Examples of Tax Calculation Methods
The following examples illustrate how the payroll process calculates taxes using the various calculation methods.
Default Method for Federal Runs
During a hypothetical reporting year, for an employee on a biweekly payroll and claiming single 0, the payroll process would calculate these earnings and taxes.
Period |
Payroll run |
Taxable earnings |
Tax due |
---|---|---|---|
1 |
Regular run |
$2500 |
$440.72 |
2 |
Regular run |
$5000 |
$1107.95 |
3 |
Regular run 1 |
$2500 |
$440.72 |
3 |
Regular run 2 |
$2500 |
$440.72 |
Default Method for Federal Runs Using Period-to-Date Amount
However, for that same year, if the payroll process uses the period-to-date amount, its results would be this.
Period |
Payroll run |
Taxable earnings |
Tax due |
---|---|---|---|
1 |
Regular run |
$2500 |
$440.72 |
2 |
Regular run |
$5000 |
$1107.95 |
3 |
Regular run 1 |
$2500 |
$440.72 |
3 |
Regular run 2 |
$2500 |
$667.23 |
In this case, the payroll process:
-
Combines the third period wages.
-
Calculates what would have been withheld had the $5000 been paid in one run.
-
Subtracts what was withheld already for that period.
This determines the difference to withhold for the second regular run of the third period.
$1107.95 - $440.72 = $667.23
Aggregation Method for Supplemental Federal Runs
For an employee that's:
-
On a biweekly payroll, claiming single 0
-
Has bonus earnings configured as Supplemental and process and pay with other earnings
In this case, the payroll process results would be:
Period |
Payroll run |
Taxable earnings |
Tax due |
---|---|---|---|
1 |
Supplemental |
$5000 |
$1107.95 |
2 |
Regular |
$2500 |
$440.72 |
2 |
Supplemental |
$5000 |
$1372.23 |
3 |
Regular |
$2500 + $5000 |
$1812.95 |
Flat Percentage Method for Federal
For an employee that's:
-
On a biweekly payroll, claiming single 0
-
Has bonus earnings configured as Supplemental and process and pay with other earnings
In this case, the payroll process results would be:
Period |
Payroll run |
Taxable earnings |
Tax due |
---|---|---|---|
1 |
Supplemental |
$5000 |
$1250 |
2 |
Regular |
$2500 |
$440.72 |
2 |
Supplemental |
$5000 |
$1250 |
3 |
Regular |
$2500 + $5000 |
$1812.95 |