Effective immediately, payroll checks will reflect changes in the withholding of federal taxes. The biweekly personal exemption value for each federal tax allowance will change to $150.00. In addition, the Single or Head of Household and the Married withholding tables have changed. The American Taxpayer Relief Act of 2012 (H.R. 8) extends the Bush-era tax cuts for individuals earning under $400,000 annually, and $450,000 for couples. However, the marginal income tax rate for high-income taxpayers will increase to 39.6 percent for the excess of annual taxable wages over $402,200 (Single or Head of Household) or $458,300 (Married).
All information in this article is based on a biweekly payroll period (PP) and the early release copies (Notice 1036 - Rev. January 2013) of the Percentage Method Tables for Income Tax Withholding that will appear in the Internal Revenue Service (IRS) Publication 15, (Circular E), Employer’s Tax Guide.
For Wages Paid in 2013 Federal Income Tax Withholding Table
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Single Person
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Married Person
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Wages*
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The withholding amount is:
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Wages*
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The withholding amount is:
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Over…
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But not over…
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Withholding Amount
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Of excess over
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Over…
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But not over…
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Withholding Amount
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Of excess over
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$0
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$85
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$0
|
|
$0
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$319
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$0
|
|
$85
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$428
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$0.00 plus 10%
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$85
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$319
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$1,006
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$0.00 plus 10%
|
$319
|
$428
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$1,479
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$34.30 plus 15%
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$428
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$1,006
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$3,108
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$68.70 plus 15%
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$1,006
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$1,479
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$3,463
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$191.95 plus 25%
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$1,479
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$3,108
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$5,950
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$384.00 plus 25%
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$3,108
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$3,463
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$7,133
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$687.95 plus 28%
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$3,463
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$5,950
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$8,898
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$1,094.50 plus 28%
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$5,950
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$7,133
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$15,406
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$1,715.55 plus 33%
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$7,133
|
$8,898
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$15,640
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$1,919.94 plus 33%
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$8,898
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$15,406
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$15,469
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$4,445.64 plus 35%
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$15,406
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$15,640
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$17,627
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$4,144.80 plus 35%
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$15,640
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$15,469
|
|
$4,467.69 plus 39.6%
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$15,469
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$17,627
|
|
$4,840.25 plus 39.6%
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$17,627
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* Wages are determined after subtracting withholding allowances, CPP, FEDVIP, FEHB, FSA, HSA, and TSP contributions from your gross earnings.
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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 Traditional 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.
n Employee contributions to a Traditional TSP fund are treated as pre-tax monies because taxes on these contributions are deferred; hence, employee contributions to a Traditional TSP fund are subtracted from gross earnings.
n FEHB benefits are treated as pre-tax monies for almost all employees. However, for those few employees who signed pre-tax waivers for FEHB Benefits, FEHB premium contributions made by these employees are not treated as pre-tax monies and subsequently are not subtracted from gross earnings.
Employees are urged to review their withholdings every year and, if necessary, to update their Federal W-4 information. For example, individuals and couples with multiple jobs, people who are having children, getting married, getting divorced, or buying a home, and those who typically have a balance due or a large refund at the end of the year may want to consider submitting revised W-4 forms.
To determine the amount of withholding, follow steps 1 through 10 as follows:
1. Determine normal biweekly gross wages from earnings statement.
2. Determine normal biweekly Traditional TSP employee 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 contributions from earnings statement (abbreviated as HP).
5. Determine normal biweekly CPP employee contributions from earnings statement.
6. Determine normal biweekly FEDVIP employee contributions from earnings statement.
7. Determine normal biweekly HSA contribution from earnings statement.
8. Multiply the number of exemptions claimed by the new biweekly exemption value of $150.00 (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 (Traditional 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 into which range this amount falls on the Federal Income Tax Withholding Table; 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; basic X 0.11 = $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; $91.29 per PP to the FEHB; $105 for this PP to the CPP; and $45.76 per PP to the GEHA PPO High Option Dental 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:
Computation continues as follows:
To complete the computation, refer to the Married/Biweekly segment of the Federal Income Tax Withholding Table. The amount of wages subject to withholding ($2,553.40) falls within the “over $1,006 but not over $3,108” range. Using the information provided within that range, the final computation is as follows:
— Payroll,
Controller, 1-24-13
