The Financial Edge annualizes the state taxes by performing the following calculation.

(((Adjusted Growth Wages for this Paycheck  ×  # of Pay Periods per Year) - Exemptions - State tax threshold amount of untaxed income) × Tax rate from State Tax table) ÷ # of Pay Periods per Year = State Tax Withholding for this Paycheck

See the following example for a married employee with 0 exemptions subject to state tax in Colorado who is paid monthly for the calendar year 2013.


$1,146.24                             <- Employee's Adjusted Gross Wages this paycheck.

× 12 pay periods in year

= $13,754.88                       <- Predicted annual earnings (assumes that the paychecks will be the same).

 

$13,754.88

- $0.00                                  <- No exceptions for this employee.

- $7,900.00                          <- Married threshold before the CO state % kicks in, or untaxed income, as pulled from State Tax table.

 

= $5,854.88                         <- Predicted annual taxable income for CO state.

 

$5,854.88

× 0.0463                               <- CO tax rate for married income above $7,900.00 is 4.6300%, as pulled from State Tax table.

= $271.08                             <- Predicted total CO state tax for year.

 

$271.08

÷ 12 pay periods

= $22.59                               <- State tax withholding for this paycheck.