Rice Business Report April Rice Business Report 2019 | Page 14

RICE BUSINESS REPORT APRIL 2019
How to Calculate Federal Payroll Taxes
By Shanda Harper
Calculating federal payroll taxes is easy once you understand a
few concepts that are fundamental to the earnings you receive re-
gardless of whether you're salaried, paid by the hour, or a contrac-
tor who has chosen to have deductions applied. This article breaks
down how the federal payroll taxes seen on employee pay stubs
are calculated
How Federal Taxes Affect Different Types of Employees
When calculating your taxes, the type of employee you are - salaried, hourly, or contrac-
tor, isn't nearly as relevant as the amount of income you generate. The exception, of
course, is that contractors and other individuals who typically don't have taxes retained,
will have a value of zero for the federal tax withheld unless they specifically request oth-
erwise.
Federal income deductions are levied among citizens based on the amount they generate
annually. The lower the income, the smaller the tax rate that is applied. As of 2016, any-
one with an annual income over $2,250 must have federal taxes deducted from their in-
come. Salaried employees, those who generate a set earning amount annually, will have a
set amount deducted in federal taxes each pay period. Hourly employees, however, will
have a federal tax rate that is projected based on the amount of earnings they have gen-
erated in their previous pay periods. As the year progresses, employers are better able to
gauge the total amount they anticipate the employee will make based on their pay fre-
quency and the number of hours they typically work during a pay period
How Pre and Post Amounts Affect Deductions
Pre and post deductions are additional factors that change the amount of federal taxes
that are withheld. As stated before, federal deductions are based on the amount of gross
income earned. The more you earned, the more you pay in taxes. With pre-tax deduction
amounts, you subtract the pre-tax amount from your gross income before the federal tax
rate is applied. Continued on page 15…….
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