Forms W-4

Tax Withholding Tables

The tax withholding tables are used by employers to figure out how much tax federal income tax needs to be withheld from employee’s salary. When the employee files a Form W-4 and gives it to the employer, the employer will use the tax withholding tables along with the employee’s W-4 to determine the federal income tax withholding needed so the employee doesn’t owe to the IRS when filing a tax return.

This is due to the IRS requirement that taxpayers must pay taxes gradually throughout the year. On the other hand, employers estimate taxes and pay for their federal income tax. The employer will receive a tax refund if the estimated taxes paid throughout the year is more than what’s owed. The same goes for the employee but with withholding. If the total federal tax withheld is more than what the employee owes, the IRS will issue a tax refund.

The Internal Revenue Service publishes the tax withholding tables on Publication 15-T. It not only includes the tax withholding tables but other information regards to employer’s tax obligations. It shows the tax under Federal Insurance Contributions Act (FICA). This is also known as the Social Security and Medicare tax.

How to figure out federal income tax withholding using tax withholding tables?

The information provided on Form W-4 is enough for the employers to compare it with the tax withholding tables. But Form W-4 isn’t the only thing you will need to figure out how much tax to withhold. Other than Form W-4 and tax withholding tables, you must take into account the employee’s salary and pay frequency.

The tax withholding tables include income tables similar to the tax brackets. Depending on how much the employee earns, the tax withholding will be adjusted based on it. Once this is done, you will take into account other information provided on the employee’s Form W-4 such as the anticipated tax deductions and credits—Child Tax Credit and Dependent Care Credit to be more specific.

Calculating Federal Income Tax Withholding Without Tax Withholding Tables

Figuring out how much the employee needs to withheld is quite simple. After all, the employee is going to state the anticipated deduction amount on Form W-4. Since you’re the employer, you know how much the employee’s annual salary is. Subtract the deduction amount from the employee’s salary and you will know the taxable portion of the income.

Now you estimated the employee’s adjusted gross income. Find the tax bracket the employee falls in and determine the tax rate. Finally, make the math and you will estimate the employee’s tax bill for that tax year. All and all, you will estimate how much the employee is likely to owe to the IRS.

Lastly, you can divide it by the pay frequency. For example, if you’re paying the employee twice a month, divide it by 24. If monthly, by 12, etc. The amount you’re left with is going to be the needed federal tax withholding.

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