December 18, 2020

W4 Form 2020

W4 Form 2020 the 20/20 withholding rates are only used when the employee works multiple jobs or spouse works flag is enabled and you will notice I believe it's, step 2 of the 20/20 w-4 form but an employee can elect to opt in for. Step two and say that they work multiple jobs or them and their spouse does and that's actually what's going to start utilizing. The new tax table instead of our standard withholding rates now we're going to walk through an example and I'm going to create a timecard, just so you can see the logic behind the tax calculation so let's pretend that, this is a brand new employee they filled out a 20/20 w-4 so we've gone and, enabled the setting let's say that they're filing status is single they have zero dependents under the age of 17 but they've got one other dependent they want an additional income of $200 and they're claiming additional, deductions of $100 and they've also gone in and specified in step 2 of the w-4 form that they work. Multiple jobs for them and their spouse works multiple jobs and therefore they're going to calculate off the new set of. Tax, tables so I'm going to go in and create a time card for this employee and I'm just gonna say this employee is getting paid $400 and I'm gonna calculate pay I did, make one mistake I need to update my check date to be a 2020 date I'm gonna recalculate so. Based on the new set of tax tables and all those new fields it's telling us that our federal income tax is $22.67 if, I double click on my withholdings you're gonna notice a new option that says set up federal.

Taxes it's going to show us exactly what we just saw in the employee profile only these are timecard specific settings. So if I go and change any. Information here it's not gonna go back and update their profile the changes will be reflected only in this timecard now we're gonna grab a calculator here and so this is. The logic behind how we get to that. $22 and sixty-seven cents value so the first thing we do is we say the federal taxable income for this timecard is $400 we, know the employee is weekly they're gonna get paid across 52 pay periods so we need to multiply this number by 52 then what we want to do is. We want to go in and consider our additional income and additional deductions so I'm going to add that $200 and I'm going to subtract the, additional deductions of $100 at this point we have twenty thousand nine hundred dollars.

And we're ready to go look at the tax tables to figure out what, our tax amount is so I'm just going to minimize this but let's all remember 20 thousand nine, hundred if I go into the tax tables I know because the employee on the multiple jobs flag that they're using the 20/20 W for withholding rates so what I. Want to do at this point is I know that that twenty thousand nine hundred dollars falls in this tax bracket at twelve percent so.

As we're calculating our values here I'm just going to open the calculator up and I'm just going to.

Clear this number so we know that out, of that twenty thousand nine hundred the first sixty one hundred dollars are going to be withheld at zero percent so I'm going to say 60.

100 times zero and that's going to give us zero dollars worth of tax then we look at the next range and. We know that because the total amount of 20 thousand nine hundred is greater than the end range here we're going to, calculate the total difference between our.

Start and end range at ten percent so in this case we're looking at four thousand eight hundred and fifty dollars times ten percent for a total. Of four hundred and eighty five dollars and then the remaining portion of that twenty thousand nine hundred falls at, the twelve percent tax rate so in this case we are looking at nine thousand nine hundred and fifty dollars times twelve percent for a, total of one thousand one hundred and ninety-four dollars and we just want to add that or eighty-five so.

This is telling us that our annual tax amount now is sixteen hundred and seventy nine dollars, and now what we need to do is consider the number of dependents so in this case we don't get two thousand. Dollar allowance for the number of qualifying children under age.


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