How to Calculate Your Payroll

This article explains how to calculate payroll for personal and/or accounting purposes.

Instructions

Difficulty: Moderate

Things You’ll Need:

• Pencil
• Paper
• Calculator
• Federal Income Tax table (can be found at IRS.gov

1. First, you must calculate your gross earnings. You do this by annualizing your pay. For example, if you make $4,000.00 per month, you must multiply it by 12 to calculate annual pay. The amount will be $48,000.00.
2. You then take that $48,000.00 and divide it by 52, because there are 52 weeks in the year and not always 4 weeks in the month. This will bring you to $923.08 per week. Remember, this is your gross pay not take home (Net Pay).
3. After you calculate weekly rate, you must then calculate hourly pay. So, take $923.08 and divide it by how many hours you work. Let's say 40 hours. That will bring you to $23.07 per hour. So, your regular rate is $23.07 per hour.
4. What if you get paid overtime?? Well, we will learn to calculate OT pay. Take your hourly rate of $23.07 and multiply it by 1.5. This will bring your OT rate to $34.61 per hour for Overtime (time over 40 hours).
5. How about double time?? Some employers pay double time for working on Sundays. So, take your hourly rate and multiply it by 2. That will bring your DT pay to $46.14 per hour.
6. Let's say you work 45 hours for your first week of employment. Take $23.07 x 40 = 922.80. OT rate => 34.61 x 5 = 173.05. Now, add $922.80 + $173.05= $1,095.85. This is your gross earnings for the first week.
7. Example of FIT Table Now, it is time to start the deductions. Let's start with Federal Income Tax. Get your FIT table. If you are single look at the single sheet and same goes for married. Find your earnings which would be within the 1095.85 range. For example, if it says at least 1000 but no more than 1500, that would be the range you would use. This range is formatted into two columns on the left side of the form.
8. All family are considered withholding allowances! Now, you find how many dependants you want to claim. This is known as withholding allowances. Find your earnings range again and scroll across to dependants and there will be how much you deduct for FIT.
9. For Social Security, there is a specific rate of pay that if you go over your social security will not be withheld. This amount is around $100,000.00 per year. If you already make 100,000 per year then chances are you know how to calculate payroll or already have someone doing it for you. So, SS rate is always 6.2% and medicare rate is always 1.45%.
10. So, you take your earnings which were 1095.85 x 6.2% = $67.94 deducted for SS. For Medicare you take 1.45% x 1095.85 = $15.89 deducted for MC.
    Now add up all deductions => $67.94 + $15.89 + your FIT = Total Deductions.
11. Now, subtract Total Deductions from gross earnings to receive your Net Pay amount or take home amount.

Tips & Warnings

• Have fun calculating!!
• Hope this small tutorial helped.
• NOTE: State Income Tax is not provided. You must get these rates from your State Dept. of Revenue webpage or somehow.
• NOTE: Any other deductions such as Insurance, Charity Contributions, etc. must be added in for Net Pay to be correct.
• PRE-TAXED RETIREMENT must be deducted from Gross Earnings before Taxes are taken out!! Otherwise, you will be really messing yourself up.