The Internal Revenue Service releases tax withholding tables every year for employers to determine how much tax needs to be withheld from the employees’ salary. All employers need to use the tax withholding tables and the employee’s Form W-4 to figure out the tax withholding amount. Without either one of them, the taxes withheld may be more or less than necessary. So it is crucial for the employee’s withholding to use the tax withholding tables.
The tax withholding tables are also good for payroll. Under federal law, all employees are required to pay taxes gradually during the course of the tax year. So the employer needs to determine the amount of federal taxes to withhold both for this and for payroll. After all, what the employee gets in his or her paycheck is after-tax dollars. With that being said, by figuring out the tax withholding amount, you handle two things at once as an employer.
How do tax withholding tables work?
Before we tell you how the tax withholding tables work, keep in mind that the tables change whenever there has been a change to the employee’s withholding certificate. This is Form W-4, previously known as employee’s withholding allowance certificate. Therefore, keep track of the changes to the Form W-4 to withhold tax easily.
As for how the tax withholding tables work, it is simple. Form W-4 your employees file includes all the information you can put side by side to the amounts seen on the tax withholding tables. Aside from what included on Form W-4, you will take pay frequency into account. So the taxes withheld is going to be drastically different if your employees are getting paid once a week, twice a week or once a month, etc.
Perhaps, the pay frequency and the filing status of the employee is what determines the withholding amount for the most part. Since tax withholding tables are renewed every year just like the Form W-4, make sure you use the right tables when determining employee’s withholdings.