How Do You Calculate Federal Withholding Tax?


Quick Answer

Employers calculate federal withholding tax by using the information on a Form W-4 that an employee fills out when he first starts work or experiences life events that change the withholding amount, reports the IRS. Employers and employees can estimate the correct withholding amount using the online IRS withholding calculator.

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Full Answer

To determine the correct amount of income tax to withhold, an employer matches the salary of an employee with the information supplied on a Form W-4, including marital status, dependents, non-wage income, claimed deductions and withholding allowances, states the IRS. Life situational changes that may affect the amount of taxes withheld and necessitate a new Form W-4 include marriage or divorce, additions to or loss of dependents, or an adjustment in deductions or withholding allowances. Individuals working at two jobs, or married couples filing jointly, can claim only one set of allowances. If employees do not complete a Form W-4, the employer must withhold income tax at the highest rate possible.

To find the IRS withholding calculator, click the Tools tab on the main page of the IRS website, select IRS Withholding Calculator, and then click Continue to the Withholding Calculator in the text of the article, according explains the IRS. Answer the questions about your filing status, dependents, income sources, wages and deductions. The IRS provides an income tax withholding estimate and a recap of the information the estimate is based on.

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