Payroll Income Tax Withholdings

This topic courtesy of a question asked by an ALS member library...

As employers, there are many different federal, state, and sometimes local laws, rules, and procedures that we must follow when we hire and pay employees.

One of the requirements, withholding of federal income taxes, was recently changed under the American Recovery and Reinvestment Act of 2009, commonly known as the Economic Stimulus Bill. The change, known as the "Making Work Pay" provision, adjusted withholding tables so that the effect was that workers would have an average of $10 per week less of federal income tax withholding which, in theory, would lead to higher take home pay and hopefully more spending - thus stimulating the economy.

For my earlier post on the Economic Stimulus Bill, click here.

If you use a third-party service to process your payroll, they should already have made the changes for the "Making Work Pay" provision effective with payrolls in May 2009.

If you use software to process your payroll, you want to make sure your software vendor has provided you with the most up-to-date tables to ensure the "Making Work Pay" provision goes into effect.

If you calculate payroll manually, you can find the updated instructions and withholding tables in Publication 15-T at the IRS website.

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