What Is FWT on a Paystub: Federal Withholding Tax Explained

April 30, 2025

FWT on a pay stub stands for Federal Withholding Tax (or Federal Income Tax Withholding), and it’s the amount of money employers deduct from your paycheck to give to the IRS.

In most cases, FWT is legally mandated. Moreover, employers need to clearly show on a pay stub how much tax they withheld for you to help you understand your take-home pay and assist with your tax compliance. Knowing what FWT on a pay stub is and understanding its concept is essential for financial and payroll management, so keep reading to find out more.

Key Takeaways

FWT on a pay stub is an abbreviation for Federal Tax Withheld.
Employers are legally mandated to withhold federal taxes for most employees.
Some of the key factors that go into FWT calculation include an employee’s gross income and the information on their Form W-4.
In addition to federal income tax, other notable deductions you can find on your pay stub include Social Security, Medicare, and state income tax.
Employers who neglect their tax duties or withhold incorrect amounts can face legal and financial repercussions, as well as criminal charges.

What Is FWT on Your Pay Stub?

FWT (also known as FITW or FWT) on your pay stubs stands for Federal Income Tax Withholding. It’s one of the most common pay stub abbreviations you’ll find on almost every document and represents a portion of your income that your employer deducts from your gross pay and gives to the IRS on your behalf.

This is known as the pay-as-you-go system that allows employers and employees to pay their taxes gradually instead of having to give a lump sum at the end of the year. The government collects and uses these funds for various purposes and public services, like building and maintaining infrastructure or providing free education.

Employers are legally obligated to withhold federal income tax. The exact amount varies based on different elements and circumstances, so let’s see what they are.

Factors that Affect FWT Deduction

The most common factors that affect FWT deduction include:

Gross salary. In general, the higher your gross salary, the higher the amount of federal taxes withheld. Bonuses, salary increases, shift differential pay, and overtime all increase FWT, while decreases in earnings typically lower it.

Pay frequency. How often you get paid doesn’t change the total amount of tax withheld from your annual paycheck, but it influences the FWT number on your pay stub.

Changes in legislation. Changes in tax rates or brackets impact the percentage of your earnings that goes toward federal tax withholding, and they can reduce or increase it.

Tax credit. You can reduce the amount of tax withheld by claiming tax credits, such as claiming dependents (e.g., for a child tax credit).

Changing your status. Getting married or going through a divorce impacts your tax rates after being declared on your W-4.

Pre-tax contributions. Contributing to 401(k), health savings accounts, and similar accounts reduces the amount of tax that should be withheld.

How to Calculate FWT on a Pay Stub

FWT is calculated mainly using the IRS guidelines, the information in an employee’s Form W-4, and their gross wage. It’s a standard step in payroll processing that ensures the employer’s tax and legal compliance.

There are two main methods of calculating how much an employer should withhold for federal tax:

The Wage Bracket method. This is a simpler method that involves using the IRS-provided tables and is typically better for employees who earn less than $100,000 per year.

The Percentage Method. This method is more complex; it involves applying tax rates to wage portions for candidates whose annual earnings exceed the amounts in the IRS tables.

The process typically starts by calculating taxable wages. This is done by subtracting all pre-tax deductions from an employee’s gross salary. Following that, employers consider the information in an employee’s W-4 Form and adjust FWT.

Publication 15-T provides detailed guidelines (including the tables for the Wage Bracket Method) on how employers can calculate employee taxes, what information they need to consider, and which documentation to file.

Why FWT Appears on Your Pay Stubs

FWT appears on your pay stubs to ensure transparency and compliance. Employees need to know how much of their income has been withheld for federal tax purposes so they can file taxes at the end of the year. Accurate and transparent pay stubs help employees avoid fines while facilitating their planning and budgeting.

By keeping track of FWT on a paycheck stub (and other withheld taxes deducted from their gross pay), employees can better understand their tax liability and make estimates on whether they’ll have to pay more. High withholdings can result in tax refunds, while low federal income tax amounts withheld can lead to fines if employees don’t pay the rest.

Businesses also need to keep track of the federal tax withheld for their employees. Since they are legally required to pay them, they can encounter severe legal and financial consequences for failing to do so.

Having clearly outlined FWT (among the other benefits, tax contributions, and deductions) is critical for accurate record-keeping. For instance, it can show if an employee needs to have more of their tax withheld. Plus, transparent and precise documentation is vital during audits.

FWT vs. Other Deductions on Pay Stubs

While FWT is one of the most common tax deductions that employers are mandated to perform, there are many others that you can find on your pay stub, depending on your circumstances and state regulations.

For starters, there are mandatory FICA (Federal Insurance Contributions Act) taxes. These taxes amount to 15.3% of an employee’s gross income, with employers paying half of that. FICA taxes are divided into two parts:

Social Security. Sometimes referred to as OASDI on a pay stub, this payroll tax goes toward funding the U.S. government’s Social Security program. Employers contribute to this tax in the amount of 6.2% of an employee’s gross salary.

