There are two methods for computing federal withholding taxes (FWT) on employee wages: the wage bracket method and the percentage method. To compute FWT, you need to use the current withholding tables in IRS Publication 15-T. The IRS updates these tables whenever there is a change in tax rates.
Read across the table to the column for the number of W-4 withholding allowances the employee claims in order to find the amount to withhold for FWT.
Find the employee's taxable wages in the first two columns of the table.
Find the appropriate table for your payroll frequency in Publication 15T's "Tables for Percentage Method of Withholding."
Locate the Wage Bracket Method withholding table in IRS publication 15-T (see Resources) for your payroll period frequency and the employee's W-4 marital status.
Withhold the result for FWT.
Perform the calculation listed for the employee's net taxable income.
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