Some small business owners are still calculating the taxes manually. Following is the step by step guide on how to use federal tax table and do it manually.
For example:
Karen is the employee of halfpricesoft.com. She lives in Arizona. Her withholding rate is married/withhold at a single rate. She has two exemptions and no extra withholds. She gets paid $10 per hour biweekly. She works 64 hours for each pay period.
Followings are the steps to calculate the federal tax:
1. Gross pay for each paycheck:
For each pay period, the gross pay is $640
2. Deduction for each paycheck:
The standard deduction is $3700 per year (For Year 2011).
She can get total $3700*2=$7400
For each pay period the deduction is: $7400/26=$284.62
3. Taxable income for each paycheck
So for each paycheck, the taxable income is: 640-284.62=$355.38
4. Federal tax
(355.38-81.00) * 10%=274.38*10%=$27.44
Current Federal Income Withholding Tax table
http://www.halfpricesoft.com/federal_income_tax_2011.asp
Payroll software is designed to automate paycheck processes to reduce the time spent on running payroll. ezPaycheck payroll software’s graphic interface leads users step-by-step through setting up employee information, importing data, calculating payroll-including calculation of federal, state and local taxes; deductions for Medicare, insurance and 401(k) plans; and printing paychecks.
To learn more about how payroll software can save time and money for small business, visit: http://www.halfpricesoft.com