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Because I am a masochist and want my pay stubs in a spreadsheet format on my computer I am looking into the formulas used to calculate federal income tax. I read over IRS Publication 15 Circular E and got the following:
Using 25% of income over 1525 + 197.85 I get
1870 - 308.34 = 1561.66 - 1525 = 36.66 * 25% = 9.165 + 197.85 = 207.015
However, paycheckcity.com and my pay stub both agree that 207.08 is being withheld. Where am I missing 6 cents from?
Using another week where I was on unpaid leave, gross pay of 850 I calculated 50.35 would be withheld, when in actuality 50.42 was withheld, so I was 7 cents off that pay period. Just seems odd that I am getting so close but not exact.
you should start a new user profile "I'mARoundingError"
Care to be the teensiest bit more helpful? I understand rounding and the potential for rounding errors but fail to see anywhere in my math where a rounding error would cause a 6 cent difference, especially since all decimals were kept until the end, and even then it was a half-penny that was rounded up to put me 6 cents below what the IRS got.
MrRational may not be talking about your rounding error but the IRS's rounding error.
In the Percentage method table here http://www.irs.gov/pub/irs-pdf/p15.pdf
It lists the SemiMonthly allowance as $154.17 (per exemption) and the Annual allowance as $3700 (per exemption). However, 24*$154.17= $3700.08.
I think the payroll programs use the annual rates and not the rounded partial-year rates
Nope. I was referring to the person as being the rounding error.
(a 6 cent variance relative to $1870? get a life dude)
The 6 cents isn't a big deal, its the fact that there is a discrepancy that I cannot solve. I have always been a problem solver and am bothered when there is something I cannot figure out. Call it mild OCD if you wish. I am not losing any sleep or freaking out, just posting on a forum to see if anybody knows where my math is wrong or the IRS is off in their documentation.
I wish you a good day, but if you have no answer or interest in helping to find an answer, I see no reason for you to continue posting in this thread.
Using 25% of income over 36,660 + 4,750 I get
44,880- 7,400 = 37,480 - 36,660= 880 * 25% = 220 +4,750 = 4,970
However, that is an annual number, divide 4,970 by 24 to get $207.08(333...)
The programs use the annual figures to do the calculations and then round it at the end. You are using rounded IRS numbers up front and carrying them through your calculations.
Thanks jw, that was just the little snag of information I was missing
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