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My wife and I grossed 185k last tax return. We got back less then a thousand between State and Federal. If we earn more doing OT we will likely owe a few thousand. Sure we would make more overall money. Yet, then have a tax bill and have to pay in a big chunk. Anyone in that same boat ? Feels like getting a moderate raise or working OT is not worth it. Might be best to work credit hours and take days off.
Last year we ended up owing a couple thousand in taxes due to some income changes from 2014 to 2015. This year we will NOT let that happen again, so my husband and I each have an extra $50 taken out of each paycheck in addition to the taxes that already get taken out. We NEVER want to be told we own THOUSANDS in taxes again. That was heartbreaking (because we had to use the $$ we had saved up for our family summer vacation to pay the tax bill).
When it comes to OT, we both flex out when OT comes up. I think last year I only got paid for about 12 hours of OT for the year, but was able to leave a couple hours early many, many Friday afternoons.
Anyone whose income can vary from paycheck to paycheck, due to OT, bonuses, commissions, promotions etc, should use the IRS's online Withholding Calculator to monitor their Federal tax withholding during the year. It will tell you whether you are on track to be under, or over, withheld. Do it several times a year, and then file an adjusted W-4 with your employer as necessary. (The calc can print one for you)
Doing this allows you to fine tune your withholding so that come the next April tax time, you control the amount owed or refunded. You can be under-withheld, or over-withheld, or nearly break even, as you wish.
My wife and I grossed 185k last tax return. We got back less then a thousand between State and Federal. If we earn more doing OT we will likely owe a few thousand. Sure we would make more overall money. Yet, then have a tax bill and have to pay in a big chunk. Anyone in that same boat ? Feels like getting a moderate raise or working OT is not worth it. Might be best to work credit hours and take days off.
OT is automatically taxed at the highest rate. You will NOT owe any more. All of your income does not becomes subject to the higher bracket. Only the wages earned IN that bracket.
Location: Stuck on the East Coast, hoping to head West
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Quote:
Originally Posted by reed303
Anyone whose income can vary from paycheck to paycheck, due to OT, bonuses, commissions, promotions etc, should use the IRS's online Withholding Calculator to monitor their Federal tax withholding during the year. It will tell you whether you are on track to be under, or over, withheld. Do it several times a year, and then file an adjusted W-4 with your employer as necessary. (The calc can print one for you)
Doing this allows you to fine tune your withholding so that come the next April tax time, you control the amount owed or refunded. You can be under-withheld, or over-withheld, or nearly break even, as you wish.
OT is automatically taxed at the highest rate. You will NOT owe any more. All of your income does not becomes subject to the higher bracket. Only the wages earned IN that bracket.
This ^
Whether it is overtime or not does not change how much you pay in taxes to earn money. You just increase your earnings which will increase your tax bill by a correlated amount. For your household income that would be a 28% rate on top of any earnings past $151K. You wouldn't need to worry about taxes going any higher on earnings unless you reach the $230K bracket in which case you would pay an extra 5% on earnings past $230K.
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