which he is entitled under subsection
(m), but only if his spouse does not have in effect a
withholding exemption certificate claiming such allowance; and
(E) a standard deduction allowance which shall be an amount
equal to one exemption (or more than one exemption if so
prescribed by the Secretary) unless (i) he is married (as
determined under section 7703) and his spouse is an employee
receiving wages subject to withholding or (ii) he has
withholding exemption certificates in effect with respect to
more than one employer.
For purposes of this title, any standard deduction allowance
under subparagraph (E) shall be treated as if it were denominated
a withholding exemption.
(2) Exemption certificates
(A) On commencement of employment
On or before the date of the commencement of employment with
an employer, the employee shall furnish the employer with a
signed withholding exemption certificate relating to the number
of withholding exemptions which he claims, which shall in no
event exceed the number to which he is entitled.
(B) Change of status
If, on any day during the calendar year, the number of
withholding exemptions to which the employee is entitled is
less than the number of withholding exemptions claimed by the
employee on the withholding exemption certificate then in
effect with respect to him, the employee shall within 10 days
thereafter furnish the employer with a new withholding
exemption certificate relating to the number of withholding
exemptions which the employee then claims, which shall in no
event exceed the number to which he is entitled on such day.
If, on any day during the calendar year, the number of
withholding exemptions to which the employee is entitled is
greater than the number of withholding exemptions claimed, the
employee may furnish the employer with a new withholding
exemption certificate relating to the number of withholding
exemptions which the employee then claims, which shall in no
event exceed the number to which he is entitled on such day.
(C) Change of status which affects next calendar year
If on any day during the calendar year the number of
withholding exemptions to which the employee will be, or may
reasonably be expected to be, entitled at the beginning of his
next taxable year under subtitle A is different from the number
to which the employee is entitled on such day, the employee
shall, in such cases and at such times as the Secretary may by
regulations prescribe, furnish the employer with a withholding
exemption certificate relating to the number of withholding
exemptions which he claims with respect to such next taxable
year, which shall in no event exceed the number to which he
will be, or may reasonably be expected to be, so entitled.
(3) When certificate takes effect
(A) First certificate furnished
A withholding exemption certificate furnished the employer in
cases in which no previous such certificate is in effect shall
take effect as of the beginning of the first payroll period
ending, or the first payment of wages made without regard to a
payroll period, on or after the date on which such certificate
is so furnished.
(B) Furnished to take place of existing certificate
(i) In general
Except as provided in clauses (ii) and (iii), a withholding
exemption certificate furnished to the employer in cases in
which a previous such certificate is in effect shall take
effect as of the beginning of the 1st payroll period ending
(or the 1st payment of wages made without regard to a payroll
period) on or after the 30th day after the day on which such
certificate is so furnished.
(ii) Employer may elect earlier effective date
At the election of the employer, a certificate described in
clause (i) may be made effective beginning with any payment
of wages made on or after the day on which the certificate is
so furnished and before the 30th day referred to in clause
(i).
(iii) Change of status which affects next year
Any certificate furnished pursuant to paragraph (2)(C)
shall not take effect, and may not be made effective, with
respect to any payment of wages made in the calendar year in
which the certificate is furnished.
(4) Period during which certificate remains in effect
A withholding exemption certificate which takes effect under
this subsection, or which on December 31, 1954, was in effect
under the corresponding subsection of prior law, shall continue
in effect with respect to the employer until another such
certificate takes effect under this subsection.
(5) Form and contents of certificate
Withholding exemption certificates shall be in such form and
contain such information as the Secretary may by regulations
prescribe.
(6) Exemption of certain nonresident aliens
Notwithstanding the provisions of paragraph (1), a nonresident
alien individual (other than an individual described in section
3401(a)(6)(A) or (B)) shall be entitled to only one withholding
exemption.
(7) Exemption where certificate with another employer is in
effect
If a withholding exemption certificate is in effect with
respect to one employer, an employee shall not be entitled under
a certificate in effect with any other employer to any
withholding exemption which he has claimed under such first
certificate.
