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Internal Revenue Code, § 3102. Deduction Of Tax From Wages

I.R.C. § 3102(a) Requirement
The tax imposed by section 3101 shall be collected by the employer of the taxpayer, by deducting the amount of the tax from the wages as and when paid. An employer who in any calendar year pays to an employee cash remuneration to which paragraph (7)(B) of section 3121(a) is applicable may deduct an amount equivalent to such tax from any such payment of remuneration, even though at the time of payment the total amount of such remuneration paid to the employee by the employer in the calendar year is less than the applicable dollar threshold (as defined in section 3121(x)) for such year; and an employer who in any calendar year pays to an employee cash remuneration to which paragraph (7)(C) or (10) of section 3121(a) is applicable may deduct an amount equivalent to such tax from any such payment of remuneration, even though at the time of payment the total amount of such remuneration paid to the employee by the employer in the calendar year is less than $100; and an employer who in any calendar year pays to an employee cash remuneration to which paragraph (8)(B) of section 3121(a) is applicable may deduct an amount equivalent to such tax from any such payment of remuneration, even though at the time of payment the total amount of such remuneration paid to the employee by the employer in the calendar year is less than $150; and an employer who is furnished by an employee a written statement of tips (received in a calendar month) pursuant to section 6053(a) to which paragraph (12)(B) of section 3121(a) is applicable may deduct an amount equivalent to such tax with respect to such tips from any wages of the employee (exclusive of tips) under his control, even though at the time such statement is furnished the total amount of the tips included in statements furnished to the employer as having been received by the employee in such calendar month in the course of his employment by such employer is less than $20.
I.R.C. § 3102(b) Indemnification Of Employer
Every employer required so to deduct the tax shall be liable for the payment of such tax, and shall be indemnified against the claims and demands of any person for the amount of any such payment made by such employer.
I.R.C. § 3102(c) Special Rule For Tips
I.R.C. § 3102(c)(1)
In the case of tips which constitute wages, subsection (a) shall be applicable only to such tips as are included in a written statement furnished to the employer pursuant to section 6053(a), and only to the extent that collection can be made by the employer, at or after the time such statement is so furnished and before the close of the 10th day following the calendar month (or, if paragraph (3) applies, the 30th day following the year) in which the tips were deemed paid, by deducting the amount of the tax from such wages of the employee (excluding tips, but including funds turned over by the employee to the employer pursuant to paragraph (2)) as are under control of the employer.
I.R.C. § 3102(c)(2)
If the tax imposed by section 3101, with respect to tips which are included in written statements furnished in any month to the employer pursuant to section 6053(a), exceeds the wages of the employee (excluding tips) from which the employer is required to collect the tax under paragraph (1), the employee may furnish to the employer on or before the 10th day of the following month (or, if paragraph (3) applies, on or before the 30th day of the following year) an amount of money equal to the amount of the excess.
I.R.C. § 3102(c)(3)
The Secretary may, under regulations prescribed by him, authorize employers—
I.R.C. § 3102(c)(3)(A)
to estimate the amount of tips that will be reported by the employee pursuant to section 6053(a) in any calendar year,
I.R.C. § 3102(c)(3)(B)
to determine the amount to be deducted upon each payment of wages (exclusive of tips) during such year as if the tips so estimated constituted the actual tips so reported, and
I.R.C. § 3102(c)(3)(C)
to deduct upon any payment of wages (other than tips, but including funds turned over by the employee to the employer pursuant to paragraph (2)) to such employee during such year (and within 30 days thereafter) such amount as may be necessary to adjust the amount actually deducted upon such wages of the employee during the year to the amount required to be deducted in respect of tips included in written statements furnished to the employer during the year.
I.R.C. § 3102(c)(4)
If the tax imposed by section 3101 with respect to tips which constitute wages exceeds the portion of such tax which can be collected by the employer from the wages of the employee pursuant to paragraph (1) or paragraph (3), such excess shall be paid by the employee.
