There are several methods to figure federal income tax withholding for employees. The most common are the wage bracket method and the percentage method.taxmap/pubs/p51-012.htm#en_us_publink1000231287
Under the wage bracket method, find the proper table (on pages 28 through 47) for your payroll period and the employee's marital status as shown on his or her Form W-4. Then, based on the number of withholding allowances claimed on the Form W-4 and the amount of wages, find the amount of federal income tax to withhold. If your employee is claiming more than 10 withholding allowances, see below.
If you cannot use the wage bracket tables because wages exceed the amount shown in the last bracket of the table, use the percentage method of withholding described later. Be sure to reduce wages by the amount of total withholding allowances (shown in the table below) before using the percentage method tables on pages 26 and 27.taxmap/pubs/p51-012.htm#en_us_publink1000231288
To adapt the wage bracket tables for employees who are claiming over 10 allowances, follow these steps.
- Multiply the number of withholding allowances that is over 10 by the allowance value for the payroll period. The allowance values are in the Percentage Method—2010 Amount for One Withholding Allowance table below.
- Subtract the result from the employee's wages.
- On this amount, find and withhold the tax in the column for 10 allowances.
This is a voluntary method. If you use the wage bracket tables, you may continue to withhold the amount in the "10" column when your employee has more than 10 allowances, using the method above. You can also use the other methods described below.taxmap/pubs/p51-012.htm#en_us_publink1000231289
If you do not want to use the wage bracket tables on pages 28 through 47 to figure how much federal income tax to withhold, you can use the percentage method based on the table on this page and the appropriate rate table. This method works for any number of withholding allowances the employee claims and any amount of wages.
Use these steps to figure the federal income tax to withhold under the percentage method.
- Multiply one withholding allowance (see table below) by the number of allowances the employee claims.
- Subtract that amount from the employee's wages.
- Determine the amount to withhold from the appropriate table on page 26 or 27.
Percentage Method—2010 Amount for One Withholding Allowance
|Payroll Period||One Withholding Allowance|
|Daily or Miscellaneous (each day of the payroll period)|| 14.04|
An unmarried employee is paid $600 weekly. This employee has a Form W-4 in effect claiming two withholding allowances. Using the percentage method, figure the federal income tax withholding as follows:
|1.||Total wage payment|| ||$600.00|
|2.||One allowance||$70.19|| |
|3.||Allowances claimed on Form W-4|| |
|4.||Multiply line 2 by line 3|| || $140.38 |
|5.||Amount subject to withholding (subtract line 4 from line 1)|| ||$459.62|
|6.||Tax to be withheld on $459.62 from Table 1—single person, page 26|| || $ 47.34 |
To figure the federal income tax to withhold, you may reduce the last digit of the wages to zero, or figure the wages to the nearest dollar.taxmap/pubs/p51-012.htm#en_us_publink1000231291
Figure the federal income tax to withhold on annual wages under the Percentage Method for an annual payroll period. Then prorate the tax back to the payroll period.taxmap/pubs/p51-012.htm#en_us_publink1000231292
A married person claims four withholding allowances. She is paid $1,000 a week. Multiply the weekly wages by 52 weeks to figure the annual wage of $52,000. Subtract $14,600 (the value of four withholding allowances annually) for a balance of $37,400. Using column (b) of taxmap/pubs/p51-012.htm#en_us_publink1000231293
Table 7—Annual Payroll Period on page 27, the annual federal income tax withholding is $3,010.00. Divide the annual amount by 52. The weekly federal income tax to withhold is $57.88.
Rather than the Percentage Method
or Wage Bracket Method
described earlier, you can use an alternative method to withhold federal income tax. Section 9 of
Publication 15-A describes these alternative methods.
If you use the percentage method or alternative methods for federal income tax withholding, you may round the tax for the pay period to the nearest dollar. The wage bracket tables are already rounded for you.
If rounding is used, it must be used consistently. Round withheld federal tax amounts to the nearest whole dollar by (a) dropping amounts under 50 cents, and (b) increasing amounts from 50 to 99 cents to the next higher dollar. For example, $2.30 becomes $2, and $2.80 becomes $3.