How to Calculate Federal Withholding From a Paycheck

Money is withheld from your paycheck to pay for federal income taxes.

The federal government has required income tax withholding since 1943 when money was withheld from employees' paychecks for the first time. You must complete a W-4 form when you start working to indicate how many person allowances you are entitled to claim. Each allowance that you claim reduces the amount of your paycheck that is used in calculating how much must be withheld. Your withholding is also affected by how much money you make, your filing status and how often you are paid.

Things You'll Need

• U.S. Internal Revenue Services Publication 15

Instructions

1. Determine how often the company pays wages. Your pay period is determined not by how many paychecks you receive, but how often paychecks go out. For example, if you work as a teacher and are paid at the end of each month but only receive 10 paychecks each year, you are still considered to be paid monthly.

2. Find the number of allowances you claimed on your W-4 form.

3. Consult IRS Publication 15 to find the value of each personal allowance per pay period. The value of each allowance does not vary depending on your filing status. For example, if you are paid quarterly, the value of each allowance is $512.50 regardless of whether you are single or married.

4. Multiply the amount of personal allowances by the value of each allowance to determine how much of your paycheck is exempt from federal income tax withholding. In this example, if you claimed four allowances, you would multiply $512.50 by four to determine that $2,050 if your quarterly paycheck would be exempt from federal withholding.

5. Subtract the amount of that is exempt from federal income tax withholding from your paycheck. In this example, if your quarterly paycheck was $6,550, you would subtract $2,050 from $6,550 to find that $4,500 of your paycheck is subject to income tax withholding.

6. Use the appropriate federal income tax withholding table found in IRS Publication 15 to calculate how much money you should have withheld from your paycheck based on your filing status (single or married) and your pay period. In this example, if you are married and have $4,500 subject to tax withholding per quarter, you would have $106.20 withheld for federal income taxes.

Tips & Warnings

• Make sure to use Publication 15 for the current year. The IRS updates the publication on an annual basis and the value of allowances and the tax tables are adjusted.

References

• IRS: Publication 15
• The Independent Institute: Wartime Origins of Modern Income Withholding