List of US Tax Codes - Guide for Employers

If you’re running international payroll for your business, you may need to know about tax codes.

Income tax can be complicated, in whichever country or state your company is based in, or wherever your employees are located. You don’t need to know absolutely everything to run payroll effectively, but it’s good to have a working knowledge of the basics.

In this guide, we’ll be looking at US tax codes. This includes whether the US uses tax codes to calculate how much tax employees should pay, and how the tax system generally works.

So, let’s get straight into it.

US tax code definition - What do tax codes mean in the US?

The US doesn’t have income tax codes in the same way that some other countries do. Take UK tax codes, for example, they are used to tell employers and tax authorities how much tax an employee should be paying, according to their personal circumstances.

It’s a kind of shortcut, making it easier for employers to calculate how much income tax should be deducted.

But in the United States, tax codes don’t really exist within the income tax system. Instead, the onus is on both employers and employees to carry out the calculations and reporting needed to determine how much tax should be paid.

It’s important to get it right, as getting it wrong could result in underpaid or overpaid tax.

If you’re a UK company employing workers in the US, it can be extra complicated. You need to understand your reporting obligations, and to which country’s tax authority - as well as categorising employees properly.

This is where specialised help with global payroll and employee management could be invaluable. Take a look here to find out how international payments specialists like Wise Business work with partners such as the RemotePass HR platform - all to make life easier for payroll managers.

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How do USA tax codes work?¹

The US income tax system is a little complicated, just like with many other tax systems all over the world.

There are a few types of payroll tax. For federal income taxes, the employer calculates the amount of tax an employee owes, withholds the amount from their paycheck and remits it to the federal government.

There are also Federal Insurance Contributions Act (FICA) taxes to be paid. These are contributions to Social Security and healthcare (Medicare) programs, shared between US-based employers and their employees. These are also withheld and remitted by the employer.

Depending which state your business or employee is in, there may also be state payroll taxes to pay on income from work.

In some countries like the UK, a tax code can be used as a shortcut to tell the employer how much tax to deduct and remit. But unfortunately, US employers (or employers in other countries who hire US workers) need to do all of the calculations themselves. However, the Internal Revenue Service (IRS) does have resources available to help, including worksheets and tax calculator tools.

If you’re a UK based business with employees in the US and in other countries, you’ll need to understand your tax obligations in each country. You’ll also need to find an easy, cost-effective way to run payroll for international employees, and pay them in their own currencies.

How to find employees' U. S tax codes?

As we’ve looked at already, US employees don’t really have tax codes. So, you won’t really find a list of payroll-related US tax codes online, or instructions on how to find employees tax codes.

However, there are still a few essential procedures to follow as an employer when a new staff member joins your company.

Here’s what you need to do when onboarding a new hire:²

1. Have your employee fill out a Form I-9 and complete Employment Eligibility Verification - this is to verify that they are legally eligible to work in the US.
2. Request a completed and signed Form W-4 form when they start work - this will give you the information needed to calculate how much payroll tax to withhold.
3. Make sure you have an Employee’s Withholding Certificate on file for each employee.

Internal revenue code - List of US tax codes

For your reference, here’s an at-a-glance look at all the United States tax codes, so you can see where income and employment tax fits in:³

Pay employees abroad with Wise Business

Tax can be complicated, but paying your staff doesn’t have to be. If you have employees spread across the US, UK or worldwide, you can pay them quickly and easily using Wise Business.

Open a Wise Business account and you can pay up to 1,000 people at once using the handy Batch Payments tool. You can even automate payments with the Wise API, and seamlessly integrate your accounting tools and other business software.

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Not only does Wise Business save you time on payroll, but money too. Wise lets you send payments in multiple currencies for low fees⁴ and mid-market exchange rate. If you have an international workforce, this could save your business a small fortune.

And there you have it - an overview of US tax codes and how the tax system works over in the United States.

After reading this, you should have a better understanding of the US tax system. This can be helpful if you’re hiring in the US and need to understand your tax obligations as an employer.

But still, it’s recommended to get specialist tax advice to help you tick every box.

Sources used for this article:

Sources checked on 30-Oct-2023.