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Question. How is your paycheck income taxes (federal, medicare, and SS) calculated? Is it based of your annual income, or is it depends on your actual paycheck amount? For example, my semimonthly paycheck before taxes and voluntary deductions is $3208.52. With 10% 401K deduction, it is $2887.67. When you account for federal, medicare, and SS, my take home pay is $2008.88, that's an approximate 27.5% reduction.
When I left the company and they paid me out including all my PTOs, that 27.5% increases all the way up to almost 35%. Is this correct? thanks
It is possible.
The % rates for Medicare and SS deductions are constant, but the % for income tax witholding can increase as the gross amount of semi-monthly paycheck increases.
This "rate increase" can also affect things like overtime, and bonuses.
You really didn't lose anything. Just think of it as pre-paying more of your eventual total tax come next April at IRS 1040 time. You'll either get a bigger refund, or owe less.
FICA is a flat 7.65% even on 401(k) contributions.
Income taxes are variable dependent on income and your W4 withholdings.
Windfalls are taxed at a higher rate because they can't account for your salary.
Fica isn't flat in that the SS portion stops at 118.5k in income
Income taxes are not dependent on anything w-4 related
Windfalls such as bonuses or overtime are not taxed at a different rate, your employer may apply different withholding rate but that doesn't mean it's taxed at a different rate
There are several ways a company can calculate income tax withholding. It starts with the W-4 that you completed identifying how many exemptions you have. The company can then use wage bracket tables, a percentage method, or a method that combines income, social security, and Medicare. But all calculations start with your wages. So if you have a paycheck with a bonus or overtime or accrual payout, the base wages are increased and thus the withholding percentage may increase. Your withholding allowances are then either subtracted (percentage method) or a table is used for up to 10 withholding allowances (bracket method). If you go to the IRS website, Publication 15 has a ton of easy to understand information on how your withholding is calculated for all taxes.
Question. How is your paycheck income taxes (federal, medicare, and SS) calculated? Is it based of your annual income, or is it depends on your actual paycheck amount? For example, my semimonthly paycheck before taxes and voluntary deductions is $3208.52. With 10% 401K deduction, it is $2887.67. When you account for federal, medicare, and SS, my take home pay is $2008.88, that's an approximate 27.5% reduction.
When I left the company and they paid me out including all my PTOs, that 27.5% increases all the way up to almost 35%. Is this correct? thanks
Fica isn't flat in that the SS portion stops at 118.5k in income
(He's not hitting that)
Income taxes are not dependent on anything w-4 related
(Yes, your W4 withholding will absolutely affect your withholding)
Windfalls such as bonuses or overtime are not taxed at a different rate, your employer may apply different withholding rate but that doesn't mean it's taxed at a different rate
(All he is talking about is withholding)
(Of course your actual taxes are based on a pretty straightforward formula, but I don't think he's not meaning that).
You mixed withholding and income tax. The op is having the same issue
W4 withholding will affect your withholding? I think you were trying to say your w-4 election will affect your withholding but in your first post you actually said income taxes will vary based on your income and w-4 withholdings. Your income taxes are your income taxes, your w-4 election or withholding won't change what your income taxes are
Last edited by Lowexpectations; 07-05-2015 at 09:14 AM..
Windfalls such as bonuses or overtime are not taxed at a different rate, your employer may apply different withholding rate but that doesn't mean it's taxed at a different rate
Yep, my employer drastically under-withheld from my bonus. Do your own calculation and adjust your withholding accordingly. It is completely OK to change your withholding as often as you want, for example just before and then just after getting a bonus.
Question. How is your paycheck income taxes (federal, medicare, and SS) calculated? Is it based of your annual income, or is it depends on your actual paycheck amount? For example, my semimonthly paycheck before taxes and voluntary deductions is $3208.52. With 10% 401K deduction, it is $2887.67. When you account for federal, medicare, and SS, my take home pay is $2008.88, that's an approximate 27.5% reduction.
When I left the company and they paid me out including all my PTOs, that 27.5% increases all the way up to almost 35%. Is this correct? thanks
That is correct. Supplemental payments (bonus, PTO payout, etcs.) have a 25% withholding rate for your Federal Taxes. "Normal" salary/hourly pay is taxed at the W-4 withholding rates.
The increase is due to the type of payment it is.
You'll get that money back when you do your taxes, as it generally is higher than your tax liability on your income taxes.
I hope that helps.
Thanks
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