Paywin fed withholding more than IRS table says

[Clark]

Using code 52 weekly pay type, Paywin calculates a higher withholding amount than what the IRS weekly percentage method table says it should be. For instance, for an employee with $1800 gross wages and 4 exemptions, Paywin says fed w/h should be $182.60, but using the IRS table, I calculate $181.90 ($1800 - ($76 x 4) = $1496...withholding = $34.30 + 15% of ($1496 - $512) = $181.90). Is there a way to tweak Paywin so that it will calculate the same as the fed table?

[Paul Mayer]

PayWindow uses the Exact Calculation method found in Circular E. Not the "averaging tables" also found in Circular E where the employee has to settle up at the end of the year.

Use your calculator and the Exact Calculation Method and you will see it comes out to the penny.

[Clark]

Paul, which page in Circular E (http://www.irs.gov/pub/irs-pdf/p15.pdf) are you referring to? I searched for the word Exact and did not find it in relation to a withholding calculation method.

[Paul Mayer]

See page 41 through 44 and use the annualized method to calculate which is what all payroll software uses.

[Clark]

Thank you, Paul. In spreadsheet, I had increased the wage bracket amounts but failed to notice that the withhold amounts has increased also. Everything checks out now. :)

[Clark]

My last post was wrong...I'm still having an issue reconciling the Paywin fed withholding calculations with what the IRS tables say.

Here is my current scenario: married w/ 4 exemptions, wages subject to withholding of $2,096.00, paid on weekly basis. Using the Percentage Method in Circular E or the Alternative 1 or Alternative 2 methods for automated payrolls in Publication 15-A, all three calculate a withholding amount of $323.90, but Paywin says $324.04. Why do these not agree?

[Paul Mayer]

Payroll software uses the Annual Table in order to handle any pay period. The math is as follows using the Annual Table for that Married employee:

2096.00 * 52 = 108992.00 (get annual wages)

4 exemptions * 3950.00 = 15800.00 (Get the annual exemptions for 4 exemptions)

108992.00 - 15800.00 = 93192.00 (Get the annual taxable wages)

Table 7 Married Persons 93192.00 is in line 3. (use line three which the annual wages falls in)

excess over 82250.00 is 10942.00 (Get the wages in excess of 82250.00 in that line)

10942.00 * 25% = 2735.50 (Multiply the excess wages by 25% from that line)

2735.50 + 10162.50 = 12988.00 (Add that result to the amount to use on that line)

12988.00 / 52 = 248.04 (Bring it back down for the weekly tax from the annual figure)

And the figure is exactly what PayWindow calculates, $248.04

I have no idea what you have going there to get $324.04 as it was not what I receive with your info as you can see above. See this screenshot:

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[Clark]

Thanks for the excellent tutorial, Paul! The strange thing is that I had entered $2,096.00 in the Earnings box on the Transaction Edit screen, clicked the Pay button, and the program calculated $324.04. However, when I went back and re-entered the $2,096.00 amount and click the Pay button, this time it calculated $248.04, the exact amount you show in your screenshot above. Strange...

[Clark]

Paul, I figured out why you were getting higher withholdings: the Earnings amount should be $2,400.00 not $2,096.00. $2,096.00 is actually the amount of wages subject to withholding. If you use $2,400.00, I think you'll get $324.04.

[Paul Mayer]

Thanks for the excellent tutorial, Paul! The strange thing is that I had entered $2,096.00 in the Earnings box on the Transaction Edit screen, clicked the Pay button, and the program calculated $324.04. However, when I went back and re-entered the $2,096.00 amount and click the Pay button, this time it calculated $248.04, the exact amount you show in your screenshot above. Strange...

You had to have had a typo or something to get an different result than I showed you. Computer code is absolute and cannot give different results for the same wages entered. Also with over a third of our 9,000 plus customers being CPA's that continually check the results, we never have problems unless it is caused by user errors setting up things improperly.

[Paul Mayer]

Paul, I figured out why you were getting higher withholdings: the Earnings amount should be $2,400.00 not $2,096.00. $2,096.00 is actually the amount of wages subject to withholding. If you use $2,400.00, I think you'll get $324.04.

Like I said, it can only be different with a "typo". :-)

[Clark]

Paul, did you see my subsequent post at 12:34 am? The reason for the difference was because I copied what you had showing on your screenshot. I then fired off the post at 10:45 pm only afterwards realizing that the earnings amount was incorrect. Gross earnings should have been $2,400.00 instead of $2,096.00, which is the amount of wages subject to withholding. Using $2,400.00, you'll get $324.04 in fed w/h.

[Paul Mayer]

Paul, did you see my subsequent post at 12:34 am? The reason for the difference was because I copied what you had showing on your screenshot. I then fired off the post at 10:45 pm only afterwards realizing that the earnings amount was incorrect. Gross earnings should have been $2,400.00 instead of $2,096.00, which is the amount of wages subject to withholding. Using $2,400.00, you'll get $324.04 in fed w/h.

Yes, with that new value of 2400.00 it does come to 324.04 which is correct when the math is worked out as well.

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