How to Manually Calculate a Paycheck

Calculating your paycheck assists in proper budgeting.

Creating a budget is a responsible decision. By calculating your paycheck, you can determine the amount of money you will have and designate it to specific bills and savings. Calculating your paycheck requires the knowledge of your withholdings and withholding allowances. Tax laws change each year, so make sure you have an updated version of IRS Publication 15, Circular E. This publication contains all of the taxing percentages and rules for the current year.

Step 1

Multiply your hourly wage by the number of hours you worked. For example, if your hourly wage is $10 per hour and you worked 40 hours, multiply $10 by 40. The result is $400. If you worked overtime, multiply your hourly wage by 1.5 to receive your overtime wage. If you worked five hours overtime, at $15 per hour, your overtime is $75. Add your overtime wage ($75) to your regular wage ($400) to determine your gross wages. The result is $475.

Step 2

Multiply the number of withholding allowances (from your Form W-4) by the amount of one allowance for the pay period. This information is listed on the current year's IRS Publication 15, Circular E. The 2010 version of Publication 15 allows $70.19 per allowance for a person who is paid weekly. For example, if you claim three allowances on Form W-4, you multiply $70.19 by 3. The result is $210.57. Subtract this amount from your gross wages. For example, if your gross wages are $475, subtract $210.57 from $475. The result is $264.43.

Step 3

Subtract any deductions that are not taxable from your gross wages. These deductions may include insurance premiums, child support payments or contributions to a 401K. If you need assistance determining nontaxable deductions, contact your employer's human resource department. If you pay $95 per week for child support, subtract the child support payment from $264.43. Your federal taxable income is $169.43.

Step 4

Calculate federal income tax withholdings. Federal tax is calculated on a sliding scale using tax tables on IRS Publication 15, Circular E. If you are paid weekly, single and your federal taxable income is $169.43, your federal income tax is 10 percent. Multiply $169.43 by .10. The federal income tax to be withheld is $16.94.

Step 5

Compute your Social Security and Medicare tax withholdings. As of November 2010, Social Security tax is 6.2 percent of your gross income, for the first $106,800 of your annual income. Medicare is 1.45 percent of your gross income. For example, if your gross income is $475, multiply $475 by .062 to determine your Social Security tax withholding. The result is $29.45. Multiply $475 by .0145 to determine your Medicare withholding. The result is $6.89.

Step 6

Calculate any state or local income taxes. The percentages and formulas for state and local taxes vary by jurisdiction. Contact your state, county or city's department of revenue to obtain instructions on how to calculate these taxes.

Step 7

Subtract any nontaxable deductions, federal income tax withholding, Social Security taxes, Medicare taxes and any state tax withholdings from your gross income. This is the amount of your paycheck.

Tip

If you are paid a salary, you may omit step 1. Gross wages also include commission, tips and any other earned compensation. Some states and localities do not charge taxes.

Things You'll Need

  • W-4 withholdings

  • IRS Publication 15, Circular E

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