### Video instructions and help with filling out and completing Fill 940 Schedule R Form

### Instructions and Help about Fill 940 Schedule R Form

Hi welcome to easy payroll guide my name is Karen Hutchinson and in this video we're going to talk about how to use the percentage method when you're trying to calculate withholding taxes for your employees this method can be used to calculate the withholding tax for any employee it does not matter how many withholding allowances they have chosen or the amount of their wages so this method can be used at any point whenever you are trying to determine withholding taxes you always need to use the employee's w-4 form this form will detail all of the information that you need in order to make this calculation we're going to use this fictitious character John Doe and this is the same exact example that we used in my previous video which was on using the wage bracket method so we're going to use the same two scenarios in order to calculate the same tax but using the percentage method John is single and he claims only one allowance remember that this information is filled out by the employee so this is the information that you must use when calculating their withholding tax John is paid on a bi-weekly basis which means that he's paid every other week and his wages for this pay period or 720 dollars so this is the information that we need to use in order to make the calculation so the first thing that we need to do the very first step now this calculation is a little more complicated so please follow along with me the first step is that the IRS in publication 15 has given us a percentage method table so these are the amounts for 2022 and these are the amounts for one withholding allowance and it's broken down by the pay period and then just the withholding out so it doesn't matter at this point how many allowances it just matters what pay period you're using so what you want to do is multiply one withholding allowance by the amounts and you want to multiply that by the number with boating allowance that they have claimed so for example John is paid on a bi-weekly basis so we're going to use the second line which is one hundred fifty one dollars and ninety cents John has only claimed one allowance so this one hundred fifty one dollars and ninety cents is what we need to use for Dawn if John's had claimed two allowances then we would multiply this number by two okay so one hundred fifty one dollars and ninety cents times one allowance is one hundred fifty one dollars and ninety cents so this is the number that we are going to use in step two okay so you're going to multiply this number by the number of allowances make sure that you pick the right number based on the payroll period step two is then to subtract this amount from the employees wages so we know that John had made seven hundred twenty dollars and we're going to subtract one hundred fifty one dollars and ninety cents and that gives us five hundred sixty-eight dollars and ten cents so this amount five hundred sixty dollars and ten cents is the amount that we're going to use to go to set up withholding tables to determine how much tax to withhold these withholding tables are in publication fifteen they are not the same withholding tables that you use for the wage bracket method okay so when you go to publication fifteen these withholding tables are on pages 43 and 44 and you'll see at the top it will say percentage method tables so please make sure that you're using the correct table you'll see that this table is broken out by pay periods so you'll see weekly bi-weekly semi-monthly monthly make sure that you're choosing the correct pay period it's also set up by single person and married person so when you find your section of the table for your pay period if you have a single person you're going to stay to the left married person you're going to stay to the right then what you're going to do is you're going to look at the table and it will tell you the amount that it's over but not over so you got to find where your amount fits in we are and I'm just going to go back to this table because it would be easier we are looking for five hundred sixty dollars in 10 cents now we can round that figure to the nearest dollar so let's say five hundred sixty-eight dollars five hundred sixty dollars John is paid bi-weekly and he is single so we are going to be in this section right here and five hundred sixty dollars is over four hundred thirty six but not over one thousand five hundred six so we're going to be using the second line right here okay now the tricky part is to calculate the tax it tells you that the text is $34.90 plus fifteen percent of any amount over four hundred thirty six dollars that's the confusing part so what you want to do is you want to first find out how much is in excess over four hundred thirty six dollars so take the five sixty eight subtract four thirty six so he is one hundred thirty-two dollars over the four hundred thirty six mark okay so this is the excess amount one hundred thirty two dollars that is the amount that we want to multiply by fifteen percent so we're going to take one hundred thirty-two dollars times fifteen percent remember to change a percent to a decimal you divide by a hundred so it's 0.15 so 132 times 0.15 is $19.80 so the tax is thirty four ninety plus this nineteen eighty so thirty four ninety plus nineteen eighty is fifty four dollars and seventy cents so fifty.