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Paycheck Withholding Calculator

Greg Hatfield Updated by Greg Hatfield

2020 brought major changes to federal withholding calculations and Form W-4. See the IRS FAQ on Form W-4 to answer your questions about the changes. Also see IRS Pub 15-T to see how withholding is calculated using the 2020 and later Form W-4 or the 2019 and prior Form W-4.
CFS Summary of 2020 Form W-4 Changes:
It is important to know that existing employees are not required to complete a 2020 or later Form W-4 (only new hires in 2020 and later, and employees wanting change their withholding). Instead, employers must compute withholding using either a new Form W-4 or a prior year Form W-4 with allowances, if an existing employee did not complete a 2020 or later Form W-4.

The IRS redesigned Form W-4 for two reason: (1) Allowances on Form W-4 no longer make much sense because they were representative of the exemptions claimed on the tax return. The value of those exemptions is now zero. (2) By allowing more detailed tax information on Form W-4, withholding could be calculated more accurately.

Although using all the fields on the new Form W-4 makes the withholding calculation, and completing the form, more complicated, employees do not have to use all the fields to get accurate withholding. CFS recommends completing only the Filing Status, line 4b Deductions, and/or line 4c Extra Withholding. Those are the only lines required to get an accurate withholding and those lines are no more complicated than the 2019 form. That option allows the privacy of not giving the employer sensitive information about the employee's other finances. The CFS W-4 Calculator program can help you determine the correct amounts to enter on Form W-4.

When determining how to complete Form W-4, the worksheets in the 2019 and 2020 and later Form W-4 instructions are similar because they both attempt to compute the employees total income.

In 2019, personal exemptions and deductions were netted with non-wage income to determine a deduction amount or if extra withholding was required. The deduction amount was converted to a whole number of allowances by dividing by 4200 (the value of an allowance is 4300 in 2020). The number of allowances or extra withholding was entered on the form.

In 2020 and later, a similar calculation determines the deduction amount or if extra withholding is required. The deduction amount is entered on line 4b and/or the extra withholding is entered on line 4c. The only difference is the deduction amount is not converted to allowances so the withholding calculation is more accurate.

How does the amount of withholding using the 2019 Form W-4 compare with the amount using the 2020 Form W-4? When using the 2020 Form W-4, the calculation assumes a married filer has 3 allowances and a single filer has 2 allowances. So a 2019 Form W-4 with a filing status of Married and 3 allowances will have the same withholding as 2020 Form W-4 with a Filing Status of Married with no other lines completed. If the 2019 Form W-4 has married with 4 allowances, then the equivalent 2020 Form W-4 would be married with $4300 (equal to one allowance) on line 4b Deductions.

Description of the Module

This module calculates Paycheck withholding either from GROSS pay to NET pay or NET pay to GROSS pay. The calculations include federal, state and local withholding as well as social security and Medicare. The user may enter their own state and local rates from the Rate Table Screen. Current state rates for all states and the District of Columbia, and local rates for California State Disability Insurance, New York City, Yonkers, and New Jersey UI/DI withholding have been included.

The mode of calculation (GROSS to NET or NET to GROSS) is determined by selecting either GROSS AMOUNT or NET AMOUNT from the drop-down list box, depending on the pay being entered, in the first field under INPUT DATA. If GROSS pay is entered then NET pay will be calculated and vice-versa.

State and local withholdings are calculated using the annual payroll period tax rate tables and spread across the number of annual paychecks specified. Available options for filing status, deduction type allowances, credit type allowances, regular allowances, dependent allowances, or other allowances are related to the entries for that state or locality on the Rate Table Screen. Options marked as N/A have no values entered on the Rate Table Screen for the corresponding item.

Note that the state and local filing status may be different from the federal filing status. Also, if the state or locality has a different taxable pay from federal, that amount must be entered in the appropriate field. Be sure that the pay difference is not already taken into account by the standard deduction or some other field on the Rate Table Screen.

Detailed Input and Pay Stub

Optionally, users can enter itemized income items with hours and hourly rates, and deductions such as 401(k) and Section 125. Users must mark the taxability of any deductions entered. If the user chooses to enter the detailed data then a detailed pay stub can be printed, with or without year-to-date totals. Detailed pay stubs with pay periods, hours worked, and hourly rates are increasingly being required by states.

Using detail screen entries with the NET to GROSS calculation results in the first income item on the detail screen being grossed up. All other income and deduction items will remain unchanged. If hours are entered for the first income item, then the rate will be calculated also.

Year-to-Date Totals

The user must enter the YTD totals the first time. To have the program update YTD totals for the next paycheck follow these steps.

1. Load the previously saved check.

2. Click UPDATE YTD menu. (updates YTD column, paycheck date, and payroll period ending date)

3. Edit check amounts.

4. Save the check.

Verify the YTD totals and pay dates.

Social security and California SDI are calculated at the appropriate rate for the paycheck but will not exceed the current limit, including YTD totals.

Sick Leave and Vacation Reporting

Some states and cities mandate paid sick leave for employees. Typically, the amount of sick leave available to an employee must be communicated to them each pay period. A convenient way to provide this information to the employee is by putting it on the paycheck. The employee's available sick leave and vacation hours can be displayed on the paycheck produced by this module if the user is entering the information on the Detailed Input screen. CFS suggests using the bottom lines in the Gross Income Detail section. In the last row of the Income Type column enter "Sick Leave Available". Then enter the number of hours of Sick Leave in the Hours/Units column. If the employee also has vacation time, enter "Vacation Available" in the row above sick leave and enter the hours in the Hours/Units column. Do not enter a rate or YTD amount. To provide a separation between the sick leave/vacation entries and the wages lines above it, we recommend filling the Income Type column in the row above with all dashes. If you prefer, you may enter "Paid Time Off" in the row above. View a Detailed Paycheck and adjust as desired. Note that all entries for sick leave and vacation must be manually updated each pay period. The program does not calculate accrued sick leave or vacation. The Update YTD function does not work for sick leave and vacation hours available.

Paycheck Withholding calculations do NOT flow to the Add/Edit Payroll Data grid in the CFS Payroll System 941/940 After-the-Fact Payroll program.

How did we do?

NY Form TR-2000 - E-ZRep Tax Information Access and Transaction Authorization Form

Statement of Account