Federal Income Tax Calculation - Common FAQs

Federal Income Tax (FIT) is calculated based upon the IRS's Publication 15-T tax tables. Several variables factor into this calculation including the following: 

• Gross wages
• Company pay schedule (weekly, bi-weekly, etc) 
• Employee W-4 elections
• Pre-tax benefits and deductions

Note: If any of the above factors changes, an employee's FIT will be impacted on subsequent payrolls. 

W-4 settings are personal and unique to each employee's personal tax plan! If you aren't sure how to fill out your W-4, the IRS has tools to help employees navigate their tax form.

• IRS Tax Withholding Estimator for Employees (irs.gov)
• FAQs about the Form W-4 (irs.gov)

Note: Homebase cannot instruct employees on what they should enter into their W-4 as that would be considered formal tax advice. 

FIT calculations are based on a combination of all of the above factors. In most cases, employees have $0 deducted for FIT due to a couple of specific variables: 

• Not enough taxable wages - As a rule of thumb, employees must make greater than the following amounts per week to have FIT deducted. If an employee is making considerably less than these amounts, then they likely will have $0 deducted. 
  • Single or Married Filing Separately - $275/week
  • Married Filing Jointly or Qualifying Widow - $535/week

• W-4 Settings - As indicated in the "Not enough gross wages" bullet above, employee filing status, dependents deductions, and other W-4 settings cause big impacts to the FIT calculation on payroll
  • The current IRS Form W-4 uses several inputs from the employee to calculate the employee's overall FIT withholding on payroll. 
• Pre-tax deductions - Benefits and retirement deductions decrease an employee's taxable wages which FIT is calculated on. If an employee has a pre-tax deduction that lowers their taxable wages, they may fall below the FIT calculation threshold and have no FIT calculated on their wages. 
  • Learn more about pre-tax benefits deductions here!