The process of calculating federal tax withholdings can be frustrating. This is because it is complex to determine the IRS tax code. This is a growing problem due to the rise of many people who are underpaying taxes. This guide provides you with the necessary steps to follow when calculating federal tax withholdings.
Start by using the IRS withholding calculator. This will assist you in knowing the lot that is 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. You have to know your filing status. This is because it will help in determining the federal tax withholding rate. In most cases the status is single, married or head of household.
Also, you need to know your allowances. 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 need to deduct expenses like donations, retirement payments, and health care costs. 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 vital that you calculate your percentages. You will get this information on IRS publication page 43. It will help in calculating withholding percentage. You just have to know your allowances and then multiply it by the figure that is listed in table 5. You will determine this by how often you get paid. Then subtract the amount out of your pay. Afterwards, use the table ton page 45 and 46 to determine the frequency you get pad and the filing status. This will help you know the income tax withheld.
After you are through with calculating the federal tax withholdings, you need now to find your payroll withholdings. Calculate the social security tax. It is not a complicated process. You need to multiply your gross pay by 6.2%. However, for Medicare tax, you multiply the gross pay by 1.45%. Check for any additional Medicare taxes.If you earn a specific amount, you will be needed to pay 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.