Federal income tax is usually withheld from your wages, and is calculated based on withholding allowance information you give your employer. This type of withholding is called a “pay-as-you-go” tax, and, at the end of the year, should add up to equal the federal tax due on your income. Your employer uses certain Internal Revenue Service materials to calculate your federal withholding, but you can also estimate your withholding using the same information.
Estimate your gross pay for the pay period. If you’re paid hourly, calculate your gross rate of pay by the number of hours you expect to work during the period. If you’re paid a regular salary, calculate the gross salary you expect for the pay period.
Subtract pretax deductions from your gross pay. These include your portion of payments for employer benefit programs like health insurance and retirement plan contributions. The result is your gross pay subject to income tax.
Obtain your W-4 withholding allowance information. You give a W-4 to your employer when you first start your job. This form tells your employer how much federal income tax to withhold from your pay. If you don’t remember the number of allowances you claimed on the form, ask your employer.
Download the Employer’s Tax Guide from the IRS website and flip to the “Wage Bracket” withholding tables near the back.
Look up the table that matches your payroll frequency and marital status.
Find the income range for your salary subject to income tax and scroll over to the number of withholding allowances you claim on Form W-4. The amount shown on the table is your estimated federal withholding.
- Federal withholding may be calculated at a different rate for certain types of income. For example, if you receive a bonus from work that is paid separately from your regular wages, a flat 25-percent rate may apply. For other types of income, such as unemployment compensation or retirement plan distributions, a 10-percent withholding rate is common. In these cases, you won't need your W-4 information to estimate your federal tax withholding.
- Social Security and Medicare taxes are also calculated using a flat rate percentage. As of March 2012, the Social Security rate is 6.2 percent and the Medicare rate is 1.45 percent. These taxes are assessed against your gross taxable salary, but are not deducted from most non-earned income, such as unemployment compensation.
With a background in taxation and financial consulting, Alia Nikolakopulos has over a decade of experience resolving tax and finance issues. She is an IRS Enrolled Agent and has been a writer for these topics since 2010. Nikolakopulos is pursuing Bachelor of Science in accounting at the Metropolitan State University of Denver.