# Federal Tax Calculation Example for Different Pay Periods

Applies to: Dynamics GP 2010

## TechKnowledge Content

Issue

Examples of how to handle Federal Tax Calculations with different pay period frequencies.

Resolution

Katherine Banks has a Federal Filing Status of Married and claims one Exemption.She has no tax-sheltered Deductions.The following pay transactions are included in the pay run:

A Biweekly Hourly Pay Code for \$600

A Biweekly Bonus Pay Code for \$201.94

A Monthly Commission Pay Code for \$214.80

This example uses the Payroll Tax Update for March 2001.

1. All wages are annualized, based on the pay period frequency.

\$600 * 26 = \$15,600

\$201.94 * 26 = \$5,250.44

\$214.80 * 12 = \$2,577.60

Total annualized wages:\$23,428.04

2. Subtract the Exemption amount.

\$23,428.04 - \$2,900 = \$20,528.04

This is the amount applied to the Tax tables.

3. Subtract according to the Tax tables then multiply by the Tax Rate.

\$20,528.04 - \$6,450 = \$14,078.04 * 15% = \$2,111.71Total Taxes

4.Calculate the withholdingfor each pay frequency.

Biweekly - Divide the total annualized amount for the frequency by the total annualized wages.

(\$15,600 + \$5,250.44) / \$23,428.04 = .8899779

Multiply by the total Taxes then divide by the pay period frequency.

.8899779 * \$2,111.71 = \$1,879.37 / 26 = \$72.28

Monthly - Divide the total annualized amount for the frequency by the total annualized wages.

\$2,577.60 / \$23,428.04 = .110022

Multiply by the total Taxes then divide by the pay period frequency.

.110022 * \$2,111.71 = \$232.33 / 12 = \$19.36

5.Add together the federal withholding for each frequency.

\$72.28 + \$19.36 = \$91.64