Issue
Examples of how to handle Federal Tax Calculations with different pay period frequencies.
Resolution
Katherine Banks has a Federal Filing Status of Married and claims one Exemption.She has no tax-sheltered Deductions.The following pay transactions are included in the pay run:
A Biweekly Hourly Pay Code for $600
A Biweekly Bonus Pay Code for $201.94
A Monthly Commission Pay Code for $214.80
This example uses the Payroll Tax Update for March 2001.
1. All wages are annualized, based on the pay period frequency.
$600 * 26 = $15,600
$201.94 * 26 = $5,250.44
$214.80 * 12 = $2,577.60
Total annualized wages:$23,428.04
2. Subtract the Exemption amount.
$23,428.04 - $2,900 = $20,528.04
This is the amount applied to the Tax tables.
3. Subtract according to the Tax tables then multiply by the Tax Rate.
$20,528.04 - $6,450 = $14,078.04 * 15% = $2,111.71Total Taxes
4.Calculate the withholdingfor each pay frequency.
Biweekly - Divide the total annualized amount for the frequency by the total annualized wages.
($15,600 + $5,250.44) / $23,428.04 = .8899779
Multiply by the total Taxes then divide by the pay period frequency.
.8899779 * $2,111.71 = $1,879.37 / 26 = $72.28
Monthly - Divide the total annualized amount for the frequency by the total annualized wages.
$2,577.60 / $23,428.04 = .110022
Multiply by the total Taxes then divide by the pay period frequency.
.110022 * $2,111.71 = $232.33 / 12 = $19.36
5.Add together the federal withholding for each frequency.
$72.28 + $19.36 = $91.64
This article was TechKnowledge Document ID:22213
Examples of how to handle Federal Tax Calculations with different pay period frequencies.
Resolution
Katherine Banks has a Federal Filing Status of Married and claims one Exemption.She has no tax-sheltered Deductions.The following pay transactions are included in the pay run:
A Biweekly Hourly Pay Code for $600
A Biweekly Bonus Pay Code for $201.94
A Monthly Commission Pay Code for $214.80
This example uses the Payroll Tax Update for March 2001.
1. All wages are annualized, based on the pay period frequency.
$600 * 26 = $15,600
$201.94 * 26 = $5,250.44
$214.80 * 12 = $2,577.60
Total annualized wages:$23,428.04
2. Subtract the Exemption amount.
$23,428.04 - $2,900 = $20,528.04
This is the amount applied to the Tax tables.
3. Subtract according to the Tax tables then multiply by the Tax Rate.
$20,528.04 - $6,450 = $14,078.04 * 15% = $2,111.71Total Taxes
4.Calculate the withholdingfor each pay frequency.
Biweekly - Divide the total annualized amount for the frequency by the total annualized wages.
($15,600 + $5,250.44) / $23,428.04 = .8899779
Multiply by the total Taxes then divide by the pay period frequency.
.8899779 * $2,111.71 = $1,879.37 / 26 = $72.28
Monthly - Divide the total annualized amount for the frequency by the total annualized wages.
$2,577.60 / $23,428.04 = .110022
Multiply by the total Taxes then divide by the pay period frequency.
.110022 * $2,111.71 = $232.33 / 12 = $19.36
5.Add together the federal withholding for each frequency.
$72.28 + $19.36 = $91.64
This article was TechKnowledge Document ID:22213