Federal and State Withholding

How much should a business withhold from an employee's paycheck?

The new employee should fill out the employment forms found on the DeCarrera Law, LLC website. The W-4 and the G-4 are the federal and state forms that you will pay particular attention to when determining how much money to withhold from the employee's paycheck. On each form, the employee will indicate whether he or she is married and the number of allowances he or she has. (Side note: If the employee is having a difficult time figuring out the number of allowances, direct the employee to the IRS Withholding Calculator.)You will use this information from the tax guides to figure out the amount of withholding.

The company should automatically withhold 6.2% of taxable wages until the employee earns $97,500 for the calendar year for Social Security taxes. The company will withhold an additional 1.45% of taxable wages for Medicare. There is no limit on the earnings of the employee for the Medicare taxes.

To determine the Federal Withholding, the company will use the W-4. If the company did not receive a W-4 from the employee, then the company will withhold as if the form said "Single, no allowances." At the end of this IRS Employer's Tax Guide are the withholding tables. The company will use the table that corresponds with the marital status and the payroll period (weekly, bi-weekly, monthly, annual, daily) the company uses. Once on the correct table, find the gross wages in the left column. Go across until you reach the column with the correct number of employee allowances. The amount in that block is the amount of withholding.

The company will use the same method for determing state withholding. The state withholding tables can be found on the Georgia Department of Revenue website.

All amounts withheld shall be submitted to the IRS on behalf of the employee.

If you have any questions, please contact me or your CPA.