Circular E is the IRS publication every non-agricultural employer in the U.S. needs to keep handy. It's officially called Publication 15, but the original "Circular E" branding stuck across decades of payroll practice. The publication is reissued every January with updated withholding tables, wage bases, deposit thresholds, and any new rules from the previous year's tax law changes. For 2026, the headline updates are the Social Security wage base jumping to $184,500 and new tip and overtime reporting rules under the OBBBA tax law.
What's Inside Circular E Publication 15 covers the four pillars of federal payroll: federal income tax withholding (using either the percentage method tables or the wage bracket tables), Social Security and Medicare withholding (FICA), federal unemployment tax (FUTA), and the deposit and filing rules for Form 941 (quarterly) and Form 940 (annual FUTA).
It also covers worker classification basics, common pay events (bonuses, supplemental wages, fringe benefits), and the rules for when supplemental wages get the flat 22% withholding versus aggregate withholding.
2026 Updates Employers Need to Know Three things changed for 2026. The Social Security wage base increased from $176,100 to $184,500, raising the maximum employee Social Security tax to $11,439. The OBBBA (One Big Beautiful Bill Act) introduced new federal tax treatment for qualified tips and qualified overtime, which affects how those amounts are reported on W-2s and Form 941. The 1099-NEC and 1099-MISC reporting threshold rose from $600 to $2,000 for payments made in 2026.
The federal income tax brackets adjusted for inflation, which means the withholding tables in the 2026 Circular E will pull slightly less from the same nominal wage compared to 2025. Most payroll software updates this automatically, but verify it's right for the first few pay cycles of the year.
Circular E vs. Form 941: What's the Difference? Circular E is the rules. Form 941 is the quarterly tax return where you report the wages paid and taxes withheld. You read Circular E to know what to do, then you use Form 941 to tell the IRS what you did. Both are needed.
How Circular E Connects to the Payroll Cycle Each pay period , an employer uses Circular E's tables to calculate federal income tax withholding from gross wages, then withholds FICA at the standard rates (6.2% Social Security up to the wage base, 1.45% Medicare on all wages). The result is net pay after all deductions.
Deposits go to the IRS either monthly or semi-weekly depending on the employer's lookback-period tax liability. Quarterly Form 941 reconciles the deposits with what was actually withheld. Annual Form W-2 issuance closes the loop with each employee. Year-end W-3 transmits totals to the SSA.
Using Circular E for Accurate 2026 Payroll Compliance The practical Circular E checklist for 2026: download the new Publication 15 in January, update payroll software with the new Social Security wage base and withholding tables, configure the new tip and overtime reporting fields if applicable to your business, verify deposit schedule based on the lookback period, and train any new payroll staff on Form 941 vs. 940 vs. W-2 differences.
The current Circular E lives at irs.gov/forms-pubs/about-publication-15 . The Social Security Administration also publishes the wage base history and 2026 amounts at ssa.gov/oact/cola/cbb , which is useful when reconciling the SSA-side numbers with what the IRS publishes.
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