Federal Income Tax Withholding

Effective as soon as possible in 2009, payroll checks will reflect an increase in the Biweekly personal exemption value for each federal tax allowance from $134.62 to $140.38. Based upon provisions in the Jobs and Growth Tax Relief Reconciliation Act of 2003, the six tax percentages remain at 10, 15, 25, 28, 33, and 35 percent. 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.

 

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	$102	$0		$0	$308	$0
$102	$400	10%	$102	$308	$921	10%	$308
$400	$1,362	$29.80 plus 15%	$400	$921	$2,910	$61.30 plus 15%	$921
$1,362	$3,242	$174.10 plus 25%	$1,362	$2,910	$5,569	$359.65 plus 25%	$2,910
$3,242	$6,677	$644.10 plus 28%	$3,242	$5,569	$8,331	$1,024.40 plus 28%	$5,569
$6,677	$14,423	$1,605.90 plus 33%	$6,677	$8,331	$14,642	$1,797.76 plus 33%	$8,331
$14,423		$4,162.08 plus 35%	$14,423	$14,642		$3880.39 plus 35%	$14,642

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

Commuter Program pre-tax (CPP), Federal Employees Dental and Vision Insurance Program (FEDVIP), Federal Employees Health Benefits (FEHB), Flexible Spending Accounts (FSA), and Thrift Savings Plan (TSP) contribu­tions made by employees are treated as pre-tax monies for these computations. 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:

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 HP).

5. Determine normal CPP employee contribution from earnings statement.

Note: This program is administered on a monthly basis. The CPP contribution is deducted in every second PP.

6. Determine normal Federal Employees Dental and Vision Insurance Program (FEDVIP) employee contri­bution from earnings statement.

7. Multiply the number of exemptions claimed by the new Biweekly exemption value of $140.38 (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).

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

9. 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 gross ($420.90) per 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 ($131.48 is the actual cost for a Postal Service employee paying for High Option Self and Family (Category One) with the GEHA Ben­efit Plan); $105 for this PP to the CPP; and $43 for the GEHA PPO High Option Dental Biweekly Premium (Rating Region 2). Please note that this Plan Amount did not change for 2009. 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. TSP contributions	420.90
3. FSADC contribution	65.00
FSAHC contribution	95.00
Total FSA contribution	160.00
4. FEHB contribution	131.48
5. CPP contribution	105.00
6. FEDVIP contribution	43.00
7. Exemptions (3 x $140.38)	421.14

Computation continues as follows:

 

Biweekly gross wages	$3,826.35
Minus TSP contributions	-420.90
Minus FSA contributions	-160.00
Minus FEHB contributions	-131.48
Minus CPP contributions	-105.00
Minus FEDVIP contributions	-43.00
Minus exemptions	-421.14
Amount of wages subject to withholding	$2,544.83

To complete the computation, refer to the Married/Biweekly segment of the Federal Income Tax Withholding Table. The amount of wages subject to withholding, $2,544.83 falls within the “over $921 but not over $2,910” range. Using the information provided within that range, the final computation is as follows:

 

Amount subject to withholding	$2,544.83
Subtract $921 from $2,544.83	1,623.83
Multiply $1,623.83 by .15 (15%)	243.57
Add from the table	61.30
Add $243.57 and $61.30	304.87
Total federal income tax* that should be withheld from this employee’s Biweekly check	$304.87

* Rounding may vary this total by a few cents.

— Payroll,
Controller, 1-1-09