I.R.C. § 3102(d) Special Rule For Certain Taxable Group-Term Life Insurance Benefits
I.R.C. § 3102(d)(1) In General
In the case of any payment for group-term life insurance to which this subsection applies—
I.R.C. § 3102(d)(1)(A)
subsection (a) shall not apply,
I.R.C. § 3102(d)(1)(B)
the employer shall separately include on the statement required under section 6051
I.R.C. § 3102(d)(1)(B)(i)
the portion of the wages which consists of payments for group-term life insurance to which this subsection applies, and
I.R.C. § 3102(d)(1)(B)(ii)
the amount of the tax imposed by section 3101 on such payments, and
I.R.C. § 3102(d)(1)(C)
the tax imposed by section 3101 on such payments shall be paid by the employee.
I.R.C. § 3102(d)(2) Benefits To Which Subsection Applies
This subsection shall apply to any payment for group-term life insurance to the extent—
I.R.C. § 3102(d)(2)(A)
such payment constitutes wages, and
I.R.C. § 3102(d)(2)(B)
such payment is for coverage for periods during which an employment relationship no longer exists between the employee and the employer.
I.R.C. § 3102(e) Special Rule For Certain Transferred Federal Employees
In the case of any payments of wages for service performed in the employ of an international organization pursuant to a transfer to which the provisions of section 3121(y) are applicable—
I.R.C. § 3102(e)(1)
subsection (a) shall not apply,
I.R.C. § 3102(e)(2)
the head of the Federal agency from which the transfer was made shall separately include on the statement required under section 6051
I.R.C. § 3102(e)(2)(A)
the amount determined to be the amount of the wages for such service, and
I.R.C. § 3102(e)(2)(B)
the amount of the tax imposed by section 3101 on such payments, and
I.R.C. § 3102(e)(3)
the tax imposed by section 3101 on such payments shall be paid by the employee.
I.R.C. § 3102(f) Special Rules For Additional Tax
I.R.C. § 3102(f)(1) In General
In the case of any tax imposed by section 3101(b)(2), subsection (a) shall only apply to the extent to which the taxpayer receives wages from the employer in excess of $200,000, and the employer may disregard the amount of wages received by such taxpayer's spouse.
I.R.C. § 3102(f)(2) Collection Of Amounts Not Withheld
To the extent that the amount of any tax imposed by section 3101(b)(2) is not collected by the employer, such tax shall be paid by the employee.
I.R.C. § 3102(f)(3) Tax Paid By Recipient
If an employer, in violation of this chapter, fails to deduct and withhold the tax imposed by section 3101(b)(2) and thereafter the tax is paid by the employee, the tax so required to be deducted and withheld shall not be collected from the employer, but this paragraph shall in no case relieve the employer from liability for any penalties or additions to tax otherwise applicable in respect of such failure to deduct and withhold.
(Added by Aug. 16, 1954, ch. 736, 68A Stat. 415; and Amended by Sept. 1, 1954, ch. 1206, title II, Sec. 205A, 68 Stat. 1093; Aug. 1, 1956, ch. 836, title II, Sec. 201(h)(3), 70 Stat. 841; July 30, 1965, Pub. L. 89-97, title III, Sec. 313(c)(1), (2), 79 Stat. 382, 383; Oct. 4, 1976, Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A), 90 Stat. 1834; Dec. 20, 1977, Pub. L. 95-216, title III, Sec. 355(a), (b), 91 Stat. 1555; Nov. 5, 1990, Pub. L. 101-508, title V, Sec. 5124(a), 104 Stat. 1388-284; Aug. 15, 1994, Pub. L. 103-296, title III, Sec. 319(a)(3); Oct. 22, 1994, Pub. L. 103-387, Sec. 2(a)(1)(D); Mar. 2, 2004, Pub. L. 108-203, Sec. 424, 118 Stat. 493; Pub. L. 111-148, Sec. 9015(a)(2), Mar. 23, 2010, 124 Stat. 119.)
BACKGROUND NOTES
AMENDMENTS
2010 - Subsec. (f). Pub. L. 111-148, Sec. 9015(a)(2), added subsec. (f).
2004 - Subsec. (a). Pub. L. 108-203, Sec. 424, amended subsec. (a) by striking “and the employee has not performed agricultural labor for the employer on 20 days or more in the calendar year for cash remuneration computed on a time basis” after “less than $150”.
1994 - Subsec. (e). Pub. L. 103-296, Sec. 319(a)(3), added new subsection (e), effective with respect to service performed after the calendar quarter following the calendar quarter in which the date of enactment of this Act occurred (August 15, 1994).
Subsec. (a). Pub. L. 103-387, Sec. 2(a)(1)(D) substituted ‘calendar year’ for ‘calendar quarter’ and substituted ‘the applicable dollar threshold (as defined in section 3121(x)) for such year’ for ‘$50’, effective for remuneration paid after December 31, 1993.
1990 - Subsec. (d). Pub. L. 101-508 added subsec. (d).
1977 - Subsec. (a). Pub. L. 95-216, Sec. 355(a), substituted ‘cash remuneration to which paragraph (7)(B) of section 3121(a) is applicable’ for ‘cash remuneration to which paragraph (7)(B) or (C) or (10) of section 3121(a) is applicable’ and inserted ‘and an employer who in any calendar year pays to an employee cash remuneration to which paragraph (7)(C) or (10) of section 3121(a) is applicable may deduct an amount equivalent to such tax from any such payment of remuneration, even though at the time of payment the total amount of such remuneration paid to the employee by the employer in the calendar year is less than $100;’.
Subsec. (c)(1), (2). Pub. L. 95-216, Sec. 355(b)(1), substituted ‘year’ for ‘quarter’ wherever appearing.
Subsec. (c)(3)(A). Pub. L. 95-216, Sec. 355(b)(2)(A), substituted ‘in any calendar year’ for ‘in any quarter of the calendar year’.
Subsec. (c)(3)(B), (C). Pub. L. 95-216, Sec. 355(b)(2)(B), substituted ‘year’ for ‘quarter’ wherever appearing.
1976 - Subsec. (c)(3). Pub. L. 94-455 struck out ‘or his delegate’ after ‘Secretary’.
1965 - Subsec. (a). Pub. L. 89-97, Sec. 313(c)(2), inserted provisions at end of second sentence allowing a deduction from any wages of an employee of an amount equivalent to the tax on tips when an employer is furnished with a written statement of tips received by an employee.
Subsec. (c). Pub. L. 89-97, Sec. 313(c)(1), added subsec. (c).
1956 - Subsec. (a). Act Aug. 1, 1956, substituted ‘$150 and the employee has not performed agricultural labor for the employer on 20 days or more in the calendar year for cash remuneration computed on a time basis’ for ‘$100’.
1954 - Subsec. (a). Act Sept. 1, 1954, inserted last sentence permitting in certain instances an employer to deduct employee tax even though payment to employee is less than $50 for calendar quarter or $100 for calendar year.
EFFECTIVE DATE OF 2010 AMENDMENT
Amendment by Section 9015(a)(2) of Pub. L. 111-148 effective for remuneration received, and taxable years beginning, after December 31, 2012.
EFFECTIVE DATE OF 2004 AMENDMENT
Amendment by Section 424 of Pub. L. 108-203 effective on the date of the enactment of this Act [Enacted: Mar. 2, 2004].
EFFECTIVE DATE OF 1990 AMENDMENT
Section 5124(c) of Pub. L. 101-508 provided that: ‘The amendments made by this section (amending this section and section 3202 of this title) shall apply to coverage provided after December 31, 1990.’
EFFECTIVE DATE OF 1977 AMENDMENT
Section 355(c) of Pub. L. 95-216 provided that: ‘The amendments made by this section (amending this section) shall apply with respect to remuneration paid and to tips received after December 31, 1977.’
EFFECTIVE DATE OF 1965 AMENDMENT
Amendment by Pub. L. 89-97 applicable only with respect to tips received by employees after 1965, see section 313(f) of Pub. L. 89-97, set out as an Effective Date note under section 6053 of this title.
