In case you have nonexempt staff, it’s important to pay them extra time wages every time they work extra time hours.
In every pay interval, it’s good to monitor worker time labored. Then, on the finish of the pay interval, you’ll calculate worker compensation. Additionally, you will should withhold employment taxes.
As you’re doing payroll calculations you would possibly marvel, is extra time taxed otherwise than common time?
Is extra time taxed otherwise?
Taxes on extra time are usually not totally different than taxes on common wages. You’ll calculate and withhold taxes the identical approach you do for normal wages.
The truth is, you’ll withhold taxes from the mixed complete of extra time and common wages. You don’t individually withhold taxes from these two kinds of compensation.
Instance: withholding taxes from extra time wages
For this instance, let’s fake you’ve gotten an worker named Molly. Molly is a nonexempt worker. She is a full-time worker and earns $11 per hour. You pay her weekly. This week, Molly labored 45 hours.
Earlier than you possibly can withhold taxes, it’s important to calculate Molly’s complete compensation.
First, calculate Molly’s common wages.
$11 hourly wage × 40 common hours = $440 common wages
Subsequent, calculate Molly’s extra time wages.
$11 hourly wage × 1.5 extra time charge = $16.50 extra time charge of pay
$16.50 extra time charge of pay × 5 extra time hours = $82.50 extra time wages
Then, add the common and extra time wages collectively.
$82.50 extra time wages + $440 common wages = $522.50 complete wages
You’ll be able to lastly start subtracting taxes from the wages. (To maintain issues easy, we’re going to say Molly doesn’t have any pre-tax deductions.)
Let’s begin with federal earnings tax. Molly is single. Utilizing the IRS’s Publication 15-T, you discover that it’s good to withhold $23 from her wages.
Calculate how a lot is taken out for Social Safety and Medicare (FICA taxes), then withhold that quantity. The worker portion of FICA taxes is 7.65% of the taxable wages.
$522.50 complete wages × 7.65% = $39.97 worker FICA taxes
Bear in mind, you additionally should pay the matching employer portion of FICA taxes.
Subtract all taxes from Molly’s wages.
$522.50 complete wages – $23 federal earnings tax – $39.97 FICA taxes = $459.53
After taxes, Molly will take residence a web pay of $459.53.
This instance solely reveals what taxes you need to withhold on the federal degree. Bear in mind to withhold any relevant state and native taxes.
Wage brackets
The addition of extra time wages can generally push an worker into the next federal earnings tax bracket. Watch out when calculating federal earnings tax. You don’t need to assume the worker retains the identical tax bracket throughout every pay interval.
For instance, Molly earned $440 with out extra time. If this have been all Molly earned, you’ll subtract $15 for federal earnings tax. However with extra time wages, Molly earned $522.50. The added extra time wages moved Molly up into the next wage bracket, which implies you withhold $23 for federal earnings tax.
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This text is up to date from its unique publication date 9/21/2016.
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