Detailed information on tax steps can be found in the Federal and State Employer's Tax Guides, available from the U.S. Internal Revenue Service (IRS) and the appropriate state departments. The IRS resources for Federal Income Tax Withholding Methods can be found at https://www.irs.gov/forms-pubs/about-publication-15-t. Example Calculation:
This example is of a tax using a simple tax table. Tax tables can use formulas to supplement the calculations for exemptions or credit allowances to better align with the processes required by the State and Federal government. To verify the tax results on a check see the article 33218 "DocLink: How do I verify that Payroll taxes are calculated correctly?". Employee is paid on weekly pay cycle with tax status of withholding setup as Married with 3 exemptions with $800.00 of wages subject to this tax. Example Married Tax Table:
Note: This is an example and not an actual tax rate/amount. On the Tax Table for the filing status percentage and amounts are pulled where the annualized wages land between the Over and Not Over amounts. | Over | Not Over | Amount | Percent | | 0 | 24,999 | 0 | 10.00000 | | 25,000 | 69.999 | 6,450 | 15.00000 | | 70,000 | 170,000 | 8,600 | 30.00000 | Example Tax Calculation Steps: - Annualize Wages: $800.00 x 52 = $41,600.00
- Take Dependent Exemption: 3 x $2,900.00 = $8,700.00
- $41,600 - $8,700.00 = $32,900.00
- Apply Tax Table Amount: $6,450.00
- $32,900.00 - $6,450.00 = $ 26,450.00
- Multiple by rate: $26,450.00. x 15% = $3,967.50
- Divided by Pay Periods: $3,967.50 / 52 = $76.30 Tax
DocLink: How does the Pay Frequency affect tax calculations?
DocLink: How do I verify that Payroll taxes are calculated correctly?
DocLink: How Does Payroll calculate taxes?
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