How to Compute the Tax

Tax Tables and Formula

For purposes of computing Withholding Tax, "payroll period" means the period of service (weekly, monthly, etc) you normally pay wages. When calculating withholding use the same payroll period you use for federal withholding tax purposes.

Please refer to the Withholding Tax Guide for further instructions and withholding tables.

In addition to the Employer Withholding Tax Calculator, the following formula will help you determine the amount of tax to withhold from your employees' wages:

Key

G = Gross Pay for pay period

P = Pay periods per year

A = Annualized gross pay E1 = Personal and dependent exemptions
T = Annualized taxable income E2 = Age 65 and Over & blind exemptions
WH = Tax to be withheld for pay period W = Annualized tax to be withheld


1. G x P - ($3000 + (E1 x 930) + (E2 x 800)) = T

2. Calculate W as follows:

If T is: W is:
Not over $3,000 2% of T
Over But Not Over Then
$3,000 $5,000 $60 + (3% of excess over $3,000)
$5,000 $17,000 $120 + (5% of excess over $5,000)
$17,000   $720 + (5.75% of excess over $17,000)


3. W / P = WH

Example

John is married, with three dependent children. His spouse is blind. He claims a total of six exemptions:

o five personal and dependent exemptions; one for himself, his wife, and one for each of his three children ( E1 exemptions); and
o One additional exemption for "blind" for his spouse (E2 exemption).

John is paid on a semimonthly basis, and his gross wages for this pay period were $2,500.

1. G x P - ($3000 + (E1 x 930) + (E2 x 800)) = T
2500*24 - [3,000 + (5*930) +(1*800)]= T
60,000 - [3000+4650+800] = T
60,000 - 8450 = 51550

2. W is $720 + 5.75% of amount over $17,000 ($51,550 - $17,000 = $34,550)
5.75% of $34,550 = $1,986.63
$720 + $1,986.63 = $2706.63

3. W / P = WH
$2,706.63 ÷ 24 = $112.78

Tax to be withheld per pay period is $112.78

Last Updated 03/19/2015 12:59