Circular E

Circular E is the commonly used name for IRS Publication 15, formally titled the Employer's Tax Guide, published by the U.S. Internal Revenue Service to help employers understand and correctly handle their federal payroll tax obligations. It is the authoritative, government-published reference most US employers and payroll professionals turn to for the specific mechanics of federal withholding and employer tax requirements.

The publication explains how to determine federal income tax withholding from employee wages, how Social Security and Medicare taxes are calculated and split between employee and employer, the employer's federal unemployment tax obligations, deposit schedules and methods for remitting withheld taxes to the government, and the various payroll tax forms employers must file throughout the year. It is updated and reissued periodically to reflect changes in tax rates, wage base limits, and withholding tables.

The name “Circular E” predates the current Publication 15 numbering system and has simply stuck as the informal, widely recognized shorthand the payroll and small-business community uses, even though the IRS's own formal title for the document has long been Publication 15. Anyone searching for authoritative federal payroll tax guidance is likely to encounter both names used interchangeably, and both refer to the exact same publication.

Because federal payroll tax rules, rates, and wage base limits change from year to year, and because the penalties for incorrect withholding or late remittance can be significant, Circular E functions as the primary reference small and mid-sized employers use, often without a dedicated payroll tax specialist on staff, to stay compliant. Payroll software providers also build their withholding calculations directly from the tables and rules this publication lays out each year.

Circular E covers federal obligations only; employers also have to separately track state and, in some cases, local payroll tax requirements, which are not addressed in this particular publication at all. Larger employers with payroll obligations across multiple states typically maintain a broader compliance calendar that layers state-specific guidance on top of what Circular E establishes at the federal level.

A small business owner setting up payroll for the first time typically consults Circular E, or relies on payroll software built from its tables, to determine exactly how much federal income tax and FICA tax to withhold from a given employee's paycheck, and by what date those withheld amounts must be deposited with the federal government to avoid penalties.

Circular E is updated annually to reflect new wage-bracket tables, changes to Social Security wage base limits, and any adjustments to federal tax law affecting payroll, which means a company using an outdated version risks withholding the wrong amount from an employee's paycheck. Most modern payroll software automates these calculations and updates them each year without the preparer having to consult the publication directly, but Circular E remains the authoritative source those systems are built from, and smaller employers running payroll manually, or auditors checking a payroll calculation, still refer to it directly to confirm a specific withholding figure is correct.

Circular E also explains an employer's deposit schedule obligations, which can be monthly or semiweekly depending on the size of the employer's payroll, and the penalties that apply for depositing withheld taxes late — information that matters as much to a company's cash management as to its compliance obligations, since missing a federal deposit deadline triggers penalties regardless of how small the shortfall or delay actually was.