It can turn out to be a nightmare to calculate federal tax withholdings. This is because it can be frustrating and complex to figure out the IRS tax code. This is an increasingly growing problem because f the rise in the number of people who are underpaying taxes. This guide provides you with the necessary steps to follow when calculating federal tax withholdings.
The first thing you need to do is use the IRS withholding calculator. This will help you in identifying the amount that is being withheld. You need to get a new W-4 form. You need to know your current withholding from the last W-2 or 1099 form. The next step would be to identify the gross income for the year. It is advisable to know your filing status. This is because it will help in determining the federal tax withholding rate. The status can be either single, married, head of household, qualifying widow or married filing separately.
Also, you need to find out your allowance. It is essential when it comes to filling the W-4 form. It assists in determining the amount that is withheld from your paycheck. More allowances means that the amount that will be withheld is less. If you have zero allowance, the amount withheld will be more or a larger refund. The next step would be to claim your deductions. This is if you get deductions that are $6,300 or more. You should deduct expenses like healthcare costs, retirement payments, and donations. It is advisable that you check with IRS. The IRS has a Publication 15 that shows what amount is needed to be withheld from a paycheck.
It is important you calculate the percentages. You will get this information on IRS publication page 43. It will help in calculating withholding percentage. Take the allowances and multiply by the figure you find on table 5. You will determine this by how often you get paid. later you need to subtract that amount from the pay. Afterwards, use the table ton page 45 and 46 to determine the frequency you get pad and the filing status. This will determine the income tax that is withheld.
After completing your federal tax withholdings, you have to know your payroll withholdings. Calculate the social security tax. It is not a complicated process. You just have to take your gross pay and have it multiplied by 6.2%. However, you will multiply the gross pay by 1.45% for Medicare tax. It is advisable to check for additional Medicare taxes.If you earn a certain amount, you have to make an additional Medicare taxes. If you are a single earner who get more than $125,000 yearly or married and earn more than $250,000 each year, you will be required to pay 0.9% in Medicare taxes.