Is there a wage minimum limit before federal tax is withheld?( my w-2 shows no federal tax withheld on my line 1 wages of 4657.89)

[georgesT]

No, as employee, you do not have to earn a minimum income for federal and state income tax to be withheld. 

Federal income tax is based on the employee’s filing status, number of allowances/exemptions, earnings, and the IRS withholding tax tables. All these factors determine the employee’s federal income tax withholding amount. The employee can earn a small amount of income but because he has few exemptions, he owes federal income tax. He can earn a large income but has so many exemptions that he pays no federal income tax. In the latter case, unless the employee truly is allowed to claim that many exemptions, he can end up owing the IRS. If the employee qualifies for exempt status, then no federal income tax should be withheld. State income tax withholding is dependent on similar factors. Furthermore, FICA taxes are based on a set percentage, which must be withheld, regardless of income amount.

 If your income is equal to or less than the sum of the exemption and standard deduction, the IRS doesn't require you to file a return. When determining whether you need to file a return, you don't include tax-exempt income. In 2017 for example, if you are under age 65 and single, you must file a tax return if you earn $10,400 or more, which is the sum of the 2017 standard deduction for a single taxpayer plus one exemption.

[Jempson]

Actually, check out this link.... there is a min. before a standard payroll system will start withholding. I've seen this issue twice where part time workers paid monthly don't have any payroll taxes withheld because they do not reach this minimum. We remedied this by requesting additional taxes be held.

www.patriotsoftware.com/blog/payroll/income-tax-withholding-tables/amp/

[ColeenD3]

Yes, unfortunately, this strategy is only successful if that is your only income. The tax withholding tables can't take into account if you have another job or any other additional income. Once you are over the filing requirement, this just adds on to the rest of your income and reduces your refund.

[MayaD]

Yes, if you are an employee you will receive a W-2 even if you didn't have any taxes withheld. 

If you were an independent contractor you will receive a 1099 MISC form instead of a W-2. Your clients are required to issue Form 1099-MISC when they pay you $600 or more in any year. 

[TestLab2020]

This is helpful. I just paid my part time employees on Friday and there was zero federal income tax withheld (but Medicare and our state taxes were all withheld as per normal). They only worked four hours, but do you know where I can find out why this federal withholding did not happen?

[ToddL99]

Yes, there are minimum income limits that must be met before federal taxes are withheld.

Those limits depend on your filing status (Married Filing Jointly, Head of Household, or Single or Married Filing Separately), the number of withholding exemptions you are claiming on your Form W-4 and the frequency with which your are paid (weekly, bi-weekly, or monthly).

For example, a person filing as Single, claiming no withholding allowances and paid weekly would not have any income tax withheld until their weekly earnings exceeded $80. (This would likely explain why employees with only 4 hours in a pay period would not have any income tax withheld).

A person filing as Married, with the same number of withholding allowances and paid weekly, would not have any income tax withheld until their weekly earnings exceeded $235.

The method for calculating withholding depends on how the payrolls are prepared (automated or manual) and when the Form W-4 was filled out.

For a complete explanation of how withholding is calculated, please go to Publication 15-T (2021), Federal Income Tax Withholding Methods.

[TestLab2020]

Thanks, ToddL99. One employee (single, no withholding allowances) earned $240 for four hours over two weeks, and was paid on a biweekly pay check. So that would be greater than $80 per week, right? But there was no federal tax withheld from their check by QuickBooks. Does that sound right to you?

I’m just nervous that the QuickBooks’ Payroll support I spoke to couldn’t actually point me to proof of why their no federal withholding calculations are correct. I appreciate your help!

[ToddL99]

Yes, the facts you presented indicate that employee's withholding was correct at "$0". 

Since you are using an automated payroll system (QuickBooks Payroll), the amount withheld is calculated using a percentage method, rather than tables. The calculation will depend on what type of Form W-4 was used to enter withholding allowances.  The amount of tax withheld will be different depending on the selection made on Form W-4 for 2020, oe if using  a Form W-4 from 2019 or earlier.

We cannot show the actual calculation without having the source documents, but you can see how it is determined at Worksheet 1. Employer’s Withholding Worksheet for Percentage Method Tables for Automated Payroll Sys....

The attached table also shows your employee's withholding as "$0" using the Wage Bracket Method for a manual payroll. 

[TestLab2020]

You are so helpful @ToddL99. Thank you for your time and responses.

Based on the Wage Bracket table for biweekly paychecks, am I correct in understanding that a Single/Standard Deduction employee would need to be making over $495/paycheck before they start having federal taxes withheld?

For example, if that part-time employee earns less than $495 on every biweekly paycheck all year, they wouldn't have any federal taxes withheld on any paycheck?

Or, is this adjusted wage amount cumulative and once the employee has earned $495 on their paychecks YTD in 2021 they will start getting federal taxes withheld on all future paychecks?

[JamesG1]

Federal withholding is determined by the amount of the weekly / biweekly / monthly payroll amount.

The IRS Income Tax Withholding Assistant for Employers can determine the correct Federal withholding.

See this IRS website.

[Eadeshaies]

Can someone please explain: I started my job in October 2022. My W2 wages are $3521.39. When I completed my W4 - I selected Head of Household & Step 3 - I put $4000 (for my 2 dependents) - My question is why $0 of federal taxes were taken out? Do I have to make a minimum amount before federal taxes are taken out? I want to make sure my W4 is right for 2023 and the correct taxes are taken out. Thanks 

[ErnieS0]

Yes, you do have to make a minimum amount to have tax withheld unless you ask for additional withholding.

The withholding tables look at each job as if that were your total income for the year. If you made $3,500 in three months or $1,170 per month. For 12 months, that comes out to $14,000. The standard deduction for head of household is $19,400. 

You would make less than that for your job for the whole year, so no tax would be taken out.

Use the free TurboTax W-4 Calculator. It will tell you how to fill out a new W-4.

@Eadeshaies 

[Eadeshaies]

So then my next question would be: would I get more back in a refund if I did “Single” & two dependents? I guess I’m just trying to figure out how to get the biggest refund & what makes the most sense for me to do. If I work this whole year I am expected to make about $36,600. So what would make more sense? 

[ErnieS0]

You will get a larger refund by claiming fewer dependents that you have. You’ll have more taken out of your pay each pay period so it balances out.

If you claim single and 0 dependents, you’ll get the biggest refund, but will have the least take-home pay.

You can change your withholding as many times as you want.

ADP has a salary paycheck calculator. You can estimate your take-home pay before filing a new Form W-4.