How to Estimate Withholding Taxes
- 1). Determine your gross income. This is your total pay before deductions occur. If you have pretax deductions, such as a 401k plan, deduct it from your gross income to arrive at the taxable wages --- income subject to taxation. If you do not have any pretax deductions, your gross wages are your pay before deductions occur. If you do not know the company's pretax deductions, ask your employer's human resources department for a list.
- 2). Use the Internal Revenue Service's Circular E (Employer's Tax Guide) and your filing status and allowances to determine federal income tax withholding. The Circular E has the federal withholding tax tables for figuring federal income tax. You can get it from the IRS's website, IRS.gov, or request a copy from your employer. If you do not know your withholding conditions, get your filing status and allowances from lines 3 and 5 of your W-4 form.
Suppose you claim married status with three allowances, and you earn $1,200 biweekly. Page 47 of the 2010 Circular E says your withholding tax is $26. - 3). Calculate Social Security tax at 6.2 percent of your gross earnings, up to $106,800 annually. Calculate Medicare tax at 1.45 percent of all gross income.
- 4). Estimate state income tax if it applies. You do not pay state income tax if you work in the following states: Alaska, Florida, Texas, Tennessee, Wyoming, Washington, New Hampshire, Nevada and South Dakota. Use your state revenue agency's withholding method to estimate state income tax. Most states require you to use a system similar to federal income tax withholding. In this case, consult your state's withholding tax table and the state income tax withholding allowance certificate to figure the tax.
Suppose you work in Georgia and claim married filing separately status, with three allowances. You earn $850 weekly. According to Georgia's Employer's Tax Guide, your state income tax withholding is $37.66.
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