Guide

How paycheck withholding works

A paycheck is a forecast of your annual tax bill, sliced into this period. Employers are not guessing a “fair” amount. They follow IRS Publication 15-T (and a state procedure, if any), using the Form W-4 you gave them plus this period’s taxable wages.

Annualizing is the core idea

If you are paid biweekly, payroll typically multiplies this check’s taxable wages by 26, subtracts withholding allowances or W-4 adjustments, applies the tax table or percentage method, then divides by 26. A huge bonus check can look “over-withheld” in that period even when the year lands correctly.

Three different cuts

1. Federal income tax — progressive, W-4 sensitive, reduced by traditional 401(k) and many cafeteria-plan premiums.
2. FICA — Social Security and Medicare. Mostly insensitive to W-4. Traditional 401(k) generally does not shrink FICA.
3. State (and sometimes local) — their own tables. Nine states take no wage income tax; many cities still might.

Withholding is not your final tax

A refund means you lent the Treasury money. A balance due means the forecast was light. Side gigs, a working spouse, equity vesting, or two jobs are the usual reasons a single W-4 on one job under-withholds.

PayNetUS copies the annual-method idea with published brackets. It is a planning sketch, not Publication 15-T itself.

Related: paycheck calculator · methodology · FAQ