ROLLOVER OF AMOUNTS RECEIVED IN AIRLINE CARRIER BANKRUPTCY
Section 1106 of Pub. L. 112-95, as amended by Pub. L. 113-243, Sec. 1, provided that:
“(a) GENERAL RULES.—
“(1) ROLLOVER OF AIRLINE PAYMENT AMOUNT.—If a qualified airline employee receives any airline payment amount and transfers any portion of such amount to a traditional IRA within 180 days of receipt of such amount (or, if later, within 180 days of the date of the enactment of this Act), then such amount (to the extent so transferred) shall be treated as a rollover contribution described in section 402(c) of the Internal Revenue Code of 1986. A qualified airline employee making such a transfer may exclude from gross income the amount transferred, in the taxable year in which the airline payment amount was paid to the qualified airline employee by the commercial passenger airline carrier.
“(2) TRANSFER OF AMOUNTS ATTRIBUTABLE TO AIRLINE PAYMENT AMOUNT FOLLOWING ROLLOVER TO ROTH IRA.—A qualified airline employee who has contributed an airline payment amount to a Roth IRA that is treated as a qualified rollover contribution pursuant to section 125 of the Worker, Retiree, and Employer Recovery Act of 2008, may transfer to a traditional IRA, in a trustee-to-trustee transfer, all or any part of the contribution (together with any net income allocable to such contribution), and the transfer to the traditional IRA will be deemed to have been made at the time of the rollover to the Roth IRA, if such transfer is made within 180 days of the date of the enactment of this Act. A qualified airline employee making such a transfer may exclude from gross income the airline payment amount previously rolled over to the Roth IRA, to the extent an amount attributable to the previous rollover was transferred to a traditional IRA, in the taxable year in which the airline payment amount was paid to the qualified airline employee by the commercial passenger airline carrier. No amount so transferred to a traditional IRA may be treated as a qualified rollover contribution with respect to a Roth IRA within the 5-taxable year period beginning with the taxable year in which such transfer was made.
“(3) EXTENSION OF TIME TO FILE CLAIM FOR REFUND.—A qualified airline employee who excludes an amount from gross income in a prior taxable year under paragraph (1) or (2) may reflect such exclusion in a claim for refund filed within the period of limitation under section 6511(a) of such Code (or, if later, April 15, 2015).
“(4) OVERALL LIMITATION ON AMOUNTS TRANSFERRED TO TRADITIONAL IRAS.—
“(A) IN GENERAL.—The aggregate amount of airline payment amounts which may be transferred to 1 or more traditional IRAs under paragraphs (1) and (2) with respect to any qualified employee for any taxable year shall not exceed the excess (if any) of—
“(i) 90 percent of the aggregate airline payment amounts received by the qualified airline employee during the taxable year and all preceding taxable years, over
“(ii) the aggregate amount of such transfers to which paragraphs (1) and (2) applied for all preceding taxable years.
“(B) SPECIAL RULES.—For purposes of applying the limitation under subparagraph (A)—
“(i) any airline payment amount received by the surviving spouse of any qualified employee, and any amount transferred to a traditional IRA by such spouse under subsection (d), shall be treated as an amount received or transferred by the qualified employee, and
“(ii) any amount transferred to a traditional IRA which is attributable to net income described in paragraph (2) shall not be taken into account.
“(5) COVERED EXECUTIVES NOT ELIGIBLE TO MAKE TRANSFERS.—Paragraphs (1) and (2) shall not apply to any transfer by a qualified airline employee (or any transfer authorized under subsection (d) by a surviving spouse of the qualified airline employee) if at any time during the taxable year of the transfer or any preceding taxable year the qualified airline employee held a position described in subparagraph (A) or (B) of section 162(m)(3) with the commercial passenger airline carrier from whom the airline payment amount was received.
“(6) SPECIAL RULE FOR CERTAIN AIRLINE PAYMENT AMOUNTS.—In the case of any amount which became an airline payment amount by reason of the amendments made by section 1(b) of Public Law 113-243 (26 U.S.C. 408 note), paragraph (1) shall be applied by substituting “(or, if later, within the period beginning on December 18, 2014, and ending on the date which is 180 days after the date of enactment of the Protecting Americans from Tax Hikes Act of 2015)” for “(or, if later, within 180 days of the date of the enactment of this Act)”.
