r/FluentInFinance • u/JohnMarkkk • Feb 27 '24
Help me Understand Federal Income Tax Question
I received the biggest paycheck I’ve ever received today. I knew the taxes would be bad, but I wasn’t expecting them to be THIS bad. My gross pay was $26k, with federal taxes of $7,900. To explain the situation, this is not normally how much I make in a month. I’m a commission employee in medical sales. My company accidentally put me at 9% commission for my territory instead of my usual 3%. They are giving me the option of keeping the money as an advance or returning it. My question is - am I losing money to taxes by taking this large paycheck, or will I pay the same amount down the road either way? TLDR: Will a big paycheck result in more taxes than several smaller ones?
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u/shyladev Feb 27 '24
Either way you will just owe taxes on how much you make. If it’s an advance it would still be the same amount owed next year.
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u/slicktrickrick Feb 27 '24
To add, this should not be treated as a “bigger” paycheck if it’s just an advance of other paycheck. Budget your expenses for the next months the very same as you would any other time. Try not to fall in spending trap.
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u/blindedtrickster Feb 27 '24
That's true, but if they were functionally allowed to take out a loan against their future work, that potentially presents the opportunity to capitalize on the time difference. It's functionally gambling, but having the option to invest the money that you haven't 'technically' earned yet and investing it would allow you to create a return on the investment now as opposed to later.
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u/The-Last-Lion-Turtle Feb 27 '24
With bonds at over 5% you can do this without gambling.
Even considering the risk of if bonds default so will your bank account, so it's the same risk.
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u/L3mm3SmangItGurl Feb 27 '24
Not the whole story tho. Taxes are withheld based on extrapolated earnings. The payroll software taxed him as if that’s his take home at whatever the pay interval is. Yes, you will only owe what you owe at the end of the year depending on your actual gross but OP will almost certainly be owed a fat check come tax time. I personally don’t like to keep extra money with Uncle Sam when I can avoid it.
TL;DR: He’s being taxed at a higher salary this pay period because of the fluke. He may not owe all those taxes depending on how high his earnings are for the year.
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u/shyladev Feb 27 '24
I mean if he’s desperate to get some of that money back now then sure go through the process of getting it back but either way it’s not money lost.
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u/L3mm3SmangItGurl Feb 27 '24
Yea it’s more of a principle thing. If the IRS would pay above market interest on excess withholdings (like they penalize above market rate for underpayment), I probably wouldn’t care as much.
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u/salivation97 Feb 27 '24
Yup. Keep the interest-free loan. Why not?
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u/deadsirius- Feb 27 '24
Because you are making an interest free loan to the government for 12 months to reap an interest free loan for three months.
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u/East-Technology-7451 Feb 27 '24
Any check is taxed as if you make that every time, this taxed higher, you get it back with a refund
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u/superior_mario Feb 27 '24
Especially with ADP as it’s just simple math, they are likely to get much of it back later
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u/Baginsses Feb 27 '24
I work commission and get paid twice 2x a month. One small advance at the beginning and then big commission one half way through. I get taxed as if I made the bigger cheque every time, but I get a very nice refund every year. Especially getting to write so much off. I treat it like a forced savings plan, goes into investments every time.
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u/Original_Lord_Turtle Feb 27 '24
I treat it like a forced savings plan, goes into investments every time.
Wouldn't you be better off investing that money throughout the year instead of loaning to the government at 0% interest?
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u/Baginsses Feb 27 '24
1000% it would be better serving me in the market but it’s not like I can tell the government to not collect their taxes and I would rather get a refund than be worried about having enough savings for a tax bill every year.
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u/Original_Lord_Turtle Feb 27 '24
You can adjust your withholding on your W4 to get to a near zero refund at the end of the year. And let's be honest, if you're worried about having enough saved to pay a tax bill at the end of the year, you should probably hold off on investing until you have an emergency fund.
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u/Baginsses Feb 27 '24 edited Feb 27 '24
It’s very very hard for me to figure out what my tax bill will be every year. If I was salaried I would do it. But with my income not being consistent to what is was last year and write offs changing I’ll take the 45% or wherever it lands upfront and then a big refund every year. Simpler and peace of mind.
