Employers are responsible for calculating, withholding, depositing and reporting federal income tax withholding.
Many small business owners ask: “How much federal income tax should be withheld from employee paychecks?”
When you hire employees for your small business, you are responsible for withholding taxes from their paychecks. Depending on where your business is located, you may handle withholding, depositing and reporting:
- federal, state and local income taxes
- Social Security
- Medicare
You can figure out how much federal income tax to withhold by using the employee’s most recent W-4, Employee’s Withholding Certificate, and the Internal Revenue Service's (IRS) income tax withholding tables.
What is a Tax Withholding Table?
A federal tax withholding table is a chart to help employers calculate how much federal income tax to deduct from each employee’s paycheck.
Where Can I Find the Tax Withholding Charts?
Business owners can reference the IRS federal withholding tables in the Main Contents of Publication 15-T to determine how much income tax to withhold. This publication also highlights recent tax updates, including changes or additions to withholding income tax.
You should review all the tables in the publication to select the right one for each employee of your business.
- There is one table for employers who use an automated payroll system, which can be used for all W-4s.
- There are two methods across four tables for employers who use manual payroll systems:
- IRS wage bracket method tables for W-4 from 2020 or later
- IRS percentage method tables for W-4 from 2020 or later
- IRS wage bracket method table for W-4 from 2019 or earlier
- IRS percentage method table for W-4 form 2019 or earlier
How Do I Use an Income Tax Withholding Table?
To compute federal income tax withholding, small business owners should select and follow the steps for the method that best meets the criteria for each employee of their business.
Before getting started, verify you’re referencing information for the current year. Make sure to update your files at the start of each new tax year. Since the IRS can adjust the income thresholds every year for inflation, the tables and brackets may also change annually.
For detailed information, check out IRS Publication 15 (Circular E), which guides employers on their responsibilities for reporting, depositing, withholding, paying and correcting employment taxes. The publication also instructs which forms you need to give your employees and which you send to the IRS. Employers can also access useful links to the latest updates, forms, help with forms and other related publications.
Easy Payroll and Tax Management
You’re an expert in your field. You don’t need to be one in payroll and payroll tax management. The right payroll service provider can help you stay focused on your business, customers and employees.
The easy, affordable solutions from SurePayroll® By Paychex help simplify the complexities of payroll and tax management, giving you the freedom to focus on your business.
Have questions? Connect to see how we can help simplify your success at SurePayroll.
