4

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:

Single Semi-monthly 2 Exemptions = 2 * 154.17 = 308.34 Gross pay: 1,870

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.

  • At least you recognize that you are in fact a masochist for computing to this level of detail :) – duffbeer703 Jun 23 '11 at 21:36
  • I have mild OCD when it comes to problem solving. I am a computer programmer (recent graduate) and I hate knowing that there is a problem I am close to solving but not quite there. It's like a little fly in the corner of my vision, not doing any harm, but still annoying. – awestover89 Jun 23 '11 at 21:54
3

Found the problem, the actual numbers used are for the annual, not for semi-monthly, so multiplying my gross by 24 and calculating that way, then dividing the final tax by 24 solved the problem.

2

I'm not aware of the exact formulas, but it appears there is either rounding error or reporting error. For example, the formula they use might be 25.047% or something like that but it's given as 25%, which could cause an error.

2

I've seen Pub E. Have you considered that withholdings may be table-based and not an equation? If you are a spreadsheet person, you'll understand this answer. For others, I'll explain. Instead of withholdings being an equation, as in "take exactly 10% of weekly salary and multiply by 10%" it's more like, "for $100-110, $10, for $111 - 120, $11, etc. That's really the only way to produce a table that doesn't contain every integer from 0 through $5000/wk (or higher). Since withholding isn't an exact science, the 5 cents this question is concerned with, $2.50/yr, isn't of concern. It gets sorted out at tax time.

  • I looked at the table based which has an even 207 and 50 respectively for the examples I gave. The 5 cents isn't really a concern, but just a nuisance. I see that my paycheck and online websites have the same exact values and am bothered that I cannot find the exact values myself. – awestover89 Jun 21 '11 at 22:03

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