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Why is there no federal withholding taken out of my paycheck
No federal income tax withheld from my paycheck

I have an employee. She is single with 3 allowances for federal tax withholding. She is paid at $21.79/hour and 21 hours per pay period. We paid her twice a month. I used your ezPaycheck payroll software to generate the paycheck.  However, I find $0 federal tax withhold on her paycheck. Is it correct? Why?

Answer: Your employee can claim allowances on the W-4. Each allowance will lower her taxable income.  The more allowances she claims the less federal income tax she pays; the less she claims, the more federal tax she pays.

The standard deduction is $3,900 per year (For Year 2013).

For your employee, her taxable income is not high enough to withhold federal tax. Here are the step by step calculations.

1. Gross pay for each paycheck:

$21.79*21 hours= $457.59

For each pay period, the gross pay is $457.59

2. Deductions for each paycheck:

 

The standard deduction is $3,900 per year (For Year 2013).

 

She can get total deductions

$3,900   X             3 =          $11,700

 

For each pay period the deduction is:

$11,700                 /              24           = $487.50

 

3. Taxable income for each paycheck

So for each paycheck, the taxable income is:

457.59   -              $487.50                 =             - $29.91

 

So for this employee, her taxable income is $0. So you will see $0 federal tax on this paycheck.

 

Related Links

  • How to calculate federal withholding tax using the percentage tables

http://www.halfpricesoft.com/payroll-software/how-to-calculate-federal-withholding-tax.asp

  • Federal Income Tax Tables

http://www.halfpricesoft.com/federal_income_tax_2013.asp

About Casey Yang
I work for halfpricesoft.com. Halfpricesoft.com is a leading provider of easy-to-use 1099, W2 and Payroll Software solutions for accountants and small to medium size businesses. And its small business software can save user both time and money. For more information, visit http://www.halfpricesoft.com



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