(g) Overlapping pay periods, and payment by agent or fiduciary
If a payment of wages is made to an employee by an employer -
(1) with respect to a payroll period or other period, any part
of which is included in a payroll period or other period with
respect to which wages are also paid to such employee by such
employer, or
(2) without regard to any payroll period or other period, but
on or prior to the expiration of a payroll period or other period
with respect to which wages are also paid to such employee by
such employer, or
(3) with respect to a period beginning in one and ending in
another calendar year, or
(4) through an agent, fiduciary, or other person who also has
the control, receipt, custody, or disposal of, or pays, the wages
payable by another employer to such employee,
the manner of withholding and the amount to be deducted and
withheld under this chapter shall be determined in accordance with
regulations prescribed by the Secretary under which the withholding
exemption allowed to the employee in any calendar year shall
approximate the withholding exemption allowable with respect to an
annual payroll period.
(h) Alternative methods of computing amount to be withheld
The Secretary may, under regulations prescribed by him, authorize
-
(1) Withholding on basis of average wages
An employer -
(A) to estimate the wages which will be paid to any employee
in any quarter of the calendar year,
(B) to determine the amount to be deducted and withheld upon
each payment of wages to such employee during such quarter as
if the appropriate average of the wages so estimated
constituted the actual wages paid, and
(C) to deduct and withhold upon any payment of wages to such
employee during such quarter (and, in the case of tips referred
to in subsection (k), within 30 days thereafter) such amount as
may be necessary to adjust the amount actually deducted and
withheld upon the wages of such employee during such quarter to
the amount required to be deducted and withheld during such
quarter without regard to this subsection.
(2) Withholding on basis of annualized wages
An employer to determine the amount of tax to be deducted and
withheld upon a payment of wages to an employee for a payroll
period by -
(A) multiplying the amount of an employee's wages for a
payroll period by the number of such payroll periods in the
calendar year,
(B) determining the amount of tax which would be required to
be deducted and withheld upon the amount determined under
subparagraph (A) if such amount constituted the actual wages
for the calendar year and the payroll period of the employee
were an annual payroll period, and
(C) dividing the amount of tax determined under subparagraph
(B) by the number of payroll periods (described in subparagraph
(A)) in the calendar year.
(3) Withholding on basis of cumulative wages
An employer, in the case of any employee who requests to have
the amount of tax to be withheld from his wages computed on the
basis of his cumulative wages, to -
(A) add the amount of the wages to be paid to the employee
for the payroll period to the total amount of wages paid by the
employer to the employee during the calendar year,
(B) divide the aggregate amount of wages computed under
subparagraph (A) by the number of payroll periods to which such
aggregate amount of wages relates,
(C) compute the total amount of tax that would have been
required to be deducted and withheld under subsection (a) if
the average amount of wages (as computed under subparagraph
(B)) had been paid to the employee for the number of payroll
periods to which the aggregate amount of wages (computed under
subparagraph (A)) relates,
(D) determine the excess, if any, of the amount of tax
computed under subparagraph (C) over the total amount of tax
deducted and withheld by the employer from wages paid to the
employee during the calendar year, and
(E) deduct and withhold upon the payment of wages (referred
to in subparagraph (A)) to the employee an amount equal to the
excess (if any) computed under subparagraph (D).
(4) Other methods
An employer to determine the amount of tax to be deducted and
withheld upon the wages paid to an employee by any other method
which will require the employer to deduct and withhold upon such
wages substantially the same amount as would be required to be
deducted and withheld by applying subsection (a) or (c), either
with respect to a payroll period or with respect to the entire
taxable year.
(i) Changes in withholding
(1) In general
The Secretary may by regulations provide for increases in the
amount of withholding otherwise required under this section in
cases where the employee requests such changes.
(2) Treatment as tax
Any increased withholding under paragraph (1) shall for all
purposes be considered tax required to be deducted and withheld
under this chapter.
