IRS Publication 15-T: Wage Bracket and Percentage Withholding Methods

IRS Publication 15-T, Federal Income Tax Withholding Methods, is the annual IRS document that tells employers how much federal income tax to take out of each paycheck. It gives you two ways to run the calculation: the Wage Bracket Method, which is a table lookup, and the Percentage Method, which is a formula. Both work off the employee’s Form W-4. The IRS reissues Publication 15-T every year because the bracket thresholds and standard deduction amounts adjust for inflation, so you need the current edition each January.¹

What You Pull From the W-4

Every calculation starts with the employee’s Form W-4. The entries on it decide which table you use and how you adjust the result.²

Step 1, filing status: Single or Married Filing Separately, Married Filing Jointly, or Head of Household. This picks the rate schedule.
Step 2, multiple-jobs checkbox: If checked, the standard deduction and bracket widths for that job are cut in half, which raises per-paycheck withholding. Whether the box is checked changes which schedule you pull.³
Step 3, dependent and other credits: an annual dollar figure. Divide by pay periods, then subtract from the tentative withholding each period.
Step 4(a), other income, and Step 4(b), extra deductions: 4(a) increases the wages subject to withholding, 4(b) decreases them.
Step 4(c), additional withholding: a flat dollar amount added to the final per-period result.

You are not responsible for verifying the employee’s entries. Your job is to apply what’s on the form to the right worksheet.⁴

One boundary worth flagging: nonresident alien employees require an extra wage adjustment before either method. You add $16,100 to annualized wages for an employee on a 2020-or-later W-4, or $11,800 for one still on a pre-2020 form, because nonresident aliens generally can’t claim the same standard deduction.⁵

The Wage Bracket Method

This is the simpler option and it’s built for manual payroll. You look up the withholding in a table instead of running a formula. The catch is that the tables only cover annual wages up to roughly $100,000. Above that, you have to use the Percentage Method.⁶

Pick the table that matches the pay period (weekly, biweekly, semimonthly, or monthly) and whether the W-4 is 2020-or-later or pre-2020. Use the accompanying worksheet to compute the Adjusted Wage Amount for the period: take gross pay, add the per-period share of any Step 4(a) other income, and subtract the per-period share of any Step 4(b) deductions.

Find the row where the Adjusted Wage Amount falls between the “At least” and “But less than” columns. Read across to the column that matches the filing status and Step 2 status. That number is the tentative withholding for the period, and the standard deduction is already baked in.

Two adjustments finish the job. Divide the annual Step 3 credit by the number of pay periods and subtract that from the tentative amount, but don’t go below zero. Then add any Step 4(c) flat amount. That’s what you withhold.

The Percentage Method

Most automated payroll systems run this method. It uses the same marginal-rate structure as the income tax brackets, so it’s precise at every income level and has no upper wage limit.¹

Start by annualizing gross pay: multiply the current period’s gross by the number of pay periods in the year. A biweekly employee earning $2,500 annualizes to $65,000. Add the full annual Step 4(a) amount, subtract the full annual Step 4(b) amount, then subtract the standard deduction for the filing status per the worksheet. The result is the Adjusted Annual Wage Amount.⁵

Apply that figure to the right Percentage Method rate schedule. Publication 15-T publishes separate schedules for each filing status and for whether the Step 2 box is checked. The schedules use seven marginal rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.⁶ The 2026 Standard Withholding Rate Schedule for a Single filer with Step 2 unchecked runs as follows:

$0 to $7,500: 0%
$7,500 to $19,900: 10% of the amount over $7,500
$19,900 to $57,900: $1,240 plus 12% of the amount over $19,900
$57,900 to $113,200: $5,800 plus 22% of the amount over $57,900
$113,200 to $209,275: $17,966 plus 24% of the amount over $113,200
$209,275 to $263,725: $41,024 plus 32% of the amount over $209,275
$263,725 to $648,100: $58,448 plus 35% of the amount over $263,725
$648,100 and above: $192,979.25 plus 37% of the amount over $648,100

