How do i calculate federal income tax withheld from paycheck?
Consult the IRS Circular E for the appropriate tax year. Furthermore, use the employee’s Form W-4 to determine his filing status and number of allowances.Use the wage bracket method to see if he has fewer than 10 allowances and if his income falls within the wage bracket limit. For example, say he earns $550 weekly and claims single/three. According to page 41 of the 2010 Circular E, his weekly federal income tax would be $30.Apply the percentage method if he has more than 10 allowances and earns more than the wage bracket limit allows. For example, say he earns $450 weekly and claims single/two. Calculation: $70.19 x 2 = $140.38. Then, $450 – 140.38 = $309.62. Excess over $200 is $109.62 x 15 percent = $16.44 + $8.40 = $24.84.