How to Determine Your Federal Withholding on a W-4 or W-9
If you receive W-2 wage income, you must use Form W-4 to determine your federal withholding. If you receive income as a contractor; or receive other types of 1099 income, such as interest, dividend or other miscellaneous income, you must provide the payer with Form W-9. In many cases, 1099 income is not subject to federal withholding. In certain cases, however, you may be subject to backup withholding on your 1099 income.
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Instructions
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Form W-4
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1
Obtain Internal Revenue Service Publication 15, Employer’s Tax Guide. This publication contains the tax tables your employer uses to calculate your federal income tax withholding.
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2
Determine the number of withholding allowances and filing status you claim on Form W-4.
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3
Calculate the income you earn during the pay period before taxes and deductions are subtracted. If you have pre-tax items deducted from your pay for items such as health insurance or retirement plan contributions, subtract the total pretax deduction amount from your income. The result is your income subject to federal withholding.
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4
Look at the “Wage Bracket” withholding tables in the back of Publication 15. Find the table for your filing status and frequency of pay.
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5
Locate the column that matches your income subject to withholding. Scroll across the row until you find the column that matches the number of withholding allowances you claim on Form W-4. The result shown is your federal withholding for the items you claim on W-4.
Form W-9
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6
Determine if you are subject to backup withholding. The person or company must withhold backup taxes from your W-9 income if you did not provide your taxpayer identification number, provide an incorrect taxpayer identification number or do not certify that you are not subject to backup withholding by properly signing Form W-9. In some cases, the IRS notifies the payer that your W-9 income is subject to backup withholding. The IRS also notifies you by mail if this occurs.
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7
Calculate the amount of W-9 income you expect receive.
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8
Multiply your W-9 income payment by 0.28. The backup withholding rate is always 28 percent, regardless of the amount of your W-9 income payment.
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