Find the bracket that holds the Adjusted Annual Wage Amount, take the base dollar amount, and add the marginal percentage applied to the piece above the bracket floor. That’s the annual withholding. Subtract the full annual Step 3 credit, divide by the number of pay periods, and add any Step 4(c) amount. The result is the per-paycheck withholding.⁶

Public Law 119-21 made the individual income tax rate structure from the Tax Cuts and Jobs Act permanent, so these rates no longer sunset after 2025. The bracket dollar thresholds still adjust each year for inflation.⁷

Handling W-4 Forms Filed Before 2020

Plenty of employees are still on a W-4 they filed before the form was redesigned in 2020. You don’t have to ask them to file a new one. Publication 15-T gives you two ways to work with the old forms.⁶

Option one: use the separate wage bracket and percentage method tables in Publication 15-T that are labeled for pre-2020 W-4s. They accept the old marital-status and allowance inputs directly.

Option two: use the computational bridge, which converts the old W-4 data into 2020-or-later equivalents so you can run everything through one set of tables. Four steps:

Convert marital status. “Single” or “Married, but withhold at higher single rate” becomes Single or Married Filing Separately. “Married” becomes Married Filing Jointly. The bridge doesn’t produce Head of Household.
Enter an amount on Step 4(a): $8,600 for Single or Married Filing Separately, $12,900 for Married Filing Jointly.
Multiply the allowances from line 5 of the old form by $4,300 and enter that as Step 4(b).
Leave the Step 2 box unchecked. The bridge doesn’t produce a Step 2 equivalent, so the standard schedules apply.

Both approaches produce the same result. The bridge exists mainly for payroll operations that would rather run one calculation pathway than maintain two.⁶

Bonuses, Commissions, and Other Supplemental Wages

Supplemental wages include bonuses, commissions, severance pay, and accumulated sick leave paid out separately from regular salary. Publication 15-T gives you two calculation choices, and cumulative supplemental wages during the calendar year affect which one applies.⁷

The flat rate method is the simple option. For total supplemental wages up to $1 million per employee per year, you withhold a flat 22% regardless of the employee’s W-4. Once the cumulative supplemental wages cross $1 million during the year, a mandatory 37% rate applies to every dollar above that threshold, and this applies even if the employee claimed exemption from withholding.⁷

The aggregate method treats the supplemental payment as though it were part of the regular paycheck. Combine the supplemental pay with the regular wages from the current or immediately preceding pay period, run withholding on the total using either method, then subtract what was already withheld from the regular wages. The remainder is the withholding on the supplemental portion. It’s more tailored but more work, and it can hit employees hard when a large bonus pushes a single period’s combined pay into a higher bracket.

Non-Cash Fringe Benefits

Taxable non-cash fringe benefits, such as personal use of a company vehicle or an employer-paid gym membership, also require federal income tax withholding. Two ways to handle them: add the value to regular wages for the pay period and withhold on the combined total, or treat the value as supplemental wages and apply the 22% flat rate.⁸

For employer-provided vehicles specifically, you can elect not to withhold federal income tax on the personal-use value, provided you notify the employee in writing and report the value on the W-2. Social Security and Medicare taxes still apply. Values for taxable non-cash benefits must be determined no later than January 31 of the following year, though reasonable estimates during the year are fine for deposit purposes.⁸

Employees Who Claim Exempt

An employee who had zero tax liability last year and expects zero again this year can claim total exemption by writing “Exempt” on the W-4. The exemption is annual. To keep it going, the employee has to file a new W-4 by February 15 of the following year. If they don’t, you start withholding as if they’d filed a W-4 with no adjustments: Single, nothing entered in Steps 2 through 4.⁷

Exempt from income tax withholding is not exempt from Social Security and Medicare, which still come out of every paycheck. Nonresident aliens can’t claim the exemption at all.⁷

