It can turn out to be a nightmare to calculate federal tax withholdings. This is because it is complex to determine the IRS tax code. This is an increasingly growing problem because f the rise in the number of people who are underpaying taxes. This guide provides you with the necessary steps to follow when calculating federal tax withholdings. Click here to check out The 12 Steps Of Calculating Federal Tax Withholdings
You need to begin by using the IRS withholding calculator. This will assist you in knowing the lot that is withheld. You need to get a new W-4 form. You need to know your current withholding from the last W-2 or 1099 form. Next you need to identify your gross income for the entire years. You have to know your filing status. This is because it will help in determining the federal tax withholding rate. The status can be either single, married, head of household, qualifying widow or married filing separately.
Also, know your allowances. This is vital when filling the W-4 form. It assists in determining the amount that is withheld from your paycheck. More allowances means that the amount that will be withheld is less. If you have zero allowance, the amount withheld will be more or a larger refund. The next step would be to claim your deductions. This is if the deductions are $6300 or more. You have to deduct expenses such as retirement payments, donations and healthcare costs. It is advisable that you check with IRS. The IRS has circular E or Publication 15 that indicates the amount that needs to be withheld out of a paycheck.
It is vital that you calculate your percentages. This information can be got from page 43 of the IRS publication. It will assist you to calculate your withholding percentage. You need to identify your allowances and then multiply it by the amount that is listed on table 5. This will be determined by how often you are paid. Then minus the amount from your pay. Afterwards, use the tables provided on pages 45 and 46 to know your filing status and the frequency in which you get paid. This will help you know the income tax withheld. Visit this link for more info on how to Calculate Federal Taxes
After you are through with calculating the federal tax withholdings, you need now to find your payroll withholdings. Make calculations of the social security tax. This is a simple process. You need to multiply your gross pay by 6.2%. However, for Medicare tax, you multiply the gross pay by 1.45%. Check for any additional Medicare taxes.If you earn a certain amount, you have to make an additional Medicare taxes. For single earner who get more than $125,000 in a year or if you are married and make more than $250, 000, you should pay 0.9% as Medicare taxes.
Get more information about tax accounting at http://www.ehow.com/about_4728517_tax-accounting_.html