“(b) TREATMENT OF AIRLINE PAYMENT AMOUNTS AND TRANSFERS FOR EMPLOYMENT TAXES.—For purposes of chapter 21 of the Internal Revenue Code of 1986 and section 209 of the Social Security Act, an airline payment amount shall not fail to be treated as a payment of wages by the commercial passenger airline carrier to the qualified airline employee in the taxable year of payment because such amount is excluded from the qualified airline employee's gross income under subsection (a).
“(c) DEFINITIONS AND SPECIAL RULES.—For purposes of this section—
“(1) AIRLINE PAYMENT AMOUNT.—
“(A) IN GENERAL.—The term “airline payment amount” means any payment of any money or other property which is payable by a commercial passenger airline carrier to a qualified airline employee—
“(i) under the approval of an order of a Federal bankruptcy court in a case filed after September 11, 2001, and before January 1, 2007, or filed on November 29, 2011, and
“(ii) in respect of the qualified airline employee's interest in a bankruptcy claim against the carrier, any note of the carrier (or amount paid in lieu of a note being issued), or any other fixed obligation of the carrier to pay a lump sum amount. The amount of such payment shall be determined without regard to any requirement to deduct and withhold tax from such payment under sections 3102(a) of the Internal Revenue Code of 1986 and 3402(a) of such Code.
“(B) EXCEPTION.—An airline payment amount shall not include any amount payable on the basis of the carrier's future earnings or profits.
“(2) QUALIFIED AIRLINE EMPLOYEE.—The term “qualified airline employee” means an employee or former employee of a commercial passenger airline carrier who was a participant in a defined benefit plan maintained by the carrier which—
“(A) is a plan described in section 401(a) of the Internal Revenue Code of 1986 which includes a trust exempt from tax under section 501(a) of such Code, and
“(B) was terminated, became subject to the restrictions contained in paragraphs (2) and (3) of section 402(b) of the Pension Protection Act of 2006, or was frozen effective November 1, 2012.
“(3) TRADITIONAL IRA.—The term “traditional IRA” means an individual retirement plan (as defined in section 7701(a)(37) of the Internal Revenue Code of 1986) which is not a Roth IRA.
“(4) ROTH IRA.—The term “Roth IRA” has the meaning given such term by section 408A(b) of such Code.
“(d) SURVIVING SPOUSE.—If a qualified airline employee died after receiving an airline payment amount, or if an airline payment amount was paid to the surviving spouse of a qualified airline employee in respect of the qualified airline employee, the surviving spouse of the qualified airline employee may take all actions permitted under section 125 of the Worker, Retiree and Employer Recovery Act of 2008, or under this section, to the same extent that the qualified airline employee could have done had the qualified airline employee survived.
“(e) EFFECTIVE DATE.—This section shall apply to transfers made after the date of the enactment of this Act with respect to airline payment amounts paid before, on, or after such date.”
INCOME AVERAGING FOR AMOUNTS RECEIVED IN CONNECTION WITH THE EXXON VALDEZ LITIGATION
Pub. L. 110-343, Div. C, Sec. 504 provided that:
“(a) Income Averaging of Amounts Received From the Exxon Valdez Litigation.—For purposes of section 1301 of the Internal Revenue Code of 1986—
“(1) any qualified taxpayer who receives any qualified settlement income in any taxable year shall be treated as engaged in a fishing business (determined without regard to the commercial nature of the business), and
“(2) such qualified settlement income shall be treated as income attributable to such a fishing business for such taxable year.
“(b) Contributions of Amounts Received to Retirement Accounts.—
“(1) IN GENERAL.—Any qualified taxpayer who receives qualified settlement income during the taxable year may, at any time before the end of the taxable year in which such income was received, make one or more contributions to an eligible retirement plan of which such qualified taxpayer is a beneficiary in an aggregate amount not to exceed the lesser of—
“(A) $100,000 (reduced by the amount of qualified settlement income contributed to an eligible retirement plan in prior taxable years pursuant to this subsection), or
“(B) the amount of qualified settlement income received by the individual during the taxable year.
