How Much Money Is Withheld for Federal Taxes Per Paycheck?

by Grace Ferguson
Change your W-4 whenever the amount of tax you need taken out changes.

It would be nice to if you could get all your gross wages on payday, but because federal taxes are a must, they're taken out of your paychecks before you're even paid. Federal income tax, Social Security tax and Medicare tax are all federal taxes. The amount your employer is supposed to withhold depends on the type of tax. Federal tax rules support several scenarios that affect your withholding.

Areas Impacting Withholding

Federal income tax withholding depends on the information you put on your W-4 form, including your filing status and personal allowances. If you intend to itemize your deductions and claim specific credits on your tax return, you should complete page 2 of the W-4 as well as page 1 to reduce your withholding to account for the credits and deductions you'll claim when you file your return. Since allowances reduce wages that are subject to taxation, you pay less federal income tax when you claim allowances. Also, if you claim “Single” or “Married, but withhold at higher Single rate” on line 3 the W-4, you’re put in a higher tax bracket than “Married.”

Withholding Basis

Your federal income tax amount is based on the IRS Circular E tax table that goes with your wages, pay period and the allowances and filing status you put on your W-4. The Circular E wage bracket method gives the exact amount to withhold based on that data. If your wages exceed the wage bracket’s limit, the percentage method must be applied. For example, as of 2012, if you claim single status and earn $2,100 or more biweekly, the percentage method applies.

Calculation Example

Let’s say you earn $70,000 annually. If you’re paid biweekly, divide $70,000 by 26 biweekly pay periods to arrive at biweekly salary of $2,692.31. Assume that you claim three allowances and single status on your W-4. As of 2012, the IRS gives $146.15 per allowance for a biweekly payroll. Multiply $146.15 times 3 to get $438.45. Subtract $438.45 from $2,692.31 to get $2,253.86. Then, find the Circular E biweekly percentage method table for single individuals. Your wages after allowances that exceed $1,688 would be subject to a 28-percent tax plus a flat amount of $335.35. Subtract $1,688 from $2,253.86 to arrive at $565.86, which is your excess wages. Multiply $565.86 by 28 percent to get $158.44. Add $335.35 to $158.44 to get total withholding per biweekly paycheck of $493.79.

FICA Withholding

As of 2012, your wages per paycheck are subject to Social Security tax of 4.2 percent, up to the annual wage limit of $110,100. You also pay Medicare tax at 1.45 percent of all your wages. When you reach the annual threshold for Social Security tax, your employer is supposed to stop the withholding. If you change jobs during the year, your new employer is supposed to withhold Social Security tax without regard for what your past employer deducted. If you overpaid the tax as a result, you may claim a refund when you file your return with the IRS on Form 1040. On line 69 of the form include the excess amount. For example, if you earned more than the annual wage limit of $110,100, you were supposed to pay $4,624.20 in Social Security tax. Add the Social Security withheld amounts shown in Box 4 of each of your W-2s. Subtract $4,624.20 from the total W-2 amounts and put the result on line 69 of the 1040.

About the Author

Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.

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