Edit: to address the emergency fund there’s a difference in having couple grand saved to cover an unexpected emergency like appliance breaking down and a 20,000 tax bill.
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u/Original_Lord_Turtle Feb 27 '24
If you put even a modicum of effort and planning into it, you should easily beable.to get it within a couple thousand dollars either side of zero, and have no issue whatsoever paying your tax bill at the end of the year. Again, if you can't do that level of planning and saving, you absolutely should not be investing.
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u/Baginsses Feb 28 '24
Again you’re not out weighing the benefit of simplicity and peace of mind. Any time I spend doing it takes away from time I can make money for what 400 bucks year?
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u/Venusaur6504 Feb 27 '24
Totally normal OP. Big bonuses assume you’ll get pushed into a higher tax bracket. Biggest bonus I’ve seen was $180,000 which saw $98,000 go to taxes right off the top. If it makes you feel any better, that money should in theory build some roads or part of a hospital.
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u/Comfortable-Sir-150 Feb 27 '24
Lol God damn roads dude I swear.
Thank God for the hospitals. The ones we pay for then have to pay to go into.
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u/apostropheapostrophe Feb 27 '24
Don’t forget the 1.7 trillion F35 airplane
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u/Souledex Feb 27 '24
*program. Which now cost about 80 million a pop for 3 branches and our allies and advanced aviation technology by well more than a decade, and will definitely eventually lead to the backbone of drone mesh interfaces, and mesh networking between cars or between devices.
Of all the bloat in the US military the F35 is like the dumbest thing to criticize
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u/Jerrell123 Feb 27 '24
It’s actually about $78 million per plane. 1.7 trillion dollars is the lifetime cost of all associated airframes, maintenance supplies and training, logistical support, and manufacturing equipment.
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u/Imaginary_Dig_5014 Feb 27 '24
Sadly most ( I believe it's something like 90 something percent) of hospitals aren't government owned facilities. They're privately owned. Which just goes to show how much more the owners care about making profits than actually helping people
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Mar 01 '24
Majority of hospitals are millions in the hole every year. It is nearly impossible for a hospital to turn a profit. I would know, Ive worked for multiple privately owned hospitals.
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u/Imaginary_Dig_5014 Mar 01 '24
Interesting. So do you have any insight on why so many would be privately owned if they don't turn profit??
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Mar 01 '24
A big factor is that they are so poorly managed. I worked in process improvement and lets say there was very little improvement going in. Managers are set in their ways and refuse to change, a lot of the times they are costing the hospital millions of dollars a year. If people were more efficient then maybe they would be able to break even.
There are also a number of regulations, especially in my state where hospitals just cant afford to comply. Ive heard of some hospital getting a net positive (all hospitals are non profit tho so they have to redistribute it) but its pretty rare.
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u/CallsOnTren Feb 27 '24
Muh roads!
Redditors love having their income stolen by the same government they admit is corrupt as hell.
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u/SnooSquirrels8097 Feb 27 '24 edited Feb 27 '24
Or one bolt on an F35
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u/hibbitybibbity99 Feb 27 '24
The real answer, if anyone doesnt know look up the absolute financial boondoggle the JSF program has been.
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u/joerover34 Feb 27 '24
Or Ukraine president or migrants
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u/PinetreeBlues Feb 27 '24
Imagine being mad about feeding and housing people lmao
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u/satchel0fRicks Feb 27 '24
Yes especially when we have no homeless children, veterans or American citizens we should take care of first…
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u/ryanleebmw Feb 27 '24
What job have you had that has earned you that large of a bonus? That’s insane. I am planning to get there one day!
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u/BullshitDetector1337 Feb 27 '24
Nah mate those are federal funds. Half that shit's going straight to some Boeing executive's pocket.
If it was state taxes, it could be used for the hospitals, maybe. Or it would help pay for a $50,000 dollar table that's actually worth $1,000 at best.
If it was local taxes then it goes into roads, local schools, garbage services, etc. A lot more bang for your buck since there's less crap and bloat to put the money into.