“(2) TIME WHEN CONTRIBUTIONS DEEMED MADE.—For purposes of paragraph (1), a qualified taxpayer shall be deemed to have made a contribution to an eligible retirement plan on the last day of the taxable year in which such income is received if the contribution is made on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (not including extensions thereof).
“(3) TREATMENT OF CONTRIBUTIONS TO ELIGIBLE RETIREMENT PLANS.—For purposes of the Internal Revenue Code of 1986, if a contribution is made pursuant to paragraph (1) with respect to qualified settlement income, then—
“(A) except as provided in paragraph (4)—
“(i) to the extent of such contribution, the qualified settlement income shall not be included in taxable income, and
“(ii) for purposes of section 72 of such Code, such contribution shall not be considered to be investment in the contract,
“(B) the qualified taxpayer shall, to the extent of the amount of the contribution, be treated—
“(i) as having received the qualified settlement income—
“(I) in the case of a contribution to an individual retirement plan (as defined under section 7701(a)(37) of such Code), in a distribution described in section 408(d)(3) of such Code, and
“(II) in the case of any other eligible retirement plan, in an eligible rollover distribution (as defined under section 402(f)(2) of such Code), and
“(ii) as having transferred the amount to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution,
“(C) section 408(d)(3)(B) of the Internal Revenue Code of 1986 shall not apply with respect to amounts treated as a rollover under this paragraph, and
“(D) section 408A(c)(3)(B) of the Internal Revenue Code of 1986 shall not apply with respect to amounts contributed to a Roth IRA (as defined under section 408A(b) of such Code) or a designated Roth contribution to an applicable retirement plan (within the meaning of section 402A of such Code) under this paragraph.
“(4) SPECIAL RULE FOR ROTH IRAS AND ROTH 401(k)s.—For purposes of the Internal Revenue Code of 1986, if a contribution is made pursuant to paragraph (1) with respect to qualified settlement income to a Roth IRA (as defined under section 408A(b) of such Code) or as a designated Roth contribution to an applicable retirement plan (within the meaning of section 402A of such Code), then—
“(A) the qualified settlement income shall be includible in taxable income, and
“(B) for purposes of section 72 of such Code, such contribution shall be considered to be investment in the contract.
“(5) ELIGIBLE RETIREMENT PLAN.—For purpose of this subsection, the term “eligible retirement plan” has the meaning given such term under section 402(c)(8)(B) of the Internal Revenue Code of 1986.
“(c) Treatment of Qualified Settlement Income Under Employment Taxes.—
“(1) SECA.—For purposes of chapter 2 of the Internal Revenue Code of 1986 and section 211 of the Social Security Act, no portion of qualified settlement income received by a qualified taxpayer shall be treated as self-employment income.
“(2) FICA.—For purposes of chapter 21 of the Internal Revenue Code of 1986 and section 209 of the Social Security Act, no portion of qualified settlement income received by a qualified taxpayer shall be treated as wages.
“(d) Qualified Taxpayer.—For purposes of this section, the term “qualified taxpayer” means—
“(1) any individual who is a plaintiff in the civil action In re Exxon Valdez, No. 89-095-CV (HRH) (Consolidated) (D. Alaska); or
“(2) any individual who is a beneficiary of the estate of such a plaintiff who-
“(A) acquired the right to receive qualified settlement income from that plaintiff; and
“(B) was the spouse or an immediate relative of that plaintiff.
“(e) Qualified Settlement Income.—For purposes of this section, the term “qualified settlement income” means any interest and punitive damage awards which are—
“(1) otherwise includible in taxable income, and
“(2) received (whether as lump sums or periodic payments) in connection with the civil action In re Exxon Valdez, No. 89-095-CV (HRH) (Consolidated) (D. Alaska) (whether pre- or post-judgment and whether related to a settlement or judgment).”