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Calculating Federal Withholding - Ask TaxGuru
 
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Old 02-14-2015, 03:46 PM
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Join Date: Feb 2015
Posts: 3
Calculating Federal Withholding

Hello all! First-time poster here...

My calculation of federal withholding does not match my employer's and I am trying to understand why.

My W-4 specifies M/5 +$10.67. I have $8.65 in taxable fringe benefits (long-term disability and group term life). Payroll is bi-weekly.

My calculation is as follows, using values from IRS Publication 15 for 2015:

$396.70 + 0.25 * (N - $3212) + $10.67

Here, N is:
gross pay +
taxable fringe benefits -
pre-tax deductions -
5 * Value of One Withholding Allowance

My employer's federal withholding calculation is $8.66 higher than mine. Note that this is only $0.01 off from the amount of my taxable fringe benefits. I don't know if this is coincidence or not.

Is anybody able to see what I am doing wrong?

Thanks to all!



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Old 02-14-2015, 06:24 PM
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Join Date: Oct 2010
Posts: 5,230
Quote:
Originally Posted by dtheese View Post
Hello all! First-time poster here...

My calculation of federal withholding does not match my employer's and I am trying to understand why.

My W-4 specifies M/5 +$10.67. I have $8.65 in taxable fringe benefits (long-term disability and group term life). Payroll is bi-weekly.

My calculation is as follows, using values from IRS Publication 15 for 2015:

$396.70 + 0.25 * (N - $3212) + $10.67

Here, N is:
gross pay +
taxable fringe benefits -
pre-tax deductions -
5 * Value of One Withholding Allowance

My employer's federal withholding calculation is $8.66 higher than mine. Note that this is only $0.01 off from the amount of my taxable fringe benefits. I don't know if this is coincidence or not.

Is anybody able to see what I am doing wrong?

Thanks to all!
why do not you check your marital status?/ Did you choose accurate status ,i.e., single or MFJ or etc; I guess you need to contact your HR/employer for sure. you may adjust your W4; the best course is to adjust your withholding so your tax payments will match your actual tax liability.



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Old 02-14-2015, 08:19 PM
Junior Member
 
Join Date: Feb 2015
Posts: 3
I did contact my payroll department, and their response was merely, "The computer calculates it. We don't know the actual formula." And I work for a very large corporation. Unbelievable!

In any case... My goal is to do precisely what you suggested: Adjust my federal withholding (by tweaking on my and my wife's W-4 the number of allowances claimed and the "additional amount to withhold") to match our projected tax liability. (I am focusing exclusively on federal withholding in this thread because I have been able to figure out how my employer is calculating all of my other taxes and other payroll deductions.)

I have put together a quite-elaborate spreadsheet to do this matching of withholding to projected actual tax liability. It takes into account my income, my wife's varying, partial-year income, property taxes, charitable contributions, and on, and on, and on. Most importantly, in this spreadsheet, I can tweak the number of allowances claimed and the "additional amount to withhold" for both me and my wife until our withholding for the year will equal our projected actual liability. But until I can understand how my employer is calculating my federal withholding, I cannot completely finish this goal.

So, that leads me back to my original question (please see my original post for details). Is anybody able to see an error in the way I am calculating my federal withholding? (Or, have I perhaps stumbled on a bug in the software my employer's payroll department is using?)



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Old 02-15-2015, 01:56 AM
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Join Date: Oct 2010
Posts: 5,230
Quote:
Originally Posted by dtheese View Post
I did contact my payroll department, and their response was merely, "The computer calculates it. We don't know the actual formula." And I work for a very large corporation. Unbelievable!

In any case... My goal is to do precisely what you suggested: Adjust my federal withholding (by tweaking on my and my wife's W-4 the number of allowances claimed and the "additional amount to withhold") to match our projected tax liability. (I am focusing exclusively on federal withholding in this thread because I have been able to figure out how my employer is calculating all of my other taxes and other payroll deductions.)

I have put together a quite-elaborate spreadsheet to do this matching of withholding to projected actual tax liability. It takes into account my income, my wife's varying, partial-year income, property taxes, charitable contributions, and on, and on, and on. Most importantly, in this spreadsheet, I can tweak the number of allowances claimed and the "additional amount to withhold" for both me and my wife until our withholding for the year will equal our projected actual liability. But until I can understand how my employer is calculating my federal withholding, I cannot completely finish this goal.

So, that leads me back to my original question (please see my original post for details). Is anybody able to see an error in the way I am calculating my federal withholding? (Or, have I perhaps stumbled on a bug in the software my employer's payroll department is using?)
I did contact my payroll department, and their response was merely, "The computer calculates it. We don't know the actual formula.====>>>>>>>>>>>Correct; for payroll tax w/h , they usually ise either e=wage bracket method or percentage method. Youneed to check it with your ER.