(j) Noncash remuneration to retail commission salesman
In the case of remuneration paid in any medium other than cash
for services performed by an individual as a retail salesman for a
person, where the service performed by such individual for such
person is ordinarily performed for remuneration solely by way of
cash commission an employer shall not be required to deduct or
withhold any tax under this subchapter with respect to such
remuneration, provided that such employer files with the Secretary
such information with respect to such remuneration as the Secretary
may by regulation prescribe.
(k) Tips
In the case of tips which constitute wages, subsection (a) shall
be applicable only to such tips as are included in a written
statement furnished to the employer pursuant to section 6053(a),
and only to the extent that the tax can be deducted and withheld by
the employer, at or after the time such statement is so furnished
and before the close of the calendar year in which such statement
is furnished, from such wages of the employee (excluding tips, but
including funds turned over by the employee to the employer for the
purpose of such deduction and withholding) as are under the control
of the employer; and an employer who is furnished by an employee a
written statement of tips (received in a calendar month) pursuant
to section 6053(a) to which paragraph (16)(B) of section 3401(a) is
applicable may deduct and withhold the tax with respect to such
tips from any wages of the employee (excluding tips) under his
control, even though at the time such statement is furnished the
total amount of the tips included in statements furnished to the
employer as having been received by the employee in such calendar
month in the course of his employment by such employer is less than
$20. Such tax shall not at any time be deducted and withheld in an
amount which exceeds the aggregate of such wages and funds
(including funds turned over under section 3102(c)(2) or section
3202(c)(2)) minus any tax required by section 3102(a) or section
3202(a) to be collected from such wages and funds.
(l) Determination and disclosure of marital status
(1) Determination of status by employer
For purposes of applying the tables in subsections (a) and (c)
to a payment of wages, the employer shall treat the employee as a
single person unless there is in effect with respect to such
payment of wages a withholding exemption certificate furnished to
the employer by the employee after the date of the enactment of
this subsection indicating that the employee is married.
(2) Disclosure of status by employee
An employee shall be entitled to furnish the employer with a
withholding exemption certificate indicating he is married only
if, on the day of such furnishing, he is married (determined with
the application of the rules in paragraph (3)). An employee whose
marital status changes from married to single shall, at such time
as the Secretary may by regulations prescribe, furnish the
employer with a new withholding exemption certificate.
(3) Determination of marital status
For purposes of paragraph (2), an employee shall on any day be
considered -
(A) as not married, if (i) he is legally separated from his
spouse under a decree of divorce or separate maintenance, or
(ii) either he or his spouse is, or on any preceding day within
the calendar year was, a nonresident alien; or
(B) as married, if (i) his spouse (other than a spouse
referred to in subparagraph (A)) died within the portion of his
taxable year which precedes such day, or (ii) his spouse died
during one of the two taxable years immediately preceding the
current taxable year and, on the basis of facts existing at the
beginning of such day, the employee reasonably expects, at the
close of his taxable year, to be a surviving spouse (as defined
in section 2(a)).
(m) Withholding allowances
Under regulations prescribed by the Secretary, an employee shall
be entitled to additional withholding allowances or additional
reductions in withholding under this subsection. In determining the
number of additional withholding allowances or the amount of
additional reductions in withholding under this subsection, the
employee may take into account (to the extent and in the manner
provided by such regulations) -
(1) estimated itemized deductions allowable under chapter 1
(other than the deductions referred to in section 151 and other
than the deductions required to be taken into account in
determining adjusted gross income under section 62(a) (other than
paragraph (10) thereof)),
(2) estimated tax credits allowable under chapter 1, and
(3) such additional deductions (including the additional
standard deduction under section 63(c)(3) for the aged and blind)
and other items as may be specified by the Secretary in
regulations.
(n) Employees incurring no income tax liability
Notwithstanding any other provision of this section, an employer
shall not be required to deduct and withhold any tax under this
chapter upon a payment of wages to an employee if there is in
effect with respect to such payment a withholding exemption
certificate (in such form and containing such other information as
the Secretary may prescribe) furnished to the employer by the
employee certifying that the employee -
(1) incurred no liability for income tax imposed under subtitle
A for his preceding taxable year, and
(2) anticipates that he will incur no liability for income tax
imposed under subtitle A for his current taxable year.
