How do employers use withholding tax tables?


Quick Answer

Employers use withholding tax tables to calculate the amount they need to take out of an employee's paycheck for taxes, according to the Internal Revenue Service. Employers make these calculations using either the percentage method or the wage bracket method with information listed on an employee's W-4 form.

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Full Answer

To use the wage bracket method, employers select the withholding table based on the pay period and marital status of the employee. Then, they use the employee's pay and the number of allowances claimed on the W-4 to determine the amount to withhold, as explained by the IRS.

For example, employers withhold $60 from a single employee who is paid between $500 and $510 weekly and has no allowances, according to the IRS. If the employee has one allowance, the employer withholds $49.

To use the percentage method, employer's first multiply the number of allowances that the employee claimed on her W-4 by the amount of one withholding allowance. Then, they deduct that amount from the employee's pay, according to the IRS. For example, as of 2015, one withholding allowance for employees who are paid weekly is $76.90, and an allowance for employees paid monthly is $333.

Employers then use the tax table to determine the amount to withhold for taxes. For example, employers should withhold 10 percent of the employee's pay if an employee earns between $44 and $222 per week after deducting allowances, according to the IRS. At the highest pay bracket, employers withhold $2,307.52 plus 39.6 percent of any amount of $7,990 per week.

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