There are several methods to figure income tax withholding, based on information you get from your employees on Form W-4, Employee's Withholding Allowance Certificate. This method is called the Percentage Method.
Under the percentage method, multiply one withholding allowance for your payroll period by the number of allowances the employee claims on his or her Form W-4. Then subtract that figure from the employee's wages and look up the resulting amount in the table for the appropriate payroll period and employee's marital status.
(If you would like, you can also use the wage bracket method of figuring withholding.)
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