Ben Franklin is quoted as saying...

In this world, nothing is certain but death and taxes.

One of the many employer responsibilities is to withhold income taxes from employees wages and paying these taxes to the federal government. In addition, many employers must also comply with state, city, and county income tax withholding laws.

This Mastery problem will use two publications: Publication 15 which outlines amounts that should be included or excluded from gross wages and Publication 15-T which contain the Federal Income Tax Withholding Methods.

Supplement - Percentage Method: 2019 and Earlier

For employees with a Form W-4 from 2019 or earlier on file, the employer uses the number of withholding allowances and marital status found on Form W-4 to calculate the federal income tax withholding^*.

For 2019 and earlier, the percentage method is used when an employee's wages exceed the Publication 15-T tables provided. The process for this method is to take the earnings, subtract the allowances the employee declared on their W-4 to determine the proper withholding.

Table of Allowance Values for 2021
Weekly	83.00		Biweekly	165.00		Semimonthly	179.00		Monthly	358.00
Quarterly	1,075.00		Semiannual	2,150.00		Annual	4,300.00		Daily/Misc.	17.00

*

Note that for employees hired prior to 2020, employers will continue to use this method. Should an employee wish to make a change to the Form W-4 currently on file, a new 2020 and Later would be completed. The employer then changes to the new withholding method (describes on the Percentage Method: 2020 and Later page).

Wage Example's sister-in-law, Perfect, is married and claims 3 allowances. She earns $5,140.75 semimonthly.

1. 	Description			Calculation
   1.	Begin with gross wages, $5,140.75.			$5,140.75
   2.	Determine the allowancea amount based on the payroll period.	$179.00
   3.	Multiply the allowance value by the employee allowances claimed.	3		(537.00)
   4.	Subtract allowances from gross pay, referred to as excess wages.			$4,603.75
   5.	Using the percentage_table, identify the correct bracket. Wages starting at $3,885 but not over $7,706.	$4,603.75 (3,885.00)
   6.	Compute the excess wage over the starting wage for this bracket.	$718.75
   7.	Multiply the excess by the tax rate in the table (22%)	x .22		$158.13
   8.	Add this bracket's minimum tax			388.64
   9.	Add the two amounts together which equals Perfect's total withholding.			$546.77
   	a Based on Table of Allowance Values for 2021 above and the scenario data, Perfect is paid semimonthly which corresponds to a semimonthly allowance of $179.00 per allowance claimed.

Making It Work

Note: Enter ALL values as positive numbers and round amounts to two decimal places unless instructed otherwise.

Note: Use percentage_table link above for tax rate information.

Ben Franklin earns $10,475.00 monthly. Additional information necessary to determine Naiser's tax withholding can be found on the attached 2019 W-4.

	Description			Calculation
1.	Begin with gross wages.			$fill in the blank cacdeefc2f9f03b_1
2.	Enter the value of the allowances based on the payroll period.		$fill in the blank cacdeefc2f9f03b_2
3.	Multiply the allowance value by the employee allowances claimed		fill in the blank cacdeefc2f9f03b_3	(fill in the blank cacdeefc2f9f03b_4)
4.	Subtract allowances from gross pay, referred to as excess wages			$fill in the blank cacdeefc2f9f03b_5
5.	Enter the correct bracket range values. Wages starting at $fill in the blank cacdeefc2f9f03b_6 but not over $fill in the blank cacdeefc2f9f03b_7		$fill in the blank cacdeefc2f9f03b_8 (fill in the blank cacdeefc2f9f03b_9)
6.	Compute value over the starting wage for this bracket		$fill in the blank cacdeefc2f9f03b_10
7.	Multiply the overage by the tax rate in the table (enter as a decimal).	x	fill in the blank cacdeefc2f9f03b_11
				$fill in the blank cacdeefc2f9f03b_12
8.	Add the bracket minimum tax.			fill in the blank cacdeefc2f9f03b_13
9.	Add the two amounts together, total withholding for Naiser Tevin.