Understanding Tax Calculations

This topic uses examples to illustrate some of the key tax calculations used in the Payroll programs.

Tips:

These examples are meant to illustrate how the tax table fields are used. Actual tax rates, limits, and calculations may vary from these examples according to current federal and state formulas.
Because tax tables are annualized, you must calculate the pay period withholding amount by dividing the annual withholding amount by the number of pay periods in a year. For example, if the annual withholding tax for a weekly employee is $5,200.00, then $5,200.00 / 52 weeks per year = $100.00 withheld per paycheck.

Federal Tax Calculation Examples:

To see the Federal Withholding Tax Calculation Example, click More.
Tip: The following Tax Tables are applicable for Federal withholding tax:
- Federal & Regular FICA Tax Table Maintenance (FEDM & FEDS)
- FEDM: Federal & Regular FICA for Married taxpayers
- FEDS: Federal & Regular FICA for Single taxpayers
- Federal & Medicare FICA Tax Table Maintenance (FEDM2 & FEDS2)
- FEDM2: Federal & Medicare FICA for Married taxpayers
- FEDS2: Federal & Medicare FICA for Single taxpayers
Tax Table Example:

If a single person's annual income is $25,000.00...
- Gross Income Level = 2 (see table)
- Federal Gross Income Over Amount = $10,000.00
- Federal Base Amount to Withhold = $735.00
- Federal Plus % of Excess Over Rate = 15.00%
- $25,000.00 - $10,000.00 = $15,000.00 Excess Taxable Amount
- Excess Taxable Amount $15,000.00 X % of Excess Over Rate 15.00% = Excess W/H Amount $2,250.00
- Federal Tax Withholding Amount = $735.00 + $2,250.00 = $2,985.00
Notes:
- To determine the withholding amount for the paycheck, divide the annual withholding amount by the number of pay periods in the year.
- Matched Annuities amounts increase the Gross Pay for the calculation.
- This example is meant to illustrate how the tax table fields are used. Actual tax rates, limits, and calculations may vary from this example according to current state formulas.

State Tax Calculation Examples:

For additional information, click More.

Tips:

You must set up the state tax table for your facility's state. Your facility's State Code is defined during the software installation at Company Control Options. You must also set up state tax tables for any states applying to employees who are located out-of-state. For example if your facility is located in Maine, and you have some employees located in Massachusetts, you must set up the tables for both Maine and Massachusetts.
The following fields affect the result of the calculations for the State Tax Withholding Amount:
State Code: Determines which table to use
Marital Status Code: Determines which table to use
Number of State Dependents
Additional State Withholding Amount
Deduction Exemptions: For state tax
Other Pay Exemptions: For state tax
Retirement Withholding Amount: Exempt from state tax in some cases
Pay Periods Per Year: Number of pay periods per year for each Run Code
Matched Annuities amounts increase the Gross Pay for the calculation.
For an over of the State Withholding Tax tables, see State Withholding Tax Table Maintenance Overview (W/Hxnn & CTnnn).

To see the Connecticut Withholding Tax Calculation Example, click More.

This section is under construction.
To see the Maine Withholding Tax Calculation Example, click More.
Example: State Withholding Tax Table - Maine (W/Hx02)

If a single person's annual gross wage is $10,350.00...
- Less exemption for one child = $2,850.00
- Taxable Income = $10,350.00 - $2,850.00 = $7,500.00
- Gross Income Level = 2 (see table)
- State Gross Income Over Amount = $6,850.00
- State Base Amount to Withhold = $91.00
- State Plus % of Excess Over Rate = 4.50%
- $7,500.00 - $6,850.00 = $650.00 Excess Taxable Amount
- Excess Taxable Amount $650.00 X % of Excess Over Rate 4.50% = Excess W/H Amount $29.25
- Annual State Tax Withholding Amount = $91.00 + $29.25 = $120.25
Notes:
- To determine the withholding amount for the paycheck, divide the annual withholding amount by the number of pay periods in the year.
- This example is meant to illustrate how the tax table fields are used. Actual tax rates, limits, and calculations may vary from this example according to current state formulas.
To see the Maryland Withholding Tax Calculation Example, click More.

