The end of 2017 saw notable changes to the American tax code and, thus, the IRS withholding tables. These tables are essential to calculate tax. Knowing how to use them is helpful in knowing how much you can get from your paycheck.
IRS Withholding Tables | Learn How to Use Them
In This Article:
- What Are IRS Withholding Tables?
- Kinds of Methods Used in Federal Withholding Tax Tables
- How Do the IRS Withholding Tables Work?
- Who Uses Withholding Tables?
- Can the Withholding Tables Change?
- Using a Withholding Calculator
What Are IRS Withholding Tables?
The IRS withholding tables are the simplest ways to understand the complex United States federal tax code. They contain federal income tax brackets.
Each table notes how much an employer should set aside from a worker’s paycheck. The amount depends on the person’s income and how often they get paid.
The federal withholding tables present federal withholding tax rate in every pay interval. These include:
- biweekly (every other week)
- semimonthly (twice a month)
- quarterly (every three months)
- semiannually (twice a year)
The IRS also divides the tables by filing status. These include single (including the head of household) and couples filing jointly. The tables also contain a formula for determining tax withheld.
Kinds of Methods Used in Federal Withholding Tax Tables
There are two methods used in IRS withholding tables in Publication 15. The most common is the wage bracket method.
This method divides withholding by income and pay interval. With this, you can quickly find your withholding by comparing your income to your allowances. Just make sure you look at the right table.
The other is the percentage method. People who have more than ten allowances may need to use this. It is also helpful for employees with higher wages.
It requires you to find your filing status and pay frequency. You can then do some math to determine your withholding based on the tax bracket.
Using either method should give you the correct amount to withhold. The wage bracket tables often serve as a quicker way for you to get the right answer.
How Do the IRS Withholding Tables Work?
Figuring out how to use the IRS withholding tables correctly is very important. It is especially necessary when you cannot use a federal income tax calculator. Fortunately, the process is easy. Start with getting the IRS withholding tables. You can find it here. It starts on page 46.
For the Percentage Method:
- Keep a calculator handy. Find the amount to adjust per allowance. This relates to how often you receive a check.
- Take the number for your allowance and multiply it by the number of withholding allowances (W4 allowances).
- Subtract that total from your total wages per paycheck.
- Locate the table for your pay frequency and filing status. The table will give you a base withholding plus a percentage based on your tax bracket.
- Add those numbers together to give you an estimate of your withholding.
Wage Bracket Method
- Go to the table indicating your filing status and pay interval.
- Scroll down until you find the range that corresponds to your gross income.
- Move to the right until you see the number under your withholding allowances. That is your withholding per paycheck.
Who Uses Withholding Tables?
Anyone can take advantage of the IRS withholding tables to get a better understanding of their taxes. In a business, the person in charge of accounting and payroll needs to have the latest withholding information. This way, every employee has the right amount taken out of their paychecks.
Workers changing jobs or getting a raise may want to look at the withholding tables to help predict their future income. So do individuals who are changing their filing status.
Remember, these tables estimate federal tax only. For your state taxes, try a state income tax calculator to get more information. You can also get details here.
Can the Withholding Tables Change?
There are a few cases in which the IRS withholding tables could change. At present, the tables focus on a specific number of allowances. Each year, the total amount of an annual allowance increases.
In 2016, one allowance was worth $4,050. In 2018, the value is $4,150. If you use the tables to calculate your own withholding, you would need to adjust it each year.
Since the tax reform did not become law until late 2017, the IRS only changed the calculation methods to a certain degree. The IRS says that it will make more changes for 2019.
There may also be an update for the W4 form, so it fits better with the new tax laws. Using the correct forms and tables ensures you withhold the right amount each year.
Using a Withholding Calculator
The IRS withholding tables only tell you how much your employer will take out based on your income and w-4 allowances. If your tax situation changes, you need to adjust the number of allowances. Adding or subtracting them also impacts your withholding. By changing this number, you can grow or shrink your tax refund. You can do this by asking your employer to change your w-4.
If you do not have the skill at estimating your tax liability, a W-4 withholding tax calculator can help you figure out how many allowances you need.
Online, you will find different federal tax income calculators. It should be easy for you to know your tax liability. Needless to say, be careful. Some of these federal tax calculators may not be updated.
Determining how much you should withhold from your paychecks is easier with the IRS withholding tables. When you know how to use these tables, you can keep an eye on your tax liability throughout the year. You have a better idea of your net income. You can also plan your expenses accordingly.
Have you used IRS withholding tables? Did you find it easy? Share your experiences with us in the comments section below.
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