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How to Withhold Using the Part-Year Employment Method

Author: Alice Gilman

An employer must withhold federal income taxes from its employees' pay every pay period. The IRS has developed several methods employers can use to fulfill this duty. The percentage method of withholding is most commonly used by employers 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 employers in the following year. The IRS publishes the percentage method tables in IRS Publication 15, Circular E, Employer's Tax Guide.

However, certain employees, such as those who start work in the middle of the year, or who work for only a short time during the year (e.g., college students working during the summer) may be overwithheld if their employer uses the regular percentage method tables without adjustment for the part-year nature of their jobs. These employees may request, in writing, that their employer use the part-year withholding method. An employee's written request must include the following elements:

  • The last day of any employment during the calendar year with any prior employer;
  • A statement that he or she uses the calendar year as his or her tax year; and
  • A statement that he or she reasonably anticipates that he or she will be employed by all of his or her employers for a total of no more than 245 days in terms of all continuous employment during the current calendar year.