Calculating Your Withholding Integrated Service Center


An hourly employee is paid at an hourly rate for the pay period. If an employee’s hourly rate is $12 and they worked 38 hours in the pay period, the employee’s gross pay for that paycheck is $456 ($12 x 38). Every time you get a paycheck, your employer withholds taxes to send to the IRS.


Pretax is more advantageous to employees because it lowers the individual’s taxable income. Federal income tax and FICA tax withholding are mandatory, so there’s no way around them unless your earnings are very low. However, they’re not the only factors that count when calculating your paycheck. In addition to income tax withholding, the other main federal component of your paycheck withholding is for FICA taxes. FICA stands for the Federal Insurance Contributions Act. Your FICA taxes are your contribution to the Social Security and Medicare programs that you’ll have access to when you’re a senior.

Why Check Your Withholding

Independent contractors or self-employed individuals pay the full amount because they are both employees and employers. This is one of the reasons why independent contractors tend to be paid more hourly than regular employees for the same job. Most U.S. cities and counties do not impose this tax, but some do, affecting approximately 10% of the total U.S. population. In general, the highest city tax rates in the U.S. are centered around large cities such as New York City.

All wages, salaries, cash gifts from employers, business income, tips, gambling income, bonuses, and unemployment benefits are subject to a federal income tax. There are voluntary pre and post-tax deductions like health insurance premiums, 401 plans, or health savings account contributions. In addition to withholding for payroll taxes, calculating your employees’ paycheck also means taking out anyapplicable deductions. For salaried employees,who are exempt from the overtime rules, gross pay will generally remain unchanged each pay period. Simply divide their salary by the number of pay periods in a year. For example, if a manager earns an annual salary of $50,000 and receives a paycheck twice a month, gross pay each pay period is $2,083.33 ($50,000/12 months/2 monthly pay periods).


Then, Fingercheck will file taxes once the first payroll is processed and all Tax ID numbers have been received. Our easy-to-use Payroll Tax Calculator allows you to figure out the take-home or gross pay after taxes and benefits are withheld. You can even use the payroll tax calculator to get into the specifics of your taxes because it includes all applicable taxes. You’ve probably asked yourself how much tax is deducted from my employees’ check? Our Payroll Tax Calculator can help you and your employees find answers to those and other questions. Enrollment in, or completion of, the H&R Block Income Tax Course or Tax Knowledge Assessment is neither an offer nor a guarantee of employment.

  • To calculate Medicare withholding, multiply your employee’s gross pay by the current Medicare tax rate (1.45%).
  • Other pre-tax deductionsEnter any other deductions made with pre-tax income.
  • Federal income tax and FICA tax withholding are mandatory, so there’s no way around them unless your earnings are very low.
  • For instance, people often overestimate how much they are able to spend based on an inflated pre-tax income figure.

Also deducted from your paychecks are any pre-tax retirement contributions you make. These are contributions that you make before any taxes are withheld from your paycheck. The most common pre-tax contributions are for retirement accounts such as a 401 or 403.

How to Calculate Withholding Tax

TheIRS Form 941, Employer’s Quarterly Federal Tax Return, provides details on how, when, and where to pay FIT and FICA. Be sure to send both the taxes you withheld from your employee’s paycheck as well as the taxes that you as the employer are responsible for. Some states have no state income taxes, so you may be off the hook.

  • The Internal Revenue Service requires that all workers in the U.S. sign IRS FormW-4​ at hire.
  • If you elect to contribute to a Health Savings Account or Flexible Spending Account to help with medical expenses, those contributions are deducted from your paychecks too.
  • Line balance must be paid down to zero by February 15 each year.
  • It includes a worksheet that allows your employees to calculate withholding allowances for dependents and children.

For instance, someone who is healthy with no major diseases or injuries can reconsider whether the most expensive top-of-the-line health insurance is necessary. In addition, each spouse’s company may have health insurance coverage for the entire family; it would be wise to compare the offerings of each health insurance plan and choose the preferred plan. Stop paying fees each time you process payroll and cut costs in half with a low, single monthly fee – no matter how often you run payroll.

Step 5: Total It All Up

Payroll, unemployment, government benefits and other direct deposit funds are available on effective date of settlement with provider. Please check with your employer or benefits provider as they may not offer direct deposit or partial direct deposit. Faster access to funds is based on comparison of traditional banking policies for check deposits versus electronic direct deposit. You are presented with a tax refund amount from the output of our W-4 calculator and and your desired tax refund is $0.

How to calculate gross income?

Again, gross income refers to the total amount you earn before taxes and other deductions, which is how an annual salary is typically expressed. Simply take the total amount of money (salary) you're paid for the year and divide it by 12.

Divide the amount listed as “Total Dependent Amount” from the withholding section of the payslip, if any, by your pay period frequency (12 if Monthly, 24 if Semi-Monthly). Remember, federal taxes aren’t automatically deducted from self-employment income. If you have a side business or do freelance work, it’s especially important to factor that income into your tax equation to make sure you don’t end up with a big tax bill at the end of the year. Now that you know your projected withholding, the next step is to estimate how much you’ll owe in taxes for this year.

IRS stress? Block has your back.

Small, midsized or large, your Calculating Withholding And Deductions From Paychecks has unique needs, from technology to support and everything in between. See how we help organizations like yours with a wider range of payroll and HR options than any other provider. Focus on what matters most by outsourcing payroll and HR tasks, or join our PEO. We don’t save or record the information you enter in the estimator.

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