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How to Withhold Using the Cumulative Wages Method

Author: Alice Gilman

An employer must withhold federal income taxes from employees' pay every pay period. The IRS has developed several methods an employer may use to fulfill this duty. The percentage method of withholding is most commonly used by an employer with automated payroll systems and third-party payroll service providers. Separate tables apply for each pay period and the marital status of employees. The percentage method tables are issued before a calendar year ends and are to be used by an employer in the following year. The IRS publishes the percentage method tables in Publication 15 (Circular E), Employer's Tax Guide.

However, certain employees, such as commission salespeople, may be overwithheld if their employer uses the regular percentage method tables without adjustment for the seasonal nature of an employee's job. These employees may request, in writing, that their employer use the cumulative wages withholding method. The cumulative wages method of withholding can only be used for employees who have regular pay periods.