The Secretary shall by regulations provide for the coordination of
the provisions of this subsection with the provisions of subsection
(f).
(o) Extension of withholding to certain payments other than wages
(1) General rule
For purposes of this chapter (and so much of subtitle F as
relates to this chapter) -
(A) any supplemental unemployment compensation benefit paid
to an individual,
(B) any payment of an annuity to an individual, if at the
time the payment is made a request that such annuity be subject
to withholding under this chapter is in effect, and
(C) any payment to an individual of sick pay which does not
constitute wages (determined without regard to this
subsection), if at the time the payment is made a request that
such sick pay be subject to withholding under this chapter is
in effect,
shall be treated as if it were a payment of wages by an employer
to an employee for a payroll period.
(2) Definitions
(A) Supplemental unemployment compensation benefits
For purposes of paragraph (1), the term "supplemental
unemployment compensation benefits" means amounts which are
paid to an employee, pursuant to a plan to which the employer
is a party, because of an employee's involuntary separation
from employment (whether or not such separation is temporary),
resulting directly from a reduction in force, the
discontinuance of a plant or operation, or other similar
conditions, but only to the extent such benefits are includible
in the employee's gross income.
(B) Annuity
For purposes of this subsection, the term "annuity" means any
amount paid to an individual as a pension or annuity.
(C) Sick pay
For purposes of this subsection, the term "sick pay" means
any amount which -
(i) is paid to an employee pursuant to a plan to which the
employer is a party, and
(ii) constitutes remuneration or a payment in lieu of
remuneration for any period during which the employee is
temporarily absent from work on account of sickness or
personal injuries.
(3) Amount withheld from annuity payments or sick pay
If a payee makes a request that an annuity or any sick pay be
subject to withholding under this chapter, the amount to be
deducted and withheld under this chapter from any payment to
which such request applies shall be an amount (not less than a
minimum amount determined under regulations prescribed by the
Secretary) specified by the payee in such request. The amount
deducted and withheld with respect to a payment which is greater
or less than a full payment shall bear the same relation to the
specified amount as such payment bears to a full payment.
(4) Request for withholding
A request that an annuity or any sick pay be subject to
withholding under this chapter -
(A) shall be made by the payee in writing to the person
making the payments and shall contain the social security
number of the payee,
(B) shall specify the amount to be deducted and withheld from
each full payment, and
(C) shall take effect -
(i) in the case of sick pay, with respect to payments made
more than 7 days after the date on which such request is
furnished to the payor, or
(ii) in the case of an annuity, at such time (after the
date on which such request is furnished to the payor) as the
Secretary shall by regulations prescribe.
Such a request may be changed or terminated by furnishing to the
person making the payments a written statement of change or
termination which shall take effect in the same manner as
provided in subparagraph (C). At the election of the payor, any
such request (or statement of change or revocation) may take
effect earlier than as provided in subparagraph (C).
(5) Special rule for sick pay paid pursuant to certain collective-
bargaining agreements
In the case of any sick pay paid pursuant to a collective-
bargaining agreement between employee representatives and one or
more employers which contains a provision specifying that this
paragraph is to apply to sick pay paid pursuant to such agreement
and contains a provision for determining the amount to be
deducted and withheld from each payment of such sick pay -
(A) the requirement of paragraph (1)(C) that a request for
withholding be in effect shall not apply, and
(B) except as provided in subsection (n), the amounts to be
deducted and withheld under this chapter shall be determined in
accordance with such agreement.
The preceding sentence shall not apply with respect to sick pay
paid pursuant to any agreement to any individual unless the
social security number of such individual is furnished to the
payor and the payor is furnished with such information as is
necessary to determine whether the payment is pursuant to the
agreement and to determine the amount to be deducted and
withheld.
(6) Coordination with withholding on designated distributions
under section 3405
This subsection shall not apply to any amount which is a
designated distribution (within the meaning of section
3405(e)(1)).
