How to Figure Amount of Tax Withholding From W-4

With the Internet, figuring the amount of W-4 withholding is easy.

Employers in the United States are required to have their employees file a W-4 form to determine how much money the company needs to withhold from each paycheck to meet the employee's estimated federal tax obligations. On the W-4 form, the employee must specify how many exemptions he wants to claim. Each exemption decreases the amount of money that will be withheld from each paycheck.

Things You'll Need

• Tax withholding table

Instructions

1. Determine the employee's biweekly wages.

2. Subtract any contributions made with pretax dollars, such as contributions to a traditional 401(k) plan or other tax-deferred retirement account, or pretax health care premium.

3. Add the value of any taxable fringe benefits, such as free meals, merchandise or housing.

4. Determine the annual wage by multiplying the biweekly amount by 26. For example, if the biweekly payment amount is $1,800, the annual salary is $46,800.

5. Subtract the value of each exemption claimed on the W-4 form. This amount will vary from year to year. For 2010, each exemption decreases the annual wage by $3,650. For example, if an employee claimed three exemptions, his salary for withholding purposes would decrease by $10,950.

6. Use the withholding brackets to determine how much needs to be withheld annually based on filing status. For example, if an employee is married and her annual salary is $30,000, you would have to withhold $1,702.50 during the year.

7. Divide the total amount to be withheld over the course of the year by 26 to determine how much to withhold each pay period. For example, if you need to withhold a total of $1,702.50 for the year, dividing by 26 would result in you withholding $65.48 each biweekly pay period.

References

• USDA: Federal Income Tax Withholding Formula

Resources

• Suburban Computer: 2011 Federal Withholding Tax Table