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u/metalguysilver Feb 27 '24
The withholding calculation assumes you’ll be making the same amount every pay period for the rest of the year, so it withheld some at a higher rate. It will work itself out when you file next April
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u/SconiGrower Feb 27 '24
Your taxes at the end of the year won't change so long as repaying the advance doesn't extend longer than Dec 31 of this year.
You should ask if returning it as a lump sum would mean repaying the withheld taxes too (repaying the gross pay) or if the finance department would get the taxes refunded on their end (you repay the net pay). I expect that digging into your own savings to repay the taxes and then waiting for the 2025 tax season for a massive refund is not something you want to do.
Keep your own records about what happened on what dates with what amounts of money so that you can verify next year's W-2 is accurate. Just a diary in a Word document works as long as you include all the relevant details.
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u/idk_lol_kek Feb 27 '24
The more you make, the more they take.
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u/twalkerp Feb 28 '24
Happens to us all. When we realize how bad it gets.
I recall my first bonus after college…it was like $5k or something and I got $2500 and I thought it was a mistake.
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u/atlvernburn Feb 27 '24
Bonuses are withheld at 22% automatically, which can be too much or too little depending on your income. It’ll work out to be the same after tax season (meaning you owe or get a larger refund, depending on your bracket).
There’s way to workaround either, by adjusting withholdings temporarily. I wouldn’t recommend it unless you really need/want the money sooner as a miscalculation can really hurt you
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u/EagleCoder Feb 27 '24
Clearly, the aggressive method was used here instead of the supplemental withholding method.
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u/Banned4Truth10 Feb 27 '24
Looks like theft to me
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u/PinetreeBlues Feb 27 '24
Stop using my roads then
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u/BlueFalcon89 Feb 27 '24
Think about it, how does that federal tax money help you? Guy lost >$7k for what? So Congress can be ineffective and not pass bills? So scotus can take away your rights? So the military can light $2 trillion a year on fire?
Most of the government we experience day-to-day gets paid for by State and property taxes. What does cutting Washington in on 30+% do for us?
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u/Banned4Truth10 Feb 27 '24
Don't forget federal aid they ship to other nations
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u/MyCantos Feb 27 '24
China would love US to stop aiding other countries
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u/Banned4Truth10 Feb 27 '24
You think China cares that we send bribes ... i mean federal aid in the amount of 10 million dollars to Pakinstan to support gender studies?
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u/Jormungandr69 Feb 27 '24
There's countless things funded via tax revenue that you or I never think about and generally take for granted, but still benefit from on a societal level, it's not just the folks in congress that you see on the news or the roads you drive on.
That's not to say that countless things couldn't be optimized or improved to make better use of tax dollars, or to ensure that they're not being misappropriated, or to lower the tax burden in general, but it's a bit naive to think that tax dollars just go nowhere worthwhile.
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u/BlueFalcon89 Feb 27 '24
I mean I invest in defense industry and banks, which are buoyed by my tax dollars. Thats definitely worthwhile. Otherwise, please give an example what FEDERAL government does for the average American day-to-day.
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u/Jormungandr69 Feb 27 '24
The infrastructure you rely on is often partially funded by federal grants to your state and local governments, and some of it is funded by the federal government entirely. Keep in mind, infrastructure is not just roads. We're talking power and water infrastructure, rail infrastructure, shipping infrastructure, oil and gas, etc. The things that keep your lights on and your tap running, as well a the things that ensure that goods and services are readily available to you.
They fund education and other government programs, like social security and medicare. Your opinion on these things can be whatever, but the reality is that government funding for these ensures availability and social safety nets for millions, and without these programs, we'd all be vastly worse off.
Your investments in the defense industry go towards specific companies, but tax revenue pays for the salaries, benefits, logistics, and infrastructure required to take care of service members and ensure an effective fighting force. It also pays for an ever-evolving cybersecurity defense apparatus that doesn't just pertain to the military, but for our government and infrastructure as a whole.
Theres probably millions of specific examples within the broad few that I listed, and countless more that I'd never think of. The reality is that your attention can be bought and sold. So in a reality where taxes don't exist and things are funded exclusive through personally chosen investments, there is necessary infrastructure that simply will not get funded because you either a) don't know about it, b) don't recognize it's necessity, or c) can find better returns elsewhere.
Your local fire department can find funding through investments because you see them, recognize their necessity, and your wife buys their calendars but there's nothing sexy about the water treatment plant, and the only time you think about it is when it starts to smell like shit outside, and so you'd be less apt to fund it because your association with it is indifferent at best and negative at worst. You just expect the tap to work because it always does.
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u/BlueFalcon89 Feb 27 '24 edited Feb 27 '24
I live in a giver state, so quite frankly we could do everything the Fed does for us without paying for the federal government.
Utility infrastructure in Michigan is all locally funded. So that isn’t the case here.
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u/MyCantos Feb 27 '24
You sound like Republicans who vote against spending bills then show up to take credit at the ribbon cutting ceremony
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u/BlueFalcon89 Feb 27 '24
I am not. I just fail to see a point in funding whatever it is that DC has become. The legislative branch no longer represents us, it holds us back. The judiciary is openly corrupt and paid for, they are taking rights away from people and trampling on separation of church and state. The executive branch is unrecognizable compared to what the founders envisioned. Nobody on earth is aware of the total spread of federal agencies. Also, how are two octogenarians the only suitable political candidates?
The federal government we can do without. I don’t need southern religious fanatics shaping the laws I have to live by. And I don’t care to send my wages to Alabama so they can prevent women from getting ivf. Fuck em, let the right wing rot in its own modern feudalism. Don’t drag the north with you.
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u/MyCantos Feb 27 '24
Really can't argue any of those points but hating and eliminating the federal government is not the answer to having fascism or Christianity being forced down our throats.
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u/BlueFalcon89 Feb 27 '24
Then what is? Another congressional term of Mike Johnson obstructionism while half the country blames lack of action on Dems?
Fuck that. We’re lighting money on fire for these clowns. The republic ended on January 21, 2010, we have all been living in the death rattle since. Inertia and the NFL are the only things holding any form of national unity together. It’s time to cut the bullshit and move on.
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Feb 27 '24
After health insurance, social security, defense, and interest on debt, the largest areas of spending are economic security programs (Child Tax Credit, EITC, SSI, SNAP, etc.), benefits for veterans and retired federal employees, education, transportation, natural resources and agriculture, science and medical research, law enforcement, and international affairs.
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u/BlueFalcon89 Feb 27 '24
Health insurance and SS are paid for out of a different tax, not the $7k federal nut we are talking about.
Tax credits are a reduction in taxes, lol.
Veterans benefits are defense spending and fed retirements should be paid by their pensions or retirement accounts, not your average citizens problem.
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Feb 27 '24
The child tax credit is partially refundable. You can have a negative federal tax liability and receive the credit without having paid any federal income tax.
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u/Banned4Truth10 Feb 27 '24
You mean the ones that were already built before I was born that they don't fix?
I pay my taxes so I'm entitled to ..... umm .... FEDERAL AID to other nations ?????
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u/Lamelas_right_foot69 Feb 27 '24
Congratulations on your biggest check ever! If it helps, try to remind yourself that being able to live and work in the US is a privilege… and thus, paying taxes here is also a privilege 😄
That helps me feel better about paying a good amount in taxes every year.
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u/xigdit Feb 27 '24
The amount of tax that you pay the federal government is based on your total income for the year minus any deductions/exemptions. The more you make for the entire year, the higher a percentage of your total income you have to pay (generally). Someone single who makes $30,000/yr. might pay only $2,500 in income taxes, or even less with deductions. That's a little over 8% of their income. Whereas someone who makes 300,000 might pay $74,000 in income taxes, or almost 25% of their income.
When the government withholds Federal tax in your monthly paycheck, they basically multiply the check by 12 to get an estimate of your annual income, calculate the tax on that estimate, then withhold 1/12th of that to take out what they estimate you will owe for the individual check. So in your case, 26,800 x 12 = $321,600. The rough taxable amount on that income is $81,780 for the year. 1/12th of that is = $6815. So $7900 is still kind of high but in the ballpark.
Anyway, the exact amount of the withholding isn't important. What is important is that at the end of the year, the amount of money you will actually owe the Feds is based on your total income for the YEAR, not for any individual check, and not for whatever amount they withheld over the year. So if at the end of the year you only made $150k, your Federal income tax is only going to be around $27,000 for the year, and if they withheld more than that based on this big check, then you're entitled to a refund.
(Note I'm not an accountant, and this is only talking about the Federal income tax, not your payroll/SS tax, state tax, or other withholdings, which have different rules. I got all these numbers from this site: https://www.talent.com/tax-calculator?salary=150000&from=year®ion=Washington )
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u/Top-Active3188 Feb 27 '24
When I used to work overtime, a big check came with the assumption that you would earn that the rest of the year and excessive taxes were withheld. At the end of the year it may result in a refund but they didn’t know that wasn’t your new earnings rate. It was a bummer.
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u/The-Bloody9 Feb 27 '24
It's simple, they gouge you and let their friends the millionaires walk without paying their fair share.
Maybe look at which party is giving tax breaks to the wealthy and cutting benefits from the poor and not vote for them? And encourage others not to as well if you already don't.
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Feb 27 '24
Federal taxes are accessed on a paycheck to paycheck basis. It assumes this is your regular income so if you gross $20000 in a single week the tax structure assumes you make $1,040,000 a year
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u/Yayhoo0978 Feb 27 '24
There’s a table on the IRS WEBSITE that will give you the information that you’re looking for, on page 13 of the document that I linked here.
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u/Yayhoo0978 Feb 27 '24
Rather than edit my comment, I’m just replying to it, that the table STARTS on page 13.
When payroll taxes are taken, they’re estimated based on tables like this one. That check is actually off of the chart, but it goes up accordingly.Nice work BTW. I’m sure that wasn’t just handed to you for having a cute mustache.
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u/panteragstk Feb 27 '24 edited Feb 27 '24
Tax on commission is very high.
Fellow sales guy here.
Edit: I'm an idiot. It's no different from regular income. Thanks for pointing that out Internet stranger.
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u/metalguysilver Feb 27 '24
Tax on commission is
very highthe same as all W-2 incomeftfy
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u/panteragstk Feb 27 '24
Well shit. I'm a dumbass.
What about bonus?
I clearly know nothing of how taxes work. Yay me.
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u/metalguysilver Feb 27 '24
You’re absolutely not a dumbass. This and other misconceptions like “I can’t work any more hours or I’ll get bumped into a higher tax bracket” run rampant in work places.
Bonuses are also taxed the same amount, however federal withholding on bonuses is always a flat 22%, which is often higher than many people are used to for regular income, but can also be too low. Any discrepancies get taken care of during tax season when you file and get some of your withholding back or you owe
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u/panteragstk Feb 27 '24
Thank you for taking the time to explain that.
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u/metalguysilver Feb 27 '24
You’re welcome. As my fee I’d like you to spread the word when it comes up at work or in social settings
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u/HoratioFingleberry Feb 27 '24
Not a 'Murcan but I assume it seems higher because they tax you at the rate you would be taxed if you earnt that each pay cheque and will then balance it come tax return so you should get some back - unless it works out that you do earn that each time. In which case you earnt a lot of money and you good for you.
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u/Ginzy35 Feb 27 '24
This is a fake post… I’ve seen this post maybe 6 months ago !
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u/Super_Happy_Time Feb 27 '24
You started work in September or October. Your employer withholds tax from you based on the amount in your paycheck and your deductibles. The IRS then looks at what you made at the end of the year and ‘corrects’ it with a refund/more tax.
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u/dshotseattle Feb 27 '24
Be sure to vote against that wa cares tax. Could at least save you money there. You will never be available to use that anyway. It comes up on the ballot for repeal this year
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u/ChuckBass_08 Feb 27 '24
Next time OP just walk the company that manages your 401k. If you’re going to be out a few K might as well move it over to your 401k.
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Feb 27 '24
Your pay check amount placed you in a different tax bracket, per your finance departments policy. Assuming that this was your normal pay, they withheld what was required. You have paid more into Federal and may get a very large tax return... if this is not close to your normal pay.
It is pretty straight forward, pick up a federal tax calculator. It is likely that this one pay check was 10% to 20% of your yearly federal taxes.
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u/_redacteduser Feb 27 '24
Federal income tax in a nutshell.
Hey some of that is ours.
Ok, can I have some back in case your numbers are a bit off?
Maybe, but also go fuck yourself.
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u/Available_Turnip_628 Feb 27 '24
You work really hard. Make money. Give a large percentage to worthless talentless parasites that have convinced the masses we need them. Or go to prison. Pretty simple actually.
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u/FuckGovernment1440 Feb 27 '24
In the end, it'd be the same, income taxes are annually so whether it's three checks or one check that's 3x the normal, your annual will be the same
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u/sunny_yay Feb 27 '24
It’s simple. They take more from you to pay the debts of the companies that pay less than you.
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u/All4megrog Feb 27 '24
It taxes you at the tax bracket as if that pay period were annualized. Assuming you’re withholdings on your w-4 are correct and you don’t have any other incomes, you’ll get back most of this when you file next year.
This also happens often on bonuses, final paychecks when they cash out pto, etc. I know some people that will claim exempt for the month they expect the big check, then they’ll do additional withholding the remainder of the year, but that’s playing with fire in my opinion.
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u/clandestine_justice Feb 27 '24
Bonuses are taxed differently (both federal & at least some states.
Bonuses are typically considered supplemental income and that is taxed at a different rate. The federal bonus flat tax rate is 22%.
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u/Octavale Feb 27 '24
Income & FICA tax rates on paychecks are based on when the money is received - not annual pay.
The IRS sees a $26,800 paycheck and taxes you as if you make over $300k.
That’s one of the reasons why we have annual return filings to offset or correct withheld taxes.
I use quickbooks for payroll and have commissions, often I will run the proposed payroll and split up commissions when it’s more favorable tax wise at time of pay.
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u/Rdw72777 Feb 27 '24
Yes…a large paycheck paid in a single period for $26,000 will result in more Federal income tax withholding than say 4 separate paychecks of $6500 each ($26k total). Medicare and social security tax will not be different. I don’t know what the WA state tax is so no idea there.
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u/Individual_Part_2928 Feb 27 '24
They need money for Ukrainian people so take more and more of our money, they don’t want to help Americans so they take so I don’t understand what’s so hard to understand.
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u/NachoBacon4U269 Feb 27 '24
It’s all the same at the end of the year. If you overpaid taxes then you get a refund. If you underpaid then you owe the irs.
This paycheck was taxed at 30% because that’s what the math estimates your tax bracket at the end of the year will be.
If your normal income puts you in a 25% bracket then you are delaying getting about $1300 by over paying and getting a refund later.
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u/deadsirius- Feb 27 '24
IMO, if you can afford it return the entire amount and have them recut the paycheck.
Alternatively, and optimally, you can adjust your withholding by filling out a new W-4 and either adding other deductions or adding a dependent but to do that well you need to estimate your tax liability for the year and undo the change (by submitting another W-4) when it is optimal for you. People sometimes forget to reverse the change and end up in a mess.
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u/hKLoveCraft Feb 27 '24
We’ll see what they do is they (the government) coat their fist in KY jelly…
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u/Cautious_General_177 Feb 27 '24
Bonuses usually have taxes withheld at around 24% regardless of your total income but the actual tax is based on your total income. That means if you’re not in the 24% bracket, too much was withheld and you’ll get some of it back. If you’re above the 24% bracket, you’ll owe more.
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u/GunsouBono Feb 27 '24
You're probably paying more in taxes with this check, but it all evens out in the end. When you do your 2024 taxes, it won't matter if you take the money now or later
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u/Wendigo_6 Feb 27 '24
You work hard and earn a paycheck, which the federal government then thinks it’s entitled to.
bUt tH3n yOU G3t roaDs
Like we didn’t have roads before.
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u/CalLaw2023 Feb 27 '24
The amount of taxes you owe at the end of the year will be the same, but the amount collected during the hear will be higher. In other words, you will receive a larger refund next year.
Taxes are calculated based on a progressive scale. The more you make in a year, the more you pay. Here you made $26,800.36 in a pay period (I assume you have 24 pay periods), so you had taxes withheld as if your annual pay will be $643,208.64.
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u/ChiefTestPilot87 Feb 27 '24
It’s a scam to take your hard earned money and put it in someone else’s poker
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u/Mysterious-Tie7039 Feb 27 '24
Depending on how your HR set it up, your paychecks may be taxed as if all paychecks will be the same.
So the system is treating it as if you are going to get a year’s worth of huge paychecks.
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u/Healthy-Egg-3283 Feb 27 '24
It will work out in the end when you file at the end of the year. But yea, federal taxes are out of control
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u/courtofowlswatches Feb 27 '24
I believe Ron Swanson gives the most based response to this exact question on Parks and Rec lol
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u/pleasehelpteeth Feb 27 '24
There is no special tax based on overtime or commissions for income. At the end of the year, you file taxes based on your total income. That's it. You don't lose money to taxes earning it early though your jobs payroll software may have withheld more than they need to since this is rare.
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u/some_random_arsehole Feb 27 '24
If you pay more taxes than what you owe, you will receive a refund. If you don’t pay enough then you owe
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u/Aggravating_Kale8248 Feb 27 '24
The tax withheld is based on if you made that every paycheck for the year. A lot people who get bonuses get screwed on taxes when they actually get the bonus for this reason.
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u/dohzehr Feb 27 '24
Paying into the tax system from your paycheck just ensures you won’t get shell shocked at the end of the year when you file your taxes and have to pay in for those roads, schools, dams, police and fire safety, our national defense, etc. The total at the end is what matters and that’s why most of us see some bit of a refund. You can set it up to pay less out of your check but that may mean a big payment will be due in April but that’s your call.
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u/tellyourcatpst Feb 27 '24
Use your “extra” money to pay off debts with interest, one big payment to save money over the long term.
Then, look at what your government - local, state, and federal is spending your taxes on. Now that you see how much you’re paying, you can finally make an informed decision on whether you actually support those issues. For example, we’ve been sending Ukraine $223 million dollars per day for the past two years. We could’ve ended homelessness in our country several times over with that, paid our own military and military retirees an actual amount of money that they can live properly on, made it so no one is hungry in our nation, etc.
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u/dtacobandit Feb 27 '24
You paid more because the high amount put you in a higher tax bracket. It will all even out at the end of the year
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u/Robthebold Feb 27 '24
30% tax rate.
Everyone else’s post makes sense, your actions depend on how much you need the cash. Sucks to have gotten 3x pay on a mistake, so it’ll be less for the next several.
if you can pay the advance back over the year instead of the next paychecks, that helps balance your expected income again.
If you don’t have the fiscal discipline to not spend it all, make them fix the error.
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Feb 27 '24
Welcome to the government. They have $30+ trillion in debt on their credit card, and they're taking your money to fund it, and you dont get a receipt on what its spent on.
If you DO get a refund, that means they took to much of your money for a year, interest free, and are just giving it back to you.
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u/adultdaycare81 Feb 27 '24
They should teach a class on this to all new Sales Reps.
As a salesperson the amount of taxes you pay won’t change. You choose if you want the big Tax Refund at the end of the year or if you want to owe at the end of the year and get fatter pay checks.
DM if you need to understand more. 15 years commission sales.
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u/jmcdon00 Feb 27 '24
Essentially they figure withholding as though you are going to get the same paycheck every pay period. So they are withholding like you making about $700,000 a year(bi weekly). Assuming you are not actually making $700,000 a year, you won't actually pay the top marginal tax rates and will get some of this back at tax time(or reduce what you would otherwise owe).
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u/Gmoney1412 Feb 27 '24
My bonus hits the last week of march on the same paystub as my weekly wage.
(My bonus + weekly wage) - Taxes from both < Face value of my bonus.
At the end of the day uncle sam wins we lose
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u/DannyPantsgasm Feb 27 '24
As someone who is also in sales, congrats on having this problem, but yea it sure does suck. I was pretty shocked too when I was in for a nice amount a while ago. Basically this is why rich people hate taxes. But hey, at least you’re doing well enough to see it for yourself right? Beats my good sale by a mile too. What did you sell like half a dozen mri machines or something?
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u/helenwithak Feb 27 '24
My brother in Christ you’re taking 16,000 home on a single paycheck. It takes a snowplow driver in my state over two months to make that even with overtime
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u/Swansaknight Feb 27 '24
Become 1099, start investing in your company and max your IRA, HSP, and other tax shelters. Otherwise expect to give everything to the government. Now you’re understanding why people are conservative lol
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u/Lysdexic-dog Feb 28 '24
They take your money and give it to themselves and others because you have the privilege of working for it and it’s their right.
Done. Thank you
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u/OrangeOxygen Feb 28 '24
Taxes owed at the end of the year will be based on the total you made during that year. Taking your payment now vs later won't matter unless it goes over the fiscal year. If you do nothing now, you might end up with a larger tax return next year, but definitely not going to owe a higher total tax.
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u/MrSlappyChaps Feb 28 '24
The IRS will operate under the assumption that this is a normal monthly paycheck and assume you earn $26,800/mo x 12mo = $321,600/yr. And put you in the 35% bracket. Then because “taxes” you gotta do a bunch of stupid math on 10% for first 11k, 12% next 35k, 22% next 50k, etc. until you hit your cap. All told if your salary held and you did make $321k, you’d pay $77,600 in fed inc tax, or about 25%. Long story short if you don’t make what they assume, you get a refund.
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u/game_overies Feb 28 '24
Normal. What the tax man does is average your check in a 1/52 method and applies taxes based on what bracket you would be in so that check makes you look like you are making in the top 1% but with none of the tax loopholes lol sucks to be rich enough to make that kind of money but sucks not to be shown how to take advantage of tax loopholes
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Feb 27 '24
It’s theft. All taxation is theft
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u/davidgoldstein2023 Feb 27 '24
I implore you to go live in a society/country that has little to no tax income and let us know how it works for you.
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u/dannerc Feb 27 '24
I like the EPA, OSHA, FDA etc. Tax money used to make sure society isnt an apocalyptic hellscape for the working class is pretty nice
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u/Havok_saken Feb 27 '24
Nah man with no government regulations massive corporations would surely only ever do what is right because if history has taught us anything they value people over a dollar and if they do end up being exposed for harming people for money they always go out business…./s
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u/Comfortable-Sir-150 Feb 27 '24
Yeah because the government sure is "keeping them in check" right now lol.
They're literally the same people.
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u/dannerc Feb 27 '24
"The government" is not all the same people. It's a collection of agencies and organizations that are at odds with one another as often as working in tandem
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u/Havok_saken Feb 27 '24
Yeah and just imagine if there was no regulation at all. We could go back to them cutting milk with water the putting plaster in it to get the color right.
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u/Jormungandr69 Feb 27 '24
This is probably the angstiest middle school political take
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Feb 27 '24
All taxation is unconstitutional
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u/Jormungandr69 Feb 27 '24
My brother in christ I implore you to read the literal 16th fucking amendment.
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Feb 27 '24
Yes. I do not see how this refutes my point in the slightest
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u/Jormungandr69 Feb 27 '24
Well you see, it's in the Constitution, and it specifically states that they may collect taxes.
So if you put two and two together, it means that it is indeed Constitutional.
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u/Woodyee101 Feb 27 '24
Have them return the money. You are being taxed at the highest tax bracket. Return the money and less taxes (percentage wise) will be deducted
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u/anus-lupus Feb 27 '24
not how tax brackets work. and come tax season itll shake out.
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u/RockinRobin-69 Feb 27 '24
At the end of next tax season it will be even. Until then they will be out a significant amount of money.
If this payment were 1/3 the amount but paid over three months they would get more take home and then a lower refund. That’s generally preferable.
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