Payroll withholding shows up as a couple of quiet lines on a pay stub, but it is two systems running side by side. Understanding how payroll tax withholding works means separating them: one is a flat percentage that never varies between employees, the other an annualized estimate driven entirely by what the employee wrote on Form W-4. That split is why two people earning the same gross pay can have different amounts withheld.
This article is general information, not tax or legal advice.
How payroll tax withholding works: two separate systems
FICA is a flat rate, and it ignores everything personal
Social Security and Medicare taxes, together called FICA, are mechanical. The employee share of Social Security tax is 6.2% of covered wages up to an annual wage base, which is $184,500 for 2026 (IRS Publication 15, 2026). Once year-to-date Social Security wages cross that ceiling, the employer stops withholding Social Security tax until January.
Medicare has no wage base. The employee share is 1.45% of every dollar of covered wages (IRS Publication 15, 2026), and an employer must also withhold an Additional Medicare Tax of 0.9% on wages it pays an employee in excess of $200,000 in a calendar year (IRS Topic No. 751), applied per employer and without regard to filing status.
Notice what is absent: filing status, dependents, a second job, a spouse's income. Two employees with identical gross pay have identical FICA withholding, to the penny.
Federal income tax withholding is an estimate, not a rate
Federal income tax withholding is not a percentage of your check. It is the employer's attempt to pre-pay, in installments, the income tax the employee will owe on the annual return. Because that tax is progressive, you cannot derive it from one paycheck in isolation.
So the IRS has the employer annualize: pretend this paycheck repeats all year, compute the annual tax on that hypothetical salary, then divide back down to one pay period. Those rules live in Publication 15-T, and that is where essentially all of the person-to-person variation comes from.
How payroll tax withholding works step by step under Publication 15-T
The percentage method runs in a fixed sequence:
- Annualize the pay. Multiply the period's gross wage by the pay periods in the year: 26 biweekly, 24 semimonthly, 52 weekly.
- Adjust for the Form W-4. Add other annual income from Step 4(a), subtract deductions from Step 4(b), then subtract a fixed deduction amount based on filing status: $12,900 if the taxpayer is married filing jointly, or $8,600 otherwise (IRS Publication 15-T, 2026, Worksheet 1A, line 1g). If the box in Step 2 is checked, signalling multiple jobs or a working spouse, that deduction is entered as zero and a separate, steeper rate schedule applies. What comes out is the adjusted annual wage amount.
- Look up the tentative annual tax. Find that figure in the rate schedule for the filing status. Each bracket gives a flat base amount plus a marginal percentage on the excess over the bracket floor.
- Subtract credits, then add extra withholding. Divide the Step 3 annual credit by the pay periods and subtract it, floored at zero, then add anything from Step 4(c).
That is the federal income tax withheld for the period. FICA is computed separately, straight off the period's wages, and never touches this worksheet.
A worked example: same gross pay, different withholding
Two employees are paid biweekly and each earns exactly $2,500 gross per period, annualizing to $2,500 x 26 = $65,000. Neither entered anything in Steps 2, 3, or 4 of Form W-4, so the only difference is filing status.
Employee A files as single:
- $65,000 minus the $8,600 deduction amount = $56,400 adjusted annual wage
- That falls in the single bracket beginning at $19,900, where the tentative tax is $1,240.00 plus 12% of the excess (IRS Publication 15-T, 2026, Standard Withholding Rate Schedules)
- 12% of $36,500 is $4,380, so the tentative annual tax is $5,620
- Divided by 26: $216.15 withheld this period
Employee B files as married filing jointly:
- $65,000 minus the $12,900 deduction amount = $52,100 adjusted annual wage
- That falls in the joint bracket beginning at $44,100, where the tentative tax is $2,480.00 plus 12% of the excess (same source)
- 12% of $8,000 is $960, so the tentative annual tax is $3,440
- Divided by 26: $132.31 withheld this period
FICA is the same arithmetic for both: $2,500 x 6.2% = $155.00 for Social Security, plus $2,500 x 1.45% = $36.25 for Medicare, or $191.25 each.
Same gross pay, identical FICA, and federal income tax withholding that differs by $83.84 per period, roughly $2,180 across a year. Neither figure is wrong. Each is a closer estimate of a different annual tax bill.
Why the same salary produces different withholding
Every source of variation is an input in that sequence:
- Filing status picks the rate schedule and the deduction amount.
- The Step 2 checkbox zeroes the deduction and switches rate schedules, because the calculation can no longer assume this job is the household's only income.
- Step 3 credits and Steps 4(a) and 4(b). A dependent-related credit is spread across pay periods and subtracted, which can cut withholding sharply at modest wages; reported outside income pushes the annualized figure up and reported deductions pull it down.
- One unusually large payment annualizes into an unusually large hypothetical salary, so a higher marginal rate hits it. Ordinary pay frequency does not cause this on its own, since 52, 26, and 24 periods all annualize to the same yearly figure.
- Mid-year changes such as a new Form W-4, a raise, or crossing the wage base alter later checks without touching earlier ones, so year-to-date totals diverge even when the current check matches.
- Pre-tax deductions. Traditional 401(k) elective deferrals generally reduce wages subject to federal income tax withholding but not wages subject to Social Security and Medicare tax, so two employees with the same gross and different deferral elections diverge on income tax while FICA stays aligned. Publication 15 tables these rules by payment type.
How payroll tax withholding works at the state level
Federal withholding is one layer. Most states run their own, and there is no shared method. Some publish annualized percentage tables that look structurally like Publication 15-T, some use wage-bracket lookup tables, and some apply a flat rate to compensation with no brackets at all: Pennsylvania levies its personal income tax at a flat 3.07 percent (Pennsylvania Department of Revenue). Several states do not tax wage income, so there is no state line to compute.
Because each state writes and revises its own formulas on its own schedule, state withholding must come from that state's current guidance, not be scaled off the federal number. UWageCo computes federal withholding from Publication 15-T plus FICA, and state withholding for all 50 states from each state's own published formulas.
How payroll tax withholding works for bonuses
Bonuses and commissions are supplemental wages, and the employer has a choice. It can combine the payment with regular wages and run the total through the ordinary annualized calculation, or, when the payment is identified separately, apply an optional flat rate: 22% for supplemental wages of $1 million or less in a calendar year, and 37% on the portion above $1 million (IRS Publication 15, 2026).
That is why a bonus can show a withholding percentage nothing like the usual paycheck. It is a convention, not a different tax rate, and the annual return reconciles it.
Making the arithmetic visible on the statement
Withholding is easiest to check when the statement shows gross wages, pre-tax deductions, each tax on its own line rather than one bundled deductions total, and year-to-date columns. Collapse the federal taxes into one number and nobody can tell whether a change came from a new W-4, a raise, or the Social Security ceiling.
UWageCo generates payroll statements from the pay information an employer or self-employed person supplies, at $27.54 per statement with no subscription, itemizing federal income tax, Social Security, Medicare, and state withholding alongside year-to-date totals. UWageCo prepares documents and does not file anything with the IRS or any state, and every generated document carries a disclosure stating that the information was supplied by the customer and not independently verified.
Withholding figures also change every year. If you are checking arithmetic for a year other than 2026, pull that year's Publication 15-T and Publication 15 rather than reusing the brackets above.