How to Determine How Much in Taxes Will Be Withheld From Your Payroll Check

By Grace Ferguson
Payroll tax calculation depends on the type of tax.
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A salaried employee typically receives the same amount of wages each payday. An hourly employee's pay may fluctuate, since he's paid according to hours worked. Regardless of your pay group, a pay raise, pay reduction or change in your federal or state income tax withholding conditions will affect your paycheck. Projecting your tax withholding can be especially useful for budgeting purposes. If you apply the appropriate calculation method, you can determine the withholding amount ahead of time.

Figure what your gross pay will be. This step applies if you received any kind of change to your pay.

Suppose you are paid biweekly. You received a 5 percent raise on your current annual salary of $40,000.

New annual salary calculation: $40,000 x .05 = $2,000 + $40,000 = $42,000.

New biweekly salary calculation: $42,000 / 26 biweekly pay periods = $1,615.38.

To determine new hourly pay, multiply your work hours by your hourly rate. Include overtime, if it applies.

Do not perform any pay calculation if you are only making a change to your tax withholding conditions, such as filing status or allowances.

Calculate federal income tax withholding. Access IRS Circular E from the IRS' website or ask your employer for a copy. Retrieve your withholding conditions from your W-4 form. The Circular E has the withholding tax tables necessary to compute federal income tax withholding.

Suppose you change your filing status from married to single, and increase your allowances from two to three. You earn $950 biweekly. According to page 10 of the 2010 Circular E, your federal income tax withholding was $14. According to page 45, the change will increase your withholding to $36.

Estimate Social Security tax withholding at 6.2 percent of gross income, up to the annual wage base of $106,800. Estimate Medicare tax withholding at 1.45 percent.

Figure state income tax withholding. This process is usually similar to the federal income tax withholding process, except that you would use your state withholding tax tables and your state withholding tax form to figure the tax. In rare cases, such as Pennsylvania and Michigan, the state charges a flat withholding tax.