Federal income tax (FIT) withholding is a critical aspect of payroll processing. Patriot Software calculates FIT based on IRS guidelines, employee W-4 details, and pay frequency. This guide explains common scenarios, discrepancies, and steps to adjust FIT withholding effectively.
Why Federal and State Withholdings Differ
Federal and state income tax withholdings are calculated using different laws, rates, and formulas, so they rarely match. Patriot Software uses IRS-compliant methods for federal withholding, while state calculations depend on state-specific rules. You can visit your state's Department of Revenue for their income tax withholding method.
Things that are considered in the calculation are:
Rate of pay
pay frequency
number of allowances
filing status
Common Scenarios
1. $0 Federal Withholding
Federal withholding may be zero if:
The employee’s taxable wages are reduced by dependents or credits claimed on their W-4.
The calculated FIT is zero for a pay period due to lower wages or tax credits.
Solution:
See if the employee wants to add an additional flat dollar amount for additional withholding. Have the employee give you an updated W-4 Form (Step 4(c) for your records (or have them update their Federal W-4 electronically in their employee portal).
If given a paper W-4 from the employee, enter the additional withholding amount in the software for the employee on their Taxes tab. Payroll > Employees > Employee Name > Taxes.
This ensures extra FIT is withheld in future payrolls.
2. Discrepancies Between Employees
Employees with similar pay and filing statuses may have different FIT amounts due to:
Different W-4 versions (pre-2020 vs. post-2020 vs. 2026).
Variations in W-4 entries, such as dependents or additional withholding.
3. Impact of Filing Status Changes
Filing status (e.g., from Single to Married Filing Jointly) affects FIT withholding. A Married Filing Jointly status generally reduces withholding compared to Single.
How to Adjust Federal Withholding for an Employee
NOTE: Do not change employee W-4 settings unless you have a new W-4 with changes from the employee. The settings you mark in the software for federal income tax withholding should reflect exactly what is on the employee W-4.
Access Employee Tax Settings: - Navigate to Payroll > Employees > Employee List. - Select the employee’s name and open the Taxes (or Federal Taxes) section.
Verify the Federal Filing Status matches the employee’s W-4 form.
Adjust fields such as Dependents, Other Income, Deductions, or Extra Withholding (Step 4(c)) as indicated on the W-4 form.
Ensure "Exempt from Federal Income Tax" is unchecked unless applicable.
Save the updated settings to apply changes to future payrolls.
Additional Notes:
Extra Withholding amounts are added to the calculated FIT total and do not appear as separate line items on paychecks.
Changes to employee W-4 settings affect withholding on future payrolls only.
FAQs
Can I manually Edit FIT Amounts for Bonuses in Payroll?
No, FIT amounts cannot be manually edited in paycheck previews. You can go back to step one of payroll to check the supplemental tax box for the bonus amount for taxes to be calculated at the applicable federal and state supplemental rates.
Otherwise, ask the employee if they want additional withholding for bonuses, and have the employee change their W-4 settings in their employee portal before running payroll.
Why didn’t taxes auto-calculate?
Federal and state taxes depend on employee W-4 details. Ensure these settings are configured for each employee. See our help article, Why Didn't Income Taxes Come out of Employee Payroll? for more information.
How does claiming more dependents or credits affect withholding?
Claiming more dependents or credits reduces withholding, increasing net pay but potentially leading to a tax liability at year-end.
*It is important to note that employers or payroll admins should not change employee W-4 or state withholding settings without having the employee's withholding form filled out and signed by them. Keep these forms for your records.