WTHG-Formula Withholding Tax Formula

$15 000 00 $25 000 00 $480 00 + 6 0% $15 000 00 $25 000 00 $1 080 00 + 7 0% $25 000 00 $3 000 00 $6 000 00 $30 00 + 2 5% $3 000 00 $6 000 00 $9 000 00 $105 00 + 3 5% $6 000 00 $9 000 00 $15 000 00 $210 00 + 4 5% $9 000 00 0 $3 000 00 1% 0 OVER BUT NOT OVER PERCENTAGE ON EXCESS OVER $1 240 00 x 3 5% = $ 43 40 $43 40 + $105 00 = $ 148 40 Total Tax per year $7 240 00 $6 000 = $1 240 00 1 Multiply the Period Gross Pay by the number of periods per year to arrive at annual gross pay Annual Gross pay =$9 240 00 Less Standard Deduction =$2 000 00 Net Taxable Income =$7 240 00 Bi Weekly x 26 = Annual Gross Pay Compared to tax table amount of $4 53 Compute Gross Tax on the net taxable income Computer Formula Daily x 260 = Annual Gross Pay Divide Net Tax Per Year by the number of Pay Periods in the year Employers having electronic systems are authorized to use the following formula to compute the amount of withholding rather than use the withholding tables EXAMPLE FORMULA METHOD Monthly x 12 = Annual Gross Pay Mr Jones a truck driver works for XYZ Trucking and is paid semi monthly $385 00 per pay period He claims a total of 2 withholding exemptions How much is withheld? Multiply total number of withholding exemptions claimed on Form AR4EC times $20 00 to arrive at Personal Tax Credits Net Tax per year Divided by pay periods = $108 40 / 24 = $4 52 Semi monthly pay = $385 00 Semi monthly pay periods = x 24 Annual Gross pay =$9 240 00 Semi Monthly x 24 = Annual Gross Pay Subtract Personal Tax Credits from gross tax to arrive at Net Tax Per Year Subtract the Standard Deduction of $2 000 to arrive at Net Taxable Income The income of $7 240 00 is over $6 000 00 but not over $9 000 00 so the tax computation is $105 00 plus the excess over $6 000 00 Total Tax per year =$148 40 Less Personal Credit (2 exemptions x $20 00) =$ 40 00 Net Tax per year $108 40 Weekly x 52 = Annual Gross Pay