Federal Income Tax Withholding

Effective as soon as possible, payroll checks will reflect a change in the withholding of federal taxes. The biweekly per­sonal exemption value for each federal tax allowance will change to $146.15. All information in this article is based on a biweekly payroll period (PP) and the withholding tables in Internal Revenue Service (IRS) Publication 15, (Circular E), Employer’s Tax Guide.

 

For Wages Paid in 2012 Federal Income Tax Withholding Table
Single Person				Married Person
Wages*		The withholding amount is:		Wages*		The withholding amount is:
Over…	But not over…	Withholding Amount	Of excess over	Over…	But not over…	Withholding amount	Of excess over
$0	$83	$0		$0	$312	$0
$83	$417	10%	$83	$312	$981	10%	$312
$417	$1,442	$33.40 plus 15%	$417	$981	$3,031	$66.90 plus 15%	$981
$1,442	$3,377	$187.15 plus 25%	$1,442	$3,031	$5,800	$374.40 plus 25%	$3,031
$3,377	$6,954	$670.90 plus 28%	$3,377	$5,800	$8,675	$1,066.65 plus 28%	$5,800
$6,954	$15,019	$1,672.46 plus 33%	$6,954	$8,675	$15,248	$1,871.65 plus 33%	$8,675
$15,019		$4,333.91 plus 35%	$15,019	$15,248		$4,040.74 plus 35%	$15,248

* Wages are determined after subtracting withholding allowances, CPP, FEDVIP, FEHB, FSA, HSA and TSP contributions from your gross earnings.

Contributions made by employees to the following are treated as pre-tax monies for federal tax computations:

n Commuter Program pre-tax (CPP).

n Federal Employees Dental and Vision Insurance Pro­gram (FEDVIP).

n Federal Employees Health Benefits (FEHB).

n Flexible Spending Accounts (FSA).

n Health Savings Account (HSA).

n Thrift Savings Plan (TSP)

When calculating your taxes, remember to subtract your withholding allowances and all of these contribution amounts from your gross earnings.

Note: There are two technical exceptions to this pre-tax rule. TSP contributions are tax-deferred; however, they are deducted during these computations. Additionally, in rare instances, if an employee has signed a pre-tax waiver for FEHB benefits, they are considered to be taxable income and not used in these calculations.

To determine the amount of withholding, follow steps 1 through 9 as follows:

1. Determine normal biweekly gross wages from earn­ings statement.

2. Determine normal biweekly TSP contributions from earnings statement.

3. Determine normal biweekly FSA contributions from earnings statement. If applicable, add the amounts from both the FSA Dependent Child (FSADC) sub-ac­count and the FSA Health Care (FSAHC) sub-account.

4. Determine normal biweekly FEHB pre-tax employee contribution from earnings statement (abbreviated as HB).

5. Determine normal CPP employee contribution from earnings statement.

6. Determine normal FEDVIP employee contribution from earnings statement.

7. Determine normal HSA contribution from earnings statement.

8. Multiply the number of exemptions claimed by the new biweekly exemption value of $146.15 (withhold­ing allowance). The federal tax line on the earnings statement shows the number of exemptions claimed (e.g., S1 = single with one exemption, M3 = married with three exemptions).

9. Subtract the amounts in step 2 (TSP), step 3 (FSA), step 4 (FEHB), step 5 (CPP), step 6 (FEDVIP), step 7 (HSA), and step 8 (exemptions) from step 1 (biweekly gross wages). The balance is the amount subject to withholding.

10. Determine which range this amount falls into on the Federal Income Tax Withholding Table, and follow the instructions listed in the table.

The following is an example of how to compute federal income taxes for a Federal Employee Retirement System (FERS) employee who claims married with three exemp­tions and makes pre-tax contributions to the TSP, FSA, FEHB, CPP, and FEDVIP.

Example: A FERS employee receives $3,826.35 as biweekly gross wages. The employee makes the following contributions: 11 percent of basic earnings (for this example, all of the gross $ is basic, X .11 = $420.90) per pay period (PP) to the TSP; $65 per PP to the FSADC Sub-Account; $95 per PP to the FSAHC Sub-Account; $131.48 per PP for FEHB, $105 for this PP to the CPP; and $43 for the GEHA PPO High Option Dental Biweekly Premium. The employee claims “married” with three exemptions (M3 on the federal tax line of the earnings statement). Using the information provided in the Federal Income Tax Withholding Table in this article, federal taxes are computed as follows:

 

1. Total biweekly gross wages	$3,826.35
2. Thrift Savings Plan contributions	420.90
3. Flexible Spending Account Dependent Child contribution	65.00
Flexible Spending Account Health Care contribution	95.00
Total Flexible Spending Account contribution	160.00
4. Federal Employees Health Benefits contribution	131.48
5. Commuter Program pre-tax contribution	105.00
6. Federal Employees Dental and VIsion Insurance Program contribution	43.00
7. Exemptions (3 x $146.15)	438.45

Computation continues as follows:

 

Biweekly gross wages	$3,826.35
Minus Thrift Savings Plan contributions	-420.90
Minus Flexible Spending Account contributions	-160.00
Minus Federal Employees Health Benefits contributions	-131.48
Minus Commuter Program pre-tax contributions	-105.00
Minus Federal Employees Dental and Vision Insurance Program contributions	-43.00
Minus exemptions	-438.45
Amount of wages subject to withholding	$2,527.52

To complete the computation, refer to the Married/Biweekly segment of the Federal Income Tax Withholding Table. The amount of wages subject to withholding ($2,527.52) falls within the “over $981 but not over $3,031” range. Using the information provided within that range, the final computation is as follows:

 

Amount subject to withholding	$2,527.52
Subtract $981 from $2,527.52	1,546.52
Multiply $1,546.52 by .15 (15%)	231.98
Add from the table	66.90
Add $231.98 and $66.90	298.88
Total federal income tax* that should be withheld from this employee’s biweekly check	$298.88

* Rounding may vary this total by a few cents.

— Payroll,
Controller, 1-26-12