How to Calculate FWT

There are two methods for computing federal withholding taxes (FWT) on employee wages: the wage bracket method and the percentage method. To compute FWT, you need to use the current withholding tables in IRS Publication 15-T. The IRS updates these tables whenever there is a change in tax rates.

Wage Bracket Method

Locate the Wage Bracket Method withholding table in IRS publication 15-T (see Resources) for your payroll period frequency and the employee’s W-4 marital status.

Find the employee’s taxable wages in the first two columns of the table.

Read across the table to the column for the number of W-4 withholding allowances the employee claims in order to find the amount to withhold for FWT.

Percentage Method

Look up the value of one withholding allowance for your payroll frequency in Publication 15-T's “Table 1 Percentage Method Amount for One Withholding Allowance.”

Multiple this value by the number of withholding allowances the employee claims on Form W-4.

Subtract the result from the employee’s wages to arrive at the net taxable income.

Find the appropriate table for your payroll frequency in Publication 15T’s "Tables for Percentage Method of Withholding."

Perform the calculation listed for the employee’s net taxable income.

Withhold the result for FWT.



About the Author

Laurie Marie has a Bachelor of Science degree from San Francisco State University in business/accounting. She is a payroll industry veteran who assists large corporations as an independent payroll consultant. She specializes in writing payroll, consumer and lifestyle topics. Her articles have been published in the American Payroll Association Paytech magazine and on eHow.