When the IRS Overrides a W-4 (Lock-in Letters)

If the IRS finds that an employee’s withholding is too low, it can send you a lock-in letter that specifies the withholding arrangement you have to use. The letter takes effect no sooner than 60 calendar days after its date.⁹

Once it’s in effect, you can’t decrease the employee’s withholding below the letter’s level unless the IRS tells you to. If the employee submits a new W-4 that would increase withholding above the lock-in level, honor it. If a new W-4 would decrease it, ignore the W-4. Block any online W-4 tool from being used to reduce withholding. A modification letter (Letter 2808C) from the IRS Withholding Compliance Program takes effect immediately.⁹

If the employee left before the lock-in takes effect, no action is needed. If they return within 12 months, apply the lock-in from their first day back.

Rounding

Publication 15-T lets you round in a few ways as long as you’re consistent. You can reduce the last digit of wages to zero, or round wages to the nearest dollar before calculating. You can round the final per-period withholding to the nearest dollar: under 50 cents drops, 50 to 99 cents rounds up. Pick an approach and use it the same way every period.⁶

After the Calculation: Deposits, Filings, and Penalties

Getting the math right is only useful if the money reaches the IRS on time. Every employer is assigned either a monthly or semi-weekly deposit schedule based on a lookback period, determined before the start of each calendar year using the instructions in Publication 15. Federal income tax withheld and both shares of Social Security and Medicare are deposited together.¹⁰

You report the amounts on Form 941, Employer’s Quarterly Federal Tax Return, which is due the last day of the month after each quarter ends: April 30, July 31, October 31, and January 31. If every deposit for the quarter was on time and in full, you get a 10-day extension.¹¹

Keep every W-4, worksheet, and employment tax record for at least four years after filing the fourth-quarter return for that year.¹²

The failure-to-deposit penalty scales with how late you are:¹³

1 to 5 calendar days late: 2% of the unpaid deposit
6 to 15 calendar days late: 5%
More than 15 calendar days late: 10%
More than 10 days after a first IRS notice, or on receiving a demand for immediate payment: 15%

The tiers don’t stack. Twenty days late is 10%, not the sum.

The bigger exposure is the Trust Fund Recovery Penalty. Federal income tax and the employee’s share of Social Security and Medicare are trust fund taxes, held for the government. Any person responsible for collecting and paying them over who willfully fails to do so can be held personally liable for the full amount, dollar for dollar.¹⁴ That liability can reach owners, officers, and others with authority over company finances. The IRS must give written notice at least 60 days before assessing the penalty, and shared responsibility allows the assessed persons to seek contribution from one another.

1
Internal Revenue Service. About Publication 15-T, Federal Income Tax Withholding Methods
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Internal Revenue Service. About Form W-4, Employee’s Withholding Certificate
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Internal Revenue Service. Form W-4 (2026), Employee’s Withholding Certificate
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Internal Revenue Service. Topic No. 753, Form W-4, Employee’s Withholding Certificate
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Internal Revenue Service. Publication 15-T (2026), Federal Income Tax Withholding Methods
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Internal Revenue Service. Publication 15-T (2026), Federal Income Tax Withholding Methods
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Internal Revenue Service. Publication 15 (2026), Employer’s Tax Guide
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Internal Revenue Service. Publication 15-B (2026), Employer’s Tax Guide to Fringe Benefits
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Internal Revenue Service. Withholding Compliance Questions and Answers
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Internal Revenue Service. Depositing and Reporting Employment Taxes
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Internal Revenue Service. Instructions for Form 941 (03/2026)
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Internal Revenue Service. Employment Tax Recordkeeping
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Internal Revenue Service. Failure to Deposit Penalty
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Office of the Law Revision Counsel. 26 U.S. Code 6672 – Failure to Collect and Pay Over Tax, or Attempt to Evade or Defeat Tax