This section is under construction.
To see the Massachusetts Withholding Tax Calculation Example, click More.
Example: State Withholding Tax Table Maintenance - Massachusetts (W/H 01)

If a single person's annual gross wage is $20,000.00...
- Less Base Allowance for self = $2,850.00
- Less Dependent Exemption for 2 children = $1,000.00 X 2 = $2,000.00
- Taxable Income = $20,000.00 - $2,850.00 - $2,000.00 = $15,150.00
- Annual State Tax Withholding Amount = Tax Percent 5.30% X Taxable Income $15,150.00 = $802.95
Notes:
- To determine the withholding amount for the paycheck, divide the annual withholding amount by the number of pay periods in the year.
- This example is meant to illustrate how the tax table fields are used. Actual tax rates, limits, and calculations may vary from this example according to current state formulas.
To see the Michigan Withholding Tax Calculation Example, click More.
Example: State Withholding Tax Table Maintenance - Michigan (W/H 08)

If a single person's annual gross wage is $20,000.00...
- Less Dependent Exemption for self & 1 child = $3,300.00 X 2 = $6,600.00
- Taxable Income = $20,000.00 - $6,600.00 = $13,400.00
- Annual State Tax Withholding Amount = Tax Percent 3.90% X Taxable Income $13,400.00 = $522.60
Notes:
- To determine the withholding amount for the paycheck, divide the annual withholding amount by the number of pay periods in the year.
- This example is meant to illustrate how the tax table fields are used. Actual tax rates, limits, and calculations may vary from this example according to current state formulas.
To see the Oregon Withholding Tax Calculation Example, click More.
Example: State Withholding Tax Table Maintenance - Oregon (W/Hx05)

If a single person's annual gross wage is $15,000.00 and the Federal W/H is $1,567.00...
- Subtract Federal Withholding Amount ($1,567.00) or Limit ($5,000.00), whichever is less.
- Less exemption for one child = $159.00
- Taxable Income = $15,000.00 - $1,567.00 - $159.00 = $13,274.00
- Wage Level = 3 (see table)
- State Gross Income Over Amount = $8,031.00
- State Base Amount to Withhold = $541.00
- State Plus % of Excess Over Rate = 9.00%
- $13,274.00 - $8,031.00 = $5,243.00 Excess Taxable Amount
- Excess Taxable Amount $5,243.00 X % of Excess Over Rate 9.00% = Excess W/H Amount $471.87
- Annual State Tax Withholding Amount = $541.00 + $471.87 = $1,012.87
Notes:
- To determine the withholding amount for the paycheck, divide the annual withholding amount by the number of pay periods in the year.
- This example is meant to illustrate how the tax table fields are used. Actual tax rates, limits, and calculations may vary from this example according to current state formulas.
To see the Pennsylvania Withholding Tax Calculation Example, click More.
Example: State Withholding Tax Table Maintenance - Pennsylvania (W/H 06)

If a single person's annual gross wage is $20,000.00...

Annual State Tax Withholding Amount = Tax Percent 3.07% X Taxable Income $20,000.00 = $614.00

Notes:
- To determine the withholding amount for the paycheck, divide the annual withholding amount by the number of pay periods in the year.
- This example is meant to illustrate how the tax table fields are used. Actual tax rates, limits, and calculations may vary from this example according to current state formulas.
To see the Vermont Withholding Tax Calculation Example, click More.
Example: State Withholding Tax Table Maintenance - Vermont (W/Hx03)

If a single person's annual gross wage is $40,350.00...
- Less exemption for one child = $3,300.00
- Taxable Income = $40,350.00 - $3,300.00 = $37,050.00
- Gross Income Level = 2 (see table)
- State Gross Income Over Amount = $32,240.00
- State Base Amount to Withhold = $1,065.24
- State Plus % of Excess Over Rate = 7.20%
- $37,050.00 - $32,240.00 = $4,810.00 Excess Taxable Amount
- Excess Taxable Amount $481.00 X % of Excess Over Rate 7.20% = Excess W/H Amount $346.32
- Annual State Tax Withholding Amount = $1,065.24 + $346.32 = $1,411.56
Notes:
- To determine the withholding amount for the paycheck, divide the annual withholding amount by the number of pay periods in the year.
- This example is meant to illustrate how the tax table fields are used. Actual tax rates, limits, and calculations may vary from this example according to current state formulas.