(p) Voluntary withholding agreements
(1) Certain Federal payments
(A) In general
If, at the time a specified Federal payment is made to any
person, a request by such person is in effect that such payment
be subject to withholding under this chapter, then for purposes
of this chapter and so much of subtitle F as relates to this
chapter, such payment shall be treated as if it were a payment
of wages by an employer to an employee.
(B) Amount withheld
The amount to be deducted and withheld under this chapter
from any payment to which any request under subparagraph (A)
applies shall be an amount equal to the percentage of such
payment specified in such request. Such a request shall apply
to any payment only if the percentage specified is 7 percent,
any percentage applicable to any of the 3 lowest income
brackets in the table under section 1(c), or such other
percentage as is permitted under regulations prescribed by the
Secretary.
(C) Specified Federal payments
For purposes of this paragraph, the term "specified Federal
payment" means -
(i) any payment of a social security benefit (as defined in
section 86(d)),
(ii) any payment referred to in the second sentence of
section 451(d) which is treated as insurance proceeds,
(iii) any amount which is includible in gross income under
section 77(a), and
(iv) any other payment made pursuant to Federal law which
is specified by the Secretary for purposes of this paragraph.
(D) Requests for withholding
Rules similar to the rules that apply to annuities under
subsection (o)(4) shall apply to requests under this paragraph
and paragraph (2).
(2) Voluntary withholding on unemployment benefits
If, at the time a payment of unemployment compensation (as
defined in section 85(b)) is made to any person, a request by
such person is in effect that such payment be subject to
withholding under this chapter, then for purposes of this chapter
and so much of subtitle F as relates to this chapter, such
payment shall be treated as if it were a payment of wages by an
employer to an employee. The amount to be deducted and withheld
under this chapter from any payment to which any request under
this paragraph applies shall be an amount equal to 10 percent of
such payment.
(3) Authority for other voluntary withholding
The Secretary is authorized by regulations to provide for
withholding -
(A) from remuneration for services performed by an employee
for the employee's employer which (without regard to this
paragraph) does not constitute wages, and
(B) from any other type of payment with respect to which the
Secretary finds that withholding would be appropriate under the
provisions of this chapter,
if the employer and employee, or the person making and the person
receiving such other type of payment, agree to such withholding.
Such agreement shall be in such form and manner as the Secretary
may by regulations prescribe. For purposes of this chapter (and
so much of subtitle F as relates to this chapter), remuneration
or other payments with respect to which such agreement is made
shall be treated as if they were wages paid by an employer to an
employee to the extent that such remuneration is paid or other
payments are made during the period for which the agreement is in
effect.
(q) Extension of withholding to certain gambling winnings
(1) General rule
Every person, including the Government of the United States, a
State, or a political subdivision thereof, or any
instrumentalities of the foregoing, making any payment of
winnings which are subject to withholding shall deduct and
withhold from such payment a tax in an amount equal to the
product of the third lowest rate of tax applicable under section
1(c) and such payment.
(2) Exemption where tax otherwise withheld
In the case of any payment of winnings which are subject to
withholding made to a nonresident alien individual or a foreign
corporation, the tax imposed under paragraph (1) shall not apply
to any such payment subject to tax under section 1441(a)
(relating to withholding on nonresident aliens) or tax under
section 1442(a) (relating to withholding on foreign
corporations).
(3) Winnings which are subject to withholding
For purposes of this subsection, the term "winnings which are
subject to withholding" means proceeds from a wager determined in
accordance with the following:
(A) In general
Except as provided in subparagraphs (B) and (C), proceeds of
more than $5,000 from a wagering transaction, if the amount of
such proceeds is at least 300 times as large as the amount
wagered.
(B) State-conducted lotteries
Proceeds of more than $5,000 from a wager placed in a lottery
conducted by an agency of a State acting under authority of
State law, but only if such wager is placed with the State
agency conducting such lottery, or with its authorized
employees or agents.