In any case... My goal is to do precisely what you suggested: Adjust my federal withholding (by tweaking on my and my wife's W-4 the number of allowances claimed and the "additional amount to withhold") to match our projected tax liability. (I am focusing exclusively on federal withholding in this thread because I have been able to figure out how my employer is calculating all of my other taxes and other payroll deductions.)==>basically as you know well, nobody is perfectly precisely adjust their withholdings from W2 to balance out federal withholding to get 0 refund, but also owe 0 to the IRS since it is almost impossible to determine ahead of time that you would have 0 owed or 0 refund since circumstances change during the year that will affect that outcome
if you are single without dependents filing single, 2 on your W-4 will probably work out fairly close

I have put together a quite-elaborate spreadsheet to do this matching of withholding to projected actual tax liability. It takes into account my income, my wife's varying, partial-year income, property taxes, charitable contributions, and on, and on, and on. Most importantly, in this spreadsheet, I can tweak the number of allowances claimed and the "additional amount to withhold" for both me and my wife until our withholding for the year will equal our projected actual liability. But until I can understand how my employer is calculating my federal withholding, I cannot completely finish this goal.=======>>>>>>>>>as said, are sure you’d itemize dedcutions on Sch A of 1040 on your expenses, i.e., property taxes, charitable contributions, and on and On??? Unless your itemized deductions on your Sch A of 1040 exceeds your std deductions as MFJ filers, you can never deduct/claim your itemized deductions so I should say it depends;

So, that leads me back to my original question (please see my original post for details). Is anybody able to see an error in the way I am calculating my federal withholding? (Or, have I perhaps stumbled on a bug in the software my employer's payroll department is using?)====>>>>>As said you neeed to check it with your HR Dept for sure or need to contact a bookkeeper that filed ur payroll tax. I guess you may try the IRS web site here by using strep by step instructions if you want; 2015 Withholding Calculator



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Old 02-15-2015, 01:27 PM
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Join Date: Feb 2015
Posts: 3
Let me start this reply by stating that the end of this post contains a clarified restatement of my original question for any new readers who want to cut to the chase. But next, I will first address the points raised by the previous reply to this thread.

The wage bracket tables do not apply to my situation because my pay does not fall within any of the brackets. Therefore, my employer is very likely using the percentage method, although this is not absolutely required. In past years, I have always been able to use the percentage tables and have my federal withholding calculation exactly match what my employer was actually withholding.

I have itemized every year for the past 20 years. And barring any unforeseen events, there's no reason to think I won't itemize again this year. If circumstances change and it starts to looks like I'll be taking the standard deduction rather than itemizing, I'll make an appropriate mid-course correction to my spreadsheet and to our W-4's. I feel like I have a pretty good grip on making the best projection I can of what my actual tax liability will be. Therefore, I'd like to keep this discussion focused on my withholding rather than on projecting my actual tax liability.

What you say is true: it is indeed virtually impossible to work things out such that you have no refund and owe nothing once the year is over. However, by keeping the YTD information in my spreadsheet current and by making a couple of mid-course corrections to our W-4's during the year, I should be able to come out pretty close, thereby maximizing our take home pay throughout the year without ending up owing a significant tax bill.

As said, my HR and payroll departments have proved unhelpful in helping me understand how my federal withholding is being calculated. Furthermore, the IRS Tax Calculator is also not going to give me the formula and the complete breakdown of exactly how my employer is calculating my federal withholding.

*** A CLARIFIED RESTATEMENT OF MY ORIGINAL QUESTION ***

My calculation of federal withholding does not match my employer's and I am trying to understand why.

My W-4 specifies "married", claiming 5 withholding allowances, and an "additional amount to withhold" of $10.67.

I have $8.65 in taxable fringe benefits, long-term disability and group term life. The group term life is imputed income.

My paychecks are issued bi-weekly.

My calculation is as follows, using values from the percentage withholding method tables in IRS Publication 15 for 2015:

$396.70 + 0.25 * (N - $3212) + $10.67

Here, $396.70, 0.25, and $3212 come from the line in the IRS Publication 15 percentage method tables that apply to my income level. They are used as follows:

"Withhold $396.70 + 25% of the amount over $3212."

Again, $10.67 is the additional amount to witthold that I specified on my W-4.

Here, N is:
(gross pay +
taxable fringe benefits -
pre-tax deductions) -

(number of withholding allowances *
value of one withholding allowance)

Here, I am claiming 5 withholding allowances. Per IRS Publication 15 for 2015, the value of one withholding allowance in 2015 for a bi-weekly payroll period is $153.80.

My employer's federal withholding calculation is $8.66 higher than mine. Note that this is only $0.01 off from the amount of my taxable fringe benefits / imputed income. I don't know if this is coincidence or not. It seems unlikely it is.

Is my treatment of my taxable fringe benefits / imputed income of $8.65 wrong? The way I am handling it has worked in past years, but I am wondering if there has perhaps been a change to the tax laws this year I have not yet unearthed. I have tried handling this taxable fringe benefit / imputed income of $8.65 in a number of different ways in my federal withholding calculation spreadsheet in a number of different ways, none of which yield the amount of federal withholding my employer is actually deducting from my paycheck.

If my treatment of taxable fringe benefits / imputed income is correct, is there anything else I am doing wrong? The IRS Publication 15 percentage method withholding tables are pretty straightforward to use. It doesn't seem like I'm doing anything wrong, but I'd love for some experts to weigh in on my calculation shown above.

Finally, have there been any updates to the IRS Publication 15 percentage method tables? In other words, are the values $396.70, 0.25, and $3212 I'm using in my calculation above still correct? I cannot find any evidence searching extensively on the Internet that there has been any change to these tables, but the question is worth asking.

Thanks to all again.



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