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PAYROLL

Federal withholding tax tables: A simplified guide for 2024

updated on June 30, 2023

updated on June 30, 2023

What are federal withholding tax tables? 

Federal withholding tables lay out the amount an employer needs to withhold from employee paychecks. This includes federal income taxes, as well as other taxes, such as Social Security and Medicare taxes. 

When it comes to running a business, there are many important factors to consider, including payroll. Although setting up payroll can be a bit daunting at first, with a little guidance and preparation, you can easily navigate the process. 


You'll need to gather some important paperwork and choose a reliable payroll system. And one of the most important factors for running payroll is federal withholding tax tables, which ensures you're properly withholding taxes for your employees. Don't worry though, with the right resources and support, you'll be able to set up payroll smoothly and efficiently.

2023 federal withholding tax tables and updates to know

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Federal tax withholding tables are different from how they used to be. The IRS adjusts the income threshold every year for inflation. That means‌ federal income withholding tables change every year, in addition to the tax brackets. 


The federal withholding income tax table for 2022 had lower income brackets. Here’s what you need to know for the 2023 withholding tax tables: 


  • Increase in each income bracket 
  • No withholding allowances for W-4s from 2020 or later  
  • Computational bridge available for W-4s from before 2019 
  • Backup withholding rate remains 24% 
  • No change in the 22% supplemental tax rate 


Here are the 2023 withholding tax tables for employers that use an automated payroll system.


The first federal tax table from the IRS is if you have a W-4 from before 2019 or if the W-4 is from 2020 or later and the Step 2 box is not checked

The next federal tax withholding table from the IRS is for automated payroll systems if the W-4 is from 2020 or later and the box in Step 2 of the W-4 is checked: 

If you run payroll using a manual system, you’ll use different tables than those for businesses that use an automated payroll system built into their accounting software.


If you use a manual payroll system and have a W-4 form for 2020 or later, you can use either of these: 



If you use a manual payroll system and have a W-4 from before 2019, you can use either of these: 



Note that withholding allowances are not part of W-4s of 2020 or later. Before the change, employees were able to claim more allowances to decrease their federal tax withholding. But with the newer W-4s, employees can only lower their withholding by using the deduction worksheet or claiming dependents. 

How to use a federal withholding tax table

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A federal withholding tax table is usually in the form of a table or chart to simplify this process for employers. To determine the amount to withhold, you will need an employee’s W-4, filing status, and pay frequency. Every new employee at a business needs to fill out a W-4 for this purpose.


Let’s discuss how to calculate the withholding tax. Follow the steps below to calculate the necessary federal withholding income tax rate:

1. Collect necessary documents 

Gathering all relevant documents from your employees is the first step in correctly calculating withholding tax. To calculate withholding tax, you’ll need your employee’s W-4 form, gross pay for the pay period, and an income withholding tax table.

2. Get your employee’s W-4 

It is crucial that your employee fills out their W-4 correctly for your withholding tax calculations. Your employee will have to fill out their filing status, number of dependents, and additional income information. You will need to reference this form to calculate withholding tax.

3. Review your payroll records 

To calculate employee withholding tax, you will need to review important information from your payroll.


As an employer, you will need to look at these payroll records: 


Payroll period information

Frequency of the pay periods

Gross pay amount for the pay period


An employer is also responsible for payroll withholding, which is money taken out of an employee’s gross wages. This money taken is then used to pay the employee’s portion of the payroll taxes to the federal government. 


These are called “trust fund” taxes because you actually hold the employee’s money in trust until you make a federal tax deposit in that amount. You need to pay these trust fund deposits on a timely basis, otherwise, you could be subject to the Trust Fund Recovery Penalty.


There are also payroll deductions, which is money taken out of an employee’s paycheck to pay for costs like employee benefits. Payroll deductions can either be mandatory, which employers are required to pay, or voluntary, which employees have the option to pay.


Understanding payroll can be overwhelming, which is why it is useful to use a payroll accounting service to keep track of payroll costs and employee compensation.

4. Calculate withholding tax  

The final step is to calculate the withholding tax. However, you’ll need to use one of several tax tables. There are two federal income tax withholding table methods for use in 2023—the wage bracket method and the percentage method.

Methods for calculating federal withholding tax 

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There are two key types of withholding tax methods. Which method you can choose will depend on your payroll system and which W-4 you have from your employees. 

Wage bracket method 

The wage bracket method is a simpler method, and it tells you the exact amount of money to withhold based on an employee’s taxable wages, number of allowances, marital status, and payroll period. It does not involve any calculations to determine federal withholding tax.

QuickBooks Tip:

If your employees filled out a 2020 or later W-4, note that they can no longer request adjustments to their withholding allowances.

A piece of paper with a calculator and a calculator on it.

More payroll tips for small business success

Correctly calculating withholding taxes is crucial for many reasons. To run a business efficiently and pay your employees accurately, you want to ensure employee W-4 forms are complete. 


Using a payroll service like QuickBooks Payroll to handle calculations can simplify your life as a business owner. QuickBooks Payroll offers everything from HR support to a paycheck calculator, so you can spend less time focusing on payroll and more time running your business. 

Federal withholding tax table FAQ

Here are some of the top questions small business owners have about federal withholding taxes: 

What is the income tax rate for 2023? 

The federal withholding tax rates from the IRS for 2023 are as follows: 


  • 10%
  • 12%
  • 22% 
  • 24%
  • 32%
  • 35%
  • 37%. 


This is unchanged from 2022. 

Do employers have to withhold taxes? 

Yes, employers do have to withhold taxes. Incorrect federal withholding tax calculations can result in many issues for your business. An employer has a legal responsibility to withhold payroll taxes and pay those taxes to the Internal Revenue Service (IRS). 


Not doing so will impact both the employer and the employee and can even lead to more serious consequences, like having to pay a heavy fine (also known as the Trust Fund Recovery Penalty). So it is crucial you stay on top of these taxes.

How do you determine federal withholding? 

The federal withholding tax an employee will pay will depend on filing status and the amount of money they make. This will depend on the individual’s filing status, such as single or married filing jointly. 

Did federal withholding tax tables change for 2023? 

Yes, the federal withholding tax tables are different for 2023 and 2022. The IRS adjusts ‌income thresholds for the tables each year to account for inflation. Thus, the federal income withholding tables change every year


Related:

https://quickbooks.intuit.com/r/manage-employees/differences-between-irs-forms-w-2-and-w-4/

https://quickbooks.intuit.com/payroll/calculate-payroll-taxes/

https://quickbooks.intuit.com/payroll/paycheck-calculator/

https://quickbooks.intuit.com/r/manage-employees/how-to-fill-out-w-4/


QuickBooks Online Payroll & Contractor Payments: Money movement services are provided by Intuit Payments Inc., licensed as a Money Transmitter by the New York State Department of Financial Services, subject to eligibility criteria, credit and application approval. For more information about Intuit Payments Inc.’s money transmission licenses, please visit https://www.intuit.com/legal/licenses/payment-licenses/


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