What are the methods to compute the amount of income tax to be withheld? Although many businesses use ADP or other outside sources to perform payroll functions, it’s still very important for the payroll accountant (even employees) to fully understand how to compute the amount of income tax to be withheld. Do you still remember filling out Form W-4 on the first days of your current job? There is one place where you enter the number of withholding allowances… how will that affect the withheld amount for FIT? Generally speaking there are two methods to be used – wage bracket method and percentage method. What’s your understanding on each of these methods and examples would be great
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