Follow the path from gross pay to net pay.
Gross-to-net payroll is the framework behind many payroll calculation questions: start with gross pay, adjust for taxability, withhold taxes and deductions, and arrive at net pay.
Practice payroll calculationsSee free testsThe gross-to-net sequence
Different employers and systems may label steps differently, but the logic is usually the same.
Start with gross pay
Gross pay includes regular wages plus applicable overtime, bonuses, commissions, and other earnings before taxes and deductions.
Apply pretax deductions
Some deductions reduce certain taxable wage bases. Treatment can vary by deduction type and tax.
Calculate taxable wages
Federal income tax, Social Security, Medicare, state taxes, and benefit deductions may use different taxable wage amounts.
Withhold employee taxes
Withhold applicable income tax, Social Security tax, Medicare tax, Additional Medicare Tax, and other required taxes.
Take post-tax deductions
Post-tax deductions may include certain benefits, repayments, garnishments, or other authorized amounts.
Arrive at net pay
Net pay is the remaining amount paid to the employee after taxes and deductions.
A simple study formula
Gross pay – pretax deductions – employee taxes – post-tax deductions = net pay.
The tricky part is not the subtraction. The tricky part is knowing which wages are taxable for which tax and which deduction happens at which stage.
Common calculation traps
Use these as checkpoints when you miss payroll math questions.
FICA wage bases
Social Security has an annual wage base; regular Medicare does not. Additional Medicare Tax starts after the employer withholding threshold is crossed.
Read FICA basicsSupplemental wages
Bonus withholding and gross-up problems often require a different setup than regular wage withholding. You can estimate bonus withholding and gross-up amounts with the calculator.
Read supplemental wage guidePretax does not mean pre-everything
A deduction may reduce federal income-taxable wages but still be subject to FICA, depending on the deduction type.
Practice the sequence, not just the math.
PrepToPay payroll calculation questions help you build the habit of identifying gross pay, taxable wages, deductions, and net pay in the right order.
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