We do annualize everything out, pay codes, deductions, benefits, etc. Daily/Misc will take a lot of tax as it thinks you are getting paid this daily. If you have mixed frequencies, then it does an averaging, it is very hard to back into, we typically recommend everything is the same.
Here is an example of my own with difference frequencies on records and how the calculation goes so you can see it.
It gets pretty complex and we do not publish this exact example
But here are two examples, one with multiple frequencies and one with flat tax
We annualize our tax based on frequency so yes they will be considered different, then we pro-rate the deductions, etc.
Amounts may vary based on tax tables used when examples were made, but gives you an idea.
Pay Period example with 2 frequencies
We have two pay periods, Bi-weekly and quarterly
1. Figure out the pay period wages
Quarterly = $ 2,100.04 –amount of quarterly paycode
Bi-weekly wages = (bi-weekly pay code – 401k) or ($ 1,938.47 - $ 121.60 )= $ 1,816.87
The 401k is grouped with the bi-weekly pay code because the 401k deduction is setup as bi-weekly
2. Annualize wages
Quarterly = $2,100.04 * 4= $ 8,400.16 Bi-weekly = $1,816.87 * 26 = $47,238.62
Total wages are $ 55,638.78
3. Calculate total taxes from tax table
Tax amount = 4,192.00 + (25% on anything over 36,200)
Amount over 36,200 = 19438.75 * 25% = 4859.20 Total taxes = $9,051.70
4.Divide the taxes between pay period using weighted average
Bi-weekly wages are $47,238.65 Quarterly wages are $8,400.16
Total wages are $ 55,638.78
Biweekly % of total is ($47,238.65/$ 55,638.78) or 84.902%
Quarterly % of total is ($8,400.16/$ 55,638.78) or 15.098%
We need to split the total taxes of $9,051.70 between the quarterly and bi weekly
Biweekly taxes = $9,051.70 * 84.902% = $ 7,685.10
Quarterly Taxes $9,051.70 * 15.098% = $1,366.60
5. Divide the taxes by the pay periods
Bi-weekly tax = $ 7,685.10 / 26 = $ 341.65
Quarterly Taxes = $1,366.60 /4 = $295.58
6. Total taxes = $ 341.65 +$295.58 = 637.23
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Here is another example that has a flat tax in if that did that with the Bonus
1. All wages are annualized, based on the pay period frequency. Employee 123 is set up as being paid on a semi-monthly basis for both the SALY and the BONUS pay codes:
SALY = 3,812.50 * 24 = 91,500
BONUS = 5,000 * 24 = 120,000 (this has 25% flat tax marked on the pay code)
Total annualized wages: $211,500
2. Find the weighted average for each pay code:
SALY: 91,500/211,500 = .43262
BONUS:120,000/211,500 = .56738
3. Annualize and add any taxable benefits to the SALY pay code:
67.00 * 24 = 1608
91,500 + 1608 = 93,108
4. Subtract the Exemption amount. In this case, employee 123 has 2 exemptions (4050.00 each):
93,108 – 8,100 = 85,008
4. Annualize Deductions that are sheltered from tax (401K and HSA both of which are also semi-monthly)
401K = 4,800 * 24 = 115,200
HSA = 108.33 * 24 = 2,599.92
Total Annualized TSA Deductions = 117,799.92
5. Using the weighted average, subtract the TSA deductions from each code:
SALY: 117,799.92 *.432624 = 50,963.07
85,008 – 50,963.07 = 34,044.93 wages subject to tax federal tax tables
BONUS:
117,799.92 * .56738 = 66,837.32
120,000 – 66,837.32 = 53,162.68 wages subject to flax tax –53172.11
5. Calculate Flat Tax Amount:
53,162.68 * 25% = 13,290.67 annualized flat tax
13,290.67 /24 = 553.77 flat tax
6. Calculate Federal Tax on SALY pay code as normal:
34,044.93 in taxable wages puts employee 123 in the tax tables at 15% (married):
As such, employee 298 has a tax of $1,865.00 (From Tax Tables – this is the amount the employee is taxed ‘up to’ 27,300).
Now, we need to reduce the total taxable wages by 27,300:
34,044.93 – 27,300 (From Tax Tables) = 6744.93 (this is the amount we need to multiply by 15%):
6744.93 * 15% = 1011.74
1865 + 1011.74 = annualized federal tax for wages subject to tax tables
2876.74/24 = 119.87 federal tax
7. Add the two tax values together:
553.77 + 119.87 = 673.64 federal tax for this pay run
