The Percentage Method of Withholding is addressed in this memo which includes extractions from the 2010 Federal Income Tax Withholding Tables (found in the IRS Publication 15-T, Circular E - Employer's Tax Guide).
Please Note:
For 2010, the "Making Work Pay" provision of the American Recovery and Reinvestment Act provides a refundable tax credit of up to $400 for working individuals and $800 for married taxpayers filing joint returns. This tax credit will be calculated at a rate of 6.2 percent of earned income and will be handled through automated tax withholding changes effective 1/01/10. This tax credit will phase out for a taxpayer with adjusted gross income in excess of $75,000, or $150,000 for married couples filing jointly.
It is not necessary to submit a Form W-4 to get the automated withholding change. However, an employee with multiple jobs or married couples whose combined incomes place them in a higher tax bracket may elect to submit a revised W-4 to ensure enough withholding is held to cover the tax for his or her combined income.
The annual personal exemption amount for 2010 remains at $3,650.00.
Tax calculations and estimates of net pay can be readily determined by using the Central Payroll Bureau Net Pay Calculator
Over 10 - Multiply amount of one withholding allowance ($140.38 for bi-weekly or $304.17 for monthly) by number of allowances claimed.
The annual personal exemption amount of $3,650 equals the biweekly amount of $140.38 (1 allowance) multiplied by 26, rounding to the nearest whole dollar, or the monthly amount of $304.17 (1 allowance) multiplied by 12, rounding to the nearest whole dollar.
NOTE: Use of these tables to compute estimated tax withholdings will result in amounts that differ slightly (by a few cents) from the precise amounts computed by the Statewide Payroll System
2010 Federal Income Tax Withholding Information
BIWEEKLY PAYROLL PERIOD
Single Person - Including Head of Household
Taxable Income*
Amount of Income Tax Withheld is:
Not over $233
0
Over -
But not over -
Of excess over -
$233
-$401
10%
-$233
$401
-$1,387
$16.80 plus 15%
-$401
$1,387
-$2,604
$164.70 plus 25%
-$1,387
$2,604
-$3.248
$468.95 plus 27%
-$2,604
$3,248
-$3,373
$642.83 plus 30%
-$3,248
$3,373
-$6,688
$680.33 plus 28%
-$3,373
$6,688
-$14,450
$1,608.53 plus 33%
-$6,688
$14,450
$4,169.99 plus 35%
-$14,450
Married Person
Taxable Income*
Amount of Income Tax Withheld is:
Not over $529
0
Over-
But not over -
Of excess over -
$529
-$942
10%
-$529
$942
-$2,913
$41.30 plus 15%
-$942
$2,913
-$3,617
$336.95 plus 25%
-$2,913
$3,617
-$4,771
$512.95 plus 27%
-$3,617
$4,771
-$5,579
$824.53 plus 25%
-$4,771
$5,579
-$8,346
$1,026.53 plus 28%
-$5,579
$8,346
-$14,669
$1,801.29 plus 33%
-$8,346
$14,669
$3,887.88 plus 35%
-$14,669
* Taxable income is biweekly gross pay less tax sheltered and/or pre-tax deductions and the dollar amount of biweekly withholding allowances.
Note:
Inflation adjustments have increased the above Tax Bracket thresholds for each filing status.
Use of these tables to compute estimated tax withholdings will result in amounts that differ slightly (by a few cents) from the precise amounts computed by the Statewide Payroll System.
2010 Federal Income Tax Withholding Information
MONTHLY PAYROLL PERIOD
Single Person - Including Head of Household
Taxable Income#
Amount of Income Tax Withheld is:
Not over $504
0
Over -
But not over -
Of excess over -
$504
-$869
10%
-$504
$869
-$3,004
$36.50 plus 15%
-$869
$3,004
-$5,642
$356.75 plus 25%
-$3,004
$5,642
-$7,038
$1,016.25 plus 27%
-$5,642
$7,038
-$7,308
$1,393.17 plus 30%
-$7,038
$7,308
-$14,492
$1,474.17 plus 28%
-$7,308
$14,492
-$31,308
$3,485.69 plus 33%
-$14,492
$31,308
$9,034.97 plus 35%
-$31,308
Married Person
Taxable Income#
Amount of Income Tax Withheld is:
Not over $1,146
0
Over-
But not over -
Of excess over -
$1,146
-$2,042
10%
-$1,146
$2,042
-$6,313
$89.60 plus 15%
-$2,042
$6,313
-$7,838
$730.25 plus 25%
-$6,313
$7,838
-$10,338
$1,111.50 plus 27%
-$7,838
$10,338
-$12,088
$1,786.50 plus 25%
-$10,838
$12,088
-$18,083
$2,224.00 plus 28%
-$12,088
$18,083
-$31,783
$3,902.60 plus 33%
-$18,083
$31,783
$8,423.60 plus 35%
-$31,783
# Taxable income is monthly gross pay less tax sheltered and/or pre-tax deductions and the dollar amount of monthly withholding allowances.
Note:
Use of these tables to compute estimated tax withholdings will result in amounts that differ slightly (by a few cents) from the precise amounts computed by the Statewide Payroll System.
Examples of Withholding Calculations using the Percentage Method
Example 1
A married employee is paid $1,356.09 bi-weekly. This employee has in effect a Form W-4 claiming (0) withholding allowances. The employee also has a deferred comp deduction. Using the percentage method, figure the income tax to withhold as follows:
Total wage payment
$1,356.09
No allowances claimed on W-4
$0.00
Deferred compensation deduction
$60.00
Amount subject to withholding (subtract lines 2 & 3 from line 1)
$1,296.09
Compute the withholding amount using the tax tables for Percentage Method of Withholding, BIWEEKLY Payroll Period, for a married person.
Since $1,296.09 falls within the range of $942 - $2,913, use the following calculation:
$41.30 plus 15% of the amount over $942.
The amount over $942 is $354.09 ($1,296.09 - $942.00)
15% of $354.09 is $53.11 ($354.09 X .15)
So the federal tax to be withheld would be $41.30 + $53.11 or $94.41.
Example 2
An unmarried employee is paid $4,000.00 monthly. This employee has in effect a Form W-4 claiming (2) withholding allowances. Using the percentage method, figure the income tax to withhold as follows:
Total wage payment
$4,000.00
2 allowances claimed on W-4
$608.34
(amount determined by allowance table)
Deferred compensation deduction
$0.00
Amount subject to withholding
$3,391.66
Compute the withholding amount using the tax tables for Percentage Method of Withholding, MONTHLY Payroll Period, for an unmarried person.
Since $3,391.66 falls within the range of $3,004 - $5,642, use the following calculation:
$356.75 plus 25% of the amount over $3,004
The amount over $3,004 is $387.66 ($3,391.66 - $3,004.00)
25% of $387.66 is $96.92 ($387.66 X .25)
So the federal tax to be withheld would be $356.75 + $96.92 or $453.67.
