Problem with Fed withholding calculation

[Clark]

I am using 14.0.14. When I manually try to calculate fed withholding, I am always a few pennies off from what PayWindow calculates.
Here's an example.
Gross Wages: 1200.00
Exemptions: 4
Withholding Allowance: 4 x 77.90 = 311.60
Wages Subj to Withholding: 888.40
Withholding calculation using 2016 Married Weekly % Table:
(888.40 - 521.00) x .15 + 35.70 = 90.81
PayWindow's calculation: 90.77

Why is this? The Oklahoma withholding amount matches just fine, but the Fed does not. Please show me how PayWindow is calculating this using the above example.

[Paul Mayer]

We use the exact calculation method, see this FAQ:

http://zpay.com/vbulletin/showthread.php?119-The-Taxes-from-PayWindow-are-different-from-Publication-15

[Clark]

Paul,

Thanks for the reference to the FAQ on the exact calculation method. I read it, but it did not give me the concrete answer I was looking for. Would you take the numbers given in the example from my original post and show how PayWindow arrives at its calculation of $90.77 instead of the $90.81 that I calculate using the Percentage Method? This would help a lot.

[Paul Mayer]

I used the formula as de3scribed in that FAQ and worked it out manually and come up with the same result as PayWindow does.

[Clark]

Sorry to be so dense, but there is no formula actually depicted in that FAQ, at least not that I saw. There's only a reference to the 2010 Publication 15 and instructions to use the similar table in the current year's publication. I have done this, and I do not arrive at the same amount shown in PayWindow. Would you please show me the formula in this thread using the numbers I presented in my first post? I really need to see this.

[Paul Mayer]

The Exact Percentage Method Formula is in the Publication 15 (to be exact in this year it is on page 45) and you would use the Annual formula which is used in payroll software by converting to annual by the pay period frequency multiplier (52 = Weekly).

Payroll software uses the Annual Percentage Method tables so it can cover all pay periods.Your employess calculation is as follows:

Take the weekly pay and convert it to annual.

1,200.00 * 52 = 62,400.00

Then deduct the 4 exemptions.

Less 4 exemptions * 4,050.00 = 16,200.00

The result is your taxable wages.

Taxable wages = 46,200.00

Since the taxable wages are over 27,100.00 but less than 83,850 we are using line two of the annual married table.

The excess over 27,100.00 is 19,100.00 so 19,100.00 * 15% = 2,865.00 plus 1,855.00 = 4,720.00

Then take it back down to weekly.

4,720.00 / 52 = 90.77

[Clark]

Thanks so much, Paul! That explanation is exactly what I was needing! I was using the Weekly Percentage Method, which calculates a slightly higher amount than the Annual Method, but without knowing that critical piece of info and seeing how PayWindow converts the annual to weekly, I was left scratching my head. Thanks again for taking the time to explain!

[Clark]

I'm back again. I am now having trouble matching the withholding amount for the state of Oklahoma. I'm assuming you annualize it the same way you do for the federal--is that right? When I do that--using the same amounts as in our example above and with an OK withholding allowance of $1000--I come up with $39, while PayWin says $37. Would you walk me through the calculations the same way you did for the fed above?

[Paul Mayer]

It is exactly the same match as used for the Federal using the Oklahoma figures:

Take the weekly pay and convert it to annual.
1,200.00 * 52 = 62,400.00

Then deduct the 4 exemptions.

Less 4 exemptions * 1,000.00 = 4,000.00

The result is your taxable wages.

Taxable wages = 58,400.00

Since the taxable wages are over 24,800.00 we are using line seven of the annual married table.

The excess over 24,800.00 is 33,600.00 so 33,600.00 * 5% = 1,680.00 plus 255.00 = 1,935.00

Then take it back down to weekly.

1,1935.00 / 52 = 37.21

And it is then rounded down to $37.00

[Clark]

Thank you for your excellent explanation, Paul.

When I checked the 2015 Oklahoma Withholding Tables (https://www.ok.gov/tax/documents/2015%20Withholding%20Tables.pdf), the Annual Married table on page 9 has 8 lines.
Lines 7 & 8 say:
>24,800 and <27,600 withhold 255.00 + 5.00% of amount over 24,800
>27,600 withhold 395.00 + 5.25% of amount over 27,600

Using line 8 would give 38.69 which rounds up to $39.00.

Please take a look and see if I have this correct.

[Paul Mayer]

Yes you are, and this is very strange as we did not get that 8th line back when we got the info from Oklahoma. I just added the high wage earner lines in the tax tables and posted the update on our website. Click Help, Updates and you will be able to download and install the update.