Credit portal




How to calculate federal tax withheld

how to calculate federal tax withheld

Calculate Federal Withholding Tax

Donna Said:

how do I calculate foreign tax credit on dividend withholding ?

We Answered:

You need to refer to Federal Tax Law Sec. 12.10.09 Code 5.1

Tara Said:

We Answered:

How much that is withheld is based on a percentage calculated by the IRS. They designate a percentage to be withheld based on your filing status, how many dependents you have, and how much you make. The percentage is based on how much the IRS estimates that you will owe in taxes each year.

In some pay periods if you made a lot more than usual (worked overtime, got a bonus, etc), you will see your percentage withheld increased because the IRS mandates that a larger percentage be taken out. If you did not make a one time occurance, you will probably see a larger refund at the end of the year.

At the end of the year, when you file your tax return. you will then calculate exactly how much you should have paid in taxes. You then either pay the government if not enough was withheld, or get a refund if too much was withheld. The IRS would rather you overpay so the percentage they mandate to be withheld is usually high enough to make sure that most people get a refund.

Some of your withholdings are set in stone. Social Security is always 6.2%. Medicare is always 1.45%. Some localities may have their own local withholding.

Timothy Said:

How do I accurately calculate the amount of federal tax that will be withheld from my paycheck?

We Answered:

The other person is right. here is a link to that Publication 15, Circular E that they mentioned:…

I do the same thing as you do. I have an Exel spreadsheet set up just like you're trying to do so that I can forecast my various withholding amounts (not just federal, but state also) to help more accurately predict my tax withholding..

Look on page 35 of that publication in Table 5. Based on what you payroll period is, see what 1 withholding allowance is worth (for example, for bi-weekly you see

that it's $134.62) -- and save that number (write it down).

Then, go to pages 38 and 39 and find the section of that table that matches your payroll period. Using a bi-weekly payroll period as an example -- Table 2 (Bi-weekly payroll period.)

1. Determine your taxable earnings.

2. Subtract your (withholding allowances x $ per allowance)

3. If that result is (for example) over $396 but under $1,306 then, the tax is $29.40 plus 15% of the excess over $396.

Here's the Excel spreadsheet calculation that you can plug into your spreadsheet:



(I've stagged this equation because this web site kept clipping it.)

If cell J3 contains your taxable income, the equation:

a. multiplies the value of 1 withholding allowance times your # of allowances

b. subtracts that result from your taxable income

c. determines the excess income over $396

d. multiplies that result by 15%

e. and adds $29.40 to it.

The result is the federal tax withheld from your paycheck.

Be sure you calculate your taxable income correctly. With my paycheck, I have to first subtract out from my gross income my pre-tax medical premiums, health savings account, and 401k in order to calculate my taxable earnings. Yours might be (and probably is) a different scenario.

You can replace and plug into the equation the correct numbers from the various tables in Publication 15 that fit your personal income situation (that's important -- make sure you use the correct table on pages 38 & 39). You can then tweak the withholding amounts in the spreadsheet order to meet the federal tax target you're looking for and then submit an updated W-4 to your employer based on those calculations. You can also use it to compare to your paystub to ensure that your employer is withholding the correct amounts each paycheck.

Hope that helps.


Here goes:

From what you've told me, your Taxable Income = your Gross Income.

Gross income = $4,000.00 per month

Taxable income = $4,000.00 per month

Federal Tax = $(579.08) assuming monthly payroll period

Social Security = $(248.00)

Category: Taxes

Similar articles: