26 CFR 31.3402(h)(2)-1 - Withholding on basis of annualized wages.
An employer may determine the amount of tax to be deducted and withheld upon a payment of wages to an employee by taking the following steps:
Step 1. Multiply the amount of the employee's wages for the payroll period by the number of such periods in the calendar year.
Step 2. Determine the amount of tax which would be required to be deducted and withheld upon the amount determined in Step 1 if that amount constituted the actual wages for the calendar year and the payroll period of the employee were an annual payroll period.
Step 3. Divide the amount of tax determined in Step 2 by the number of periods by which the employee's wages were multiplied in Step 1.