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If you are on salary, or work 40 hours each week, by the end of the month, you will have paid the same amount of taxes no matter how many pay periods you have.
If you are paid by the hour and one pay period you do 20 hours overtime, you will have more money taken out for that pay period.
If you work on commission as I always did when working, your taxes will depend on how much money you make for the pay period. It can be all over the place, depending on how much was earned that pay period.
WRONG..... your taxes are based upon the income of the pay period, not what your yearly salary is. How would the IRS or state tax authority know what your yearly salary is?!??!? How would they know you're not just an independent contractor who did work for them and is getting paid?
You withholdings are based upon your income in that pay period, which would be the month. YES, the tax withholding rate will be more than if you were getting paid bi-weekly and more than if you were getting paid weekly. How do I know? Here's my story:
I learned the hard way years ago when I worked for a company that decided to cheap out and pay us monthly rather than bi-weekly (to save on the amount they would be paying the payroll company). When I got my paycheck, I couldn't believe the amount of taxes taken out --- I think it was like a week's salary. Another time, a company I was working for (and being paid weekly) was sold to another company. The new company decided to pay us bi-weekly. Same thing happened. A LOT more was taken out in taxes than if I was being paid weekly.
Bottom line is, the tax people look at the money you have NOW and the tax rate is based on that, not on what you "might" make or not make for the year.
Not true. As an employer who has to take these taxes out, the tax rate is the same. Its based on an estimation of your yearly taxes based on current income divided by the number of pay periods. Its going to be the same after 2-3 months , and this time lag only due to the 5 pay periods a month that sometimes comes up. $ 50K made in 52 weekly checks and $ 50 K made in 12 monthly checks will be the same amount of taxes at the end of the year for the same person.
Actually, you're giving the government an interest free loan. When I had my company if employee federal withholding (tax and SS/Medicare) goes above $50K, then the money withheld must be wired to the IRS the next day. If your total employee withholding is less than $50K you have 3 days. When we got large enough to require overnight deposits, I had to contract with a payroll service. Employers who do not make timely deposits are assessed heavy penalties and interest.
I totally agree with Amisi!!!
I was employed at a sales job making $12 hourly. This sales job I was getting paid weekly @ $12 hourly and my commission check was monthly. My monthly commission has no bearing on the topic. So before taxes @ $12 an hourly is $480 and with my weekly tax deductions I cleared a little over $365 a week.
Now I'm employed at another sales job @ $17 an hour. I was excited to move up $5 more an hour in less in year with the same deductions, the only difference was I was now getting biweekly. I was still receiving a monthly commission, that I figured I will be able to grow my savings account more significantly. On the contrary, how wrong I was. At $5 more an hour, that would be an extra $800. When I received my first check I thought it had to be wrong. $1360 gross with my deductions, I've barely cleared $1000. Yes it's more than I was making but not $800 I was expecting. These figures are before insurance, $401k, and other holds. For the last 5 months, I'm working another sales job @ $16 + a monthly commission, back to getting paid weekly. Now I have an added deduction. I get $640 gross after my added deduction and medical, dental, and vision I'm clearing $500 a week.
My sister who owns her business advised me hourly is better weekly because less taxes are taken out because biweekly or bimonthly can put you in another tax bracket whereas it's better for someone receiving a salary is better to get paid biweekly/monthly or even monthly.
My sister who owns her business advised me hourly is better weekly because less taxes are taken out because biweekly or bimonthly can put you in another tax bracket whereas it's better for someone receiving a salary is better to get paid biweekly/monthly or even monthly.
Your sister is wrong, if you claim the same number of deductions and work the same hours. The taxes deducted and the net pay works out the same. The payroll program takes into account if you are being paid weekly or bi-weekly or bimonthly and makes the adjustments. The payroll program works on the annual amount you are being paid and breaks it down accordingly. I wrote programs like those in the past and also had my own business.
Only if your hours vary would there be a difference.
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I agree with Amisi
