Withholding taxes include federal income tax, Social Security tax, Medicare tax and, in most cases, state income tax. Some local governments require local income tax withholding. Your tax amounts depend on your wages; the more you earn the more tax you pay, and the less you earn the less tax you pay. Your work hours are linked to your wages, so they directly impact your withholding amounts.
Assume that you earn $11 per hour and worked 35 hours during the last pay period and 40 hours during the current pay period. Multiply 35 hours by $11 to get $385, which is your regular hourly wages for the last pay period. For the current pay period, multiply 40 hours by $11 to get $440. Since you worked fewer hours during the last pay period, your tax liabilities would be less than for the current pay period. Your tax withholding amounts depend on the type of tax.
Federal Income Tax
To determine federal income tax based on hours worked, retrieve your filing status and allowances, respectively, from lines 3 and 5 of your W-4 form. Then, apply the Internal Revenue Service Circular E tax table that goes with the W-4 information plus your wages and pay period. For example, you claim married filing status and three allowances on the W-4. Note that tax withholding is based on taxable wages, so if you have pretax deductions, such as medical and dental insurance, subtract your premiums from your gross pay. The rest is your taxable wages. If you have no pretax deductions, all of your wages are taxable. For taxable wages of $385, page 40 of the 2012 Circular E says you would pay $1 in federal income tax. For taxable wages of $440, you would pay $7 in federal income tax.
Medicare and Social Security taxes are called FICA, as the Federal Insurance Contributions Act enacts their collection. As of 2012, you pay Medicare tax at 1.45 percent of all taxable wages, and Social Security tax at 4.2 percent of taxable wages up to $110,100 for the year. Whereas weekly hourly wages of $385 would be subject to Medicare tax of $5.58, weekly hourly wages of $440 would be subject to $6.38.
State and Local Taxes
The same concept applies if you’re subject to state and/or local income tax withholding. For example, as of 2012, Pennsylvania requires state income tax withholding at a flat 3.07 percent. Whereas weekly hourly wages of $385 would be subject to $11.82 in state income tax, weekly hourly wages of $440 would be subject to $13.51. Some state and local governments require that employers use the employee’s state or local tax form and the state or local tax-withholding tables to figure state and local income tax.
Voluntary deductions decrease your take-home pay. For example, if you worked 35 hours for the week and have no voluntary deductions, your take-home pay might be more than if you worked 40 hours and have voluntary deductions.
Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.