Medicare. The Medicare tax goes toward funding the federal health insurance program. Employers pay 1.45% of an employee’s gross wage for Medicare.

Depending on your state and jurisdiction, you can also encounter state and even local taxes under the deduction section of your pay stub.

Nine states don’t levy state income taxes, and they are:

Alaska
Florida
Nevada
New Hampshire
South Dakota
Tennessee
Texas
Washington
Wyoming

Out of these, Washington only taxes capital gains income.

From the remaining 41 states, 14 have single-rate tax structures and 27 have graduated-rate tax structures.

On top of that, there may be various other deductions, such as:

SDI (State Disability Insurance)
SUI (State Unemployment Insurance)
WC (Workers' Compensation)
FLI (Paid Family Leave)

Just like with FWT deductions, it’s critical for all the other deductions to be properly itemized and accurately displayed on a pay stub for legal and tax purposes.

How FWT Affects Your Year-End Tax Return

FWT affects your year-end tax return by directly influencing whether you’ll have to pay more or receive a tax refund.

When your employer files Form W-2, Wage and Tax Statement, they’ll include how much federal income tax has been withheld in Box 2. The IRS will compare this number against your tax liability based on the entirety of your income, deductions, and credits for the year, which you should disclose in the Form 1040.

Once the IRS makes a comparison, there can be two outcomes that require reconciling FWT, and they are:

The total FWT withheld is higher than the actual tax you owe. This means that the federal income tax has been overpaid, and you’re likely due for a tax refund.

The total FWT withheld is lower than the actual tax you owe. This means that you’ve underpaid your taxes, and you need to pay the remaining sum to avoid penalties.

Regularly monitoring your paycheck withholdings will help you stay on top of your financial situation. You should review every pay stub you receive to verify that your employer withheld the required amount of federal income tax so that you avoid potentially uncomfortable surprises at the end of the year.

The Importance of FWT for Employers

Withholding federal taxes for employees is legally mandated, and employers must do it to avoid severe repercussions. Employers must withhold federal taxes, Social Security, and Medicare from employee wages at the least, based on their salaries and information in Form W-4.

Failure to comply with the IRS regulations (e.g., withholding incorrect amounts, missing deadlines, or not withholding taxes at all) can result in penalties with interest. Willfully committing tax fraud can lead to criminal charges with severe monetary penalties and even prison time.

In addition to all that, employers who neglect their tax obligations can develop a bad reputation for their business. This can lead to losing employees and having a hard time finding and hiring new talent.

How Paystub.org Can Help With FWT on a Pay Stub

Paystub.org can help you calculate and display FWT on a pay stub, as well as SWT, FICA, and all the other earnings and deductions.

We have a user-friendly online pay stub generator that you can leverage to create these documents in minutes! Here’s a step-by-step guide on how to use it:

Navigate to the pay stub generator from the main page of the website (we also have a Form 1099 generator, invoice generator, and Form W-2 generator).
Select a template and choose a color that suits your needs and brand.
Follow the steps and fill in the blanks with the necessary information about the payment, company, and employee.
Complete the earnings statement.
Check out to download your pay stub after verifying that it’s correct.

One of the main reasons why our generator is great for adding and displaying FWT on a pay stub is that it automatically calculates it. Once you start filling in the earnings statement, you’ll notice how the tool adjusts the gross pay and net pay, as well as federal tax, Medicare, Social Security, and other deductions on its own.

As a result, you don’t have to spend time and effort doing tedious research and calculations. Instead, you can generate professional and accurate pay stubs, knowing they are properly structured and compliant with all the regulations.

Final Thoughts

Understanding what FWT is on a pay stub helps you manage your finances and stay on top of your tax obligations. Employers withhold federal income (and several other) taxes from employees’ wages and pay them to the IRS in regular installments over the year. The amount influences whether you’ll have to pay more, do nothing, or get a tax refund.

That’s why you should review every pay stub you receive for accuracy. This is the best way to ensure compliance with the regulations and avoid paying potential fines.

What is FWT on a Pay Stub FAQ

#1. Does everyone need to pay FWT?

Not everyone needs to pay FWT. While employers need to withhold federal income tax for the majority of employees on their payroll, there are several groups of people who don’t pay taxes. These include the U.S. citizens working abroad, low-income taxpayers, taxpayers with many deductions and dependents, etc.

#2. What if my employer withholds too much FWT?

If your employer withholds too much FWT, you will probably receive less take-home pay. However, you will likely be eligible for a tax refund toward the end of the year after filing your return.

#3. What does SWT stand for in taxes?

SWT (also referred to as ST or St Tax) stands for State Tax Withheld. It’s a mandatory contribution similar to federal income tax, except it’s used to fund state-level endeavors and services. The exact rates and structures vary from state to state, with nine states not levying them at all.