Federal Income Tax Withholding
Income tax is withheld from most earnings types; hourly pay, salary, bonuses, commissions, tips, and numerous others. This tax is calculated based on graduated rate; roughly the more earned the higher rate of taxes withheld. It is not a simple flat percentage tax calculation that is applied across all employees, but rather is based on the employee's W4 election. For most people the easiest way to understood the calculation is by looking at the wage bracket calculation method and tables that correspond to the payment frequency and employee's W4 elections.
Federal withholding is generally calculated on a per check basis. The IRS supplies tax tables & methods that rely on the following items to instruct employers how much to withhold:
- Total taxable earnings paid (all taxable earnings types not just salary)
- W4 Marital status & Allowances claimed
- Paycheck Payment Frequency (daily, weekly, bi-weekly, semi-monthly, monthly)
In addition, there are special rules for supplemental wages for withholding proper taxes on items such as bonuses, commissions or other earnings not regularly paid.
Federal Income Tax is reported on the form 941. The amount withheld should be paid along with all Medicare, Social Security taxes according to the employer's deposit frequency - (next-day, semi-weekly, monthly).
If you are an employee wishing to update your Form W4 election, you can download this form anytime and supply to your employer. ASAP cannot take action on any information supplied to us directly by an employee. Any changes must be approved & verified by an authorized contact.