Add regular and overtime earnings to arrive at the employee's total gross pay.
The U.S. Department of Labor requires employers to pay overtime to qualified workers. The employee must actually work more than 40 hours during the workweek to receive overtime pay. Therefore, if he has more than 40 hours due to vacation or sick time taken, the employer does not have to pay him overtime. The employer pays overtime at one and one-half times the employee's regular pay rate. The Internal Revenue Service regards overtime pay as wages that are subject to taxation. Overtime pay is taxed in the same manner as regular wages.
Instructions
1. Calculate federal income tax withholding. Consult Lines 3 and 5 of the employee's W-4 form for her filing status and allowances and use IRS Circular E's withholding tax tables to figure the withholding amount. The Circular E gives you the withholding amount based on the employee's allowances, filing status, pay period and earnings.
Suppose the employee earns $400 in regular wages for the week. She has $110 in overtime earnings. Add $400 to $110, which equals $510. She claims single with one allowance on her W-4. According to page 41 of the 2010 Circular E, her total federal income tax withholding is $41.
2. Compute Social Security tax at 6.2 percent of gross income and Medicare tax at 1.45 percent.
3. Apply your state revenue agency's income tax withholding method to calculate state income tax withholding. Most states require employers to use the employee's state withholding form and the state withholding tax table--similar to the federal income tax withholding process--to figure state income tax. Still, check with your state revenue agency for guidelines, because some states use a different system. For example, Pennsylvania charges a flat withholding tax of 3.07 percent for 2009 state income tax withholding.
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