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Payroll Software Authors: Casey Yang

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Small Business Payroll 101: How to Calculate Federal Income Tax Manually

Paycheck FAQs: How to Calculate Federal Income Tax Manually

For example:

Karen is the employee of company ABC. She lives in Arizona. Her withholding rate is married/withhold at a single rate.  She has two exemptions and no extra withholds.  She gets paid $10 per hour biweekly.  She works 64 hours for each pay period.

Followings are the steps to calculate the federal tax:

1. Gross pay for each paycheck:

For each pay period, the gross pay is $640

2. Deduction for each paycheck:
The standard deduction is $3700 per year (For Year 2011).
She can get total $3700*2=$7400
For each pay period the deduction is: $7400/26=$284.62

3. Taxable income for each paycheck
So for each paycheck, the taxable income is: 640-284.62=$355.38

4. Federal tax
(355.38-81.00) * 10%=274.38*10%=$27.44

Current Federal Income Withholding Tax table

EzPaycheck payroll software is designed to automate paycheck processes to reduce the time spent on running payroll. The software's graphic interface leads users step-by-step through setting up employee information, importing data, calculating payroll-including calculation of federal, state and local taxes; deductions for Medicare, insurance and 401(k) plans; and printing paychecks.

Priced at just $89 per installation, ezPaycheck's graphical interface and functions are so intuitive that even users without much computer or accounting experience can start automating payroll processes within minutes of installation. Additionally, customers can try ezPaycheck payroll software without cost or obligation for 30 days.


More Stories By Casey Yang

I work for is a leading provider of easy-to-use 1099, W2 and Payroll Software solutions for accountants and small to medium size businesses. And its small business software can save user both time and money. For more information, visit