(C) Sweepstakes, wagering pools, certain parimutuel pools, jai
alai, and lotteries
Proceeds of more than $5,000 from -
(i) a wager placed in a sweepstakes, wagering pool, or
lottery (other than a wager described in subparagraph (B)),
or
(ii) a wagering transaction in a parimutuel pool with
respect to horse races, dog races, or jai alai if the amount
of such proceeds is at least 300 times as large as the amount
wagered.
(4) Rules for determining proceeds from a wager
For purposes of this subsection -
(A) proceeds from a wager shall be determined by reducing the
amount received by the amount of the wager, and
(B) proceeds which are not money shall be taken into account
at their fair market value.
(5) Exception for bingo, keno, and slot machines
The tax imposed under paragraph (1) shall not apply to winnings
from a slot machine, keno, and bingo.
(6) Statement by recipient
Every person who is to receive a payment of winnings which are
subject to withholding shall furnish the person making such
payment a statement, made under the penalties of perjury,
containing the name, address, and taxpayer identification number
of the person receiving the payment and of each person entitled
to any portion of such payment.
(7) Coordination with other sections
For purposes of sections 3403 and 3404 and for purposes of so
much of subtitle F (except section 7205) as relates to this
chapter, payments to any person of winnings which are subject to
withholding shall be treated as if they were wages paid by an
employer to an employee.
(r) Extension of withholding to certain taxable payments of Indian
casino profits
(1) In general
Every person, including an Indian tribe, making a payment to a
member of an Indian tribe from the net revenues of any class II
or class III gaming activity conducted or licensed by such tribe
shall deduct and withhold from such payment a tax in an amount
equal to such payment's proportionate share of the annualized
tax.
(2) Exception
The tax imposed by paragraph (1) shall not apply to any payment
to the extent that the payment, when annualized, does not exceed
an amount equal to the sum of -
(A) the basic standard deduction (as defined in section
63(c)) for an individual to whom section 63(c)(2)(C) (!1)
applies, and
(B) the exemption amount (as defined in section 151(d)).
(3) Annualized tax
For purposes of paragraph (1), the term "annualized tax" means,
with respect to any payment, the amount of tax which would be
imposed by section 1(c) (determined without regard to any rate of
tax in excess of the fourth lowest rate of tax applicable under
section 1(c)) on an amount of taxable income equal to the excess
of -
(A) the annualized amount of such payment, over
(B) the amount determined under paragraph (2).
(4) Classes of gaming activities, etc.
For purposes of this subsection, terms used in paragraph (1)
which are defined in section 4 of the Indian Gaming Regulatory
Act (25 U.S.C. 2701 et seq.), as in effect on the date of the
enactment of this subsection, shall have the respective meanings
given such terms by such section.
(5) Annualization
Payments shall be placed on an annualized basis under
regulations prescribed by the Secretary.
(6) Alternate withholding procedures
At the election of an Indian tribe, the tax imposed by this
subsection on any payment made by such tribe shall be determined
in accordance with such tables or computational procedures as may
be specified in regulations prescribed by the Secretary (in lieu
of in accordance with paragraphs (2) and (3)).
(7) Coordination with other sections
For purposes of this chapter and so much of subtitle F as
relates to this chapter, payments to any person which are subject
to withholding under this subsection shall be treated as if they
were wages paid by an employer to an employee.
(s) Exemption from withholding for any vehicle fringe benefit
(1) Employer election not to withhold
The employer may elect not to deduct and withhold any tax under
this chapter with respect to any vehicle fringe benefit provided
to any employee if such employee is notified by the employer of
such election (at such time and in such manner as the Secretary
shall by regulations prescribe). The preceding sentence shall not
apply to any vehicle fringe benefit unless the amount of such
benefit is included by the employer on a statement timely
furnished under section 6051.
(2) Employer must furnish W-2
Any vehicle fringe benefit shall be treated as wages from which
amounts are required to be deducted and withheld under this
chapter for purposes of section 6051.
(3) Vehicle fringe benefit
For purposes of this subsection, the term "vehicle fringe
benefit" means any fringe benefit -
(A) which constitutes wages (as defined in section 3401), and
(B) which consists of providing a highway motor vehicle for
the use of the employee.