How are Payroll Taxes Calculated in Sage 100 Payroll


How to verify payroll taxes are calculated correctly using tax table maintenance


Sage Customer Support does not provide assistance for issues related to third party products or enhancements, hardware, report customizations, state or federal tax-related questions, or specific accounting questions.


Tax calculation steps for a tax code must be entered in Tax Table Maintenance in the order in which they must be performed. Up to nine steps can be entered. A step number cannot be repeated.

Payroll taxes are calculated using Annualized Wages table. Detailed information on tax steps can be found in the Federal and State Employer’s Tax Guides (available from the U.S. Internal Revenue Service (IRS) and the appropriate state departments).

Employee is paid on weekly pay cycle with tax status of Federal withholding setup as Married with 3 exemptions. Wages total $800.00 with FED tax withholding = $76.30

Tax Calculation Steps

  • Tax step 2-Annualize Wages $800.00 x 52 = $41,600.00
  • Tax step 6-Take Dependent Exemption 3 x $2,900.00 = $8,700.00
    • $41,600 – $8,700.00 = $32,900.00
  • Tax Step 7-Apply Tax Table = $6,450.00
    • $32,900.00 – $6,450.00 = $ 26,450.00
  • $26,450.00. x 15% = $3,967.50
  • $3,967.50 divided by 52 weeks = Weekly Federal Withholding Tax = $76.30

If taxes are still not calculating correctly, please do the following

Verify the correct Pay Cycle is selected in Employee Maintenance:

  1. Open Payroll, Main, Employee Maintenance
  2. Select applicable Employee from look up
  3. Click on the Wages tab
  4. In the Pay Cycle field, select a code from the following list to indicate this employee’s pay cycle
Pay CycleNo. Pay Periods/YearStandard No. Hrs/Pay Cycle
  1. Click Accept