# Income Tax Withholding Section 6.4. Employee’s Withholding Allowance Certificate (IRS W-4 form) Form on which employee states marital status and number.

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Income Tax Withholding Section 6.4

Employee’s Withholding Allowance Certificate (IRS W-4 form) Form on which employee states marital status and number of withholding allowances being claimed. This information is used to determine the amount of federal withholding tax. This is done using one of two methods…

1. The Wage Bracket Method Uses the tables found on p 242 - 243 Look at the correct table: Weekly or Monthly earnings? Married or Single? Find the correct wage range along the left columns. Cross-match to the correct # of allowances along the top.

Examples: Wage Bracket Method Rachel Leach is single and claims 2 withholding allowances. Use the wage bracket method to find her withholding tax if her weekly gross earnings are \$308.10. Bob has monthly earnings of \$2,439.78. He is married and claims 4 withholding allowances. Find his withholding tax using the wage bracket method.

2. The Percentage Method Uses the table on p 245. Find the correct table. Weekly, Biweekly, Semimonthly, or Monthly? Married or Single? Find the withholding allowance for one person. Multiply by the # of allowances being claimed. Subtract that value from the gross earnings. Find the range (Married or Single?) that includes that value. Subtract the ‘of excess over’ amount before you multiply by the %, then add.

Percentage Method Examples Sadie is married and claims 3 withholding allowances. Use the percentage method to find her withholding tax in a week when she has earnings of \$1263. Howard has earnings of \$5735 for the month. He is married and claims 4 withholding allowances. Use the percentage method to find his tax.

Another Example! Carol has weekly earnings of \$2175, is single, and claims 2 withholding allowances. Use the percentage method to find her withholding tax.

State Withholding Tax Uses the state’s tax rate… varies by state! Tax = state’s percent rate x gross earnings EX: An employee has gross earnings of \$3786 for the month. If her state has a 6.15% income tax rate, find the state withholding tax.

NET PAY… after all the taxes! To find net pay, first find all the taxes: FICA Medicare Federal Withholding State Withholding Any others (like SDI) Then subtract ALL the taxes from the gross earnings.

Net pay example Al has monthly gross earning of \$8762, is married, and claims 3 withholding allowance. His state withholding is 3% and his union dues are \$58. Find his net pay using the percentage method for federal withholding.

Quarterly amount owed to IRS Remember: employee’s contributions for Medicare and FICA are matched by the employer. Usually paid quarterly… Payless Dry Cleaners withheld \$461.90 in FICA and \$108.03 in Medicare Tax from employees. How much must the employer send to the IRS? In one quarter, City Electronics has collected \$1953.82 in FICA, \$456.75 in Medicare Tax, and \$3780.47 in Federal Withholding tax from its employees. Find the total amount due to the government by the employer.

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