Payroll Tax Question

[jronald]

In 90 days my pay plan changes, so Im curious about withholdings:
All numbers are rounded for the sake of argument.

Current Plan:
$1000/wk Total taxes withheld @ 33% for a take home $660 ($4000.00/month)
Future Plan:
$600/wk plus a monthy commision $1600.00 ($4000.00/month)
Question:
Is the withholding different on the larger figure?
State of North Carolina

Not worried about the actual ins and outs....I need to know about Uncle Sam's portion.

Thanks
Ron

[robert213]

In my opinion, $4,000 is still 4,000. Your Federal Income Tax Withholding amount should not change. Only your Human Resources department can answer your question correctly.

Because I am a very cautious, I would examine your Paycheck summary statements. If the January 2012 monthly total of your Federal Withholding amount is significantly less than December 2011, then I would start making quarterly Federal Estimated Tax payments -- in other words, mail in your first 2012 Federal Form 1040-ES payment which is due MAR 15th.

-----------------------------------------------------------------------------
Off on a tangent...
because I hate taxes that Employer pays, but are hidden from Employee.
------------------------------------------------------------------------------
_YEAR_ _____TAX_____ _EMPLOYER_ _EMPLOYEE_ ___CAP_____ __TOTAL__
..2009.. FICA_SOCSEC... ..... 6.20 % .. .... 6.20 %.. .... $106,000 .... 12.40%
..2009.. FICA_MEDICARE. ..... 1.45 % .. .... 1.45 %.. .... Infinity.. ..... 2.90%
..2009.. FED_UNEMPLOY.. ..... 0.80 % .. .... 0.00 %.. ........ $7,000 ... $56.00

..2012.. FICA_SOCSEC... ..... 6.20 % .. .... 4.20 %.. .... $106,000 .... 10.40%
..2012.. FICA_MEDICARE. ..... 1.45 % .. .... 1.45 %.. .... Infinity.. ..... 2.90%
..2012.. FED_UNEMPLOY.. ..... 1.40 % .. .... 0.00 %.. ....... TBD .... ... > $98.00

Note 01: Employee contribution of SOC SEC will go back up to 6.2 % at a later date
Note 02: Employer also pays State Unemployment Tax (aka insurance premium) amount which averages to approximately $50 per employee.
Note 03: Federal Unemployment Tax is sometimes called FUTA
Note 04: State Unemployment Tax is sometimes called SUTA
Note 05: Employer is also responsibile for calculating withholding amounts, filling out forms, and making monthly payments for both Federal and State Income Taxes.

[jronald]

I have always heard, the higher the pay (within reason) the more taxes taken out. Im not referring to quantity, Im referring to ratio.

Ron

[ajkula66]

You've heard correctly.

Even if it's for *one* week, you'll get slaughtered with taxes if the amount is high enough.

Found that out many years ago and that's why I normally refuse OT unless I'm forced.

If your payroll department knows what they're doing, you shouldn't worry about our favourite uncle - he'll be taken care of before you are.

Good luck.

[jronald]

Not that worried about Unca................
I worried about me taking a pay cut, for the convenience of the company. So I need numbers.

Ron

[ajkula66]

That you need to discuss with your CPA or with the payroll department...

[laowai]

4k is 4k either way.

And as a side note, working overtime might potentially increase the withholding amount, but you get back the difference at the end of the year anyways. Hooray for understanding how progressive tax brackets actually work!

[ajkula66]

laowai wrote:

And as a side note, working overtime might potentially increase the withholding amount, but you get back the difference at the end of the year anyways.

While this statement might hold true on a theoretical level, making it work on a practical level (actually getting one's money back from being over-taxed while working OT) is a whole another matter...

[jronald]

I spoke to the FO at my Brother In Laws company. In her words "slaughter" was more like it. That said, she told me to compare the total taxes withheld during the months Im on salary. Then compare the taxes on the new plan, and adjust my withholding accordingly. Make small changes and keep track of them so that by the 4th month, Im back to where I should be.

Ron

[laowai]

While this statement might hold true on a theoretical level, making it work on a practical level (actually getting one's money back from being over-taxed while working OT) is a whole another matter...

Filing for a tax refund really isn't that big a deal, there is literally zero possible way for you to end up with less money from putting in OT. There's nothing "theoretical" about it. If at the end of the year you have a large refund without filing for out of the ordinary deductions, then either HR is being retarded, or you are doing something wrong.

[ajkula66]

@laowai:

I work for a Fortune 20 company that has been in existence (under various names) since 1880s, so if their payroll department is retarded, so be it. My experience is that it's impossible - in real life - to get the "extra" money back.

It's far simpler not to work OT in the first place, at least for me.

[laowai]

@laowai:

I work for a Fortune 20 company that has been in existence (under various names) since 1880s, so if their payroll department is retarded, so be it. My experience is that it's impossible - in real life - to get the "extra" money back.

It's far simpler not to work OT in the first place, at least for me.

So a 1040 is one of those "impossible" things now... got it...

edit: any competent payroll department will ensure that it all evens in the end anyways. so, if, per chance, your F20 payroll is mentally challenged, then you get it back any overage once you file your 1040. This is hardly "impossible".

[ajkula66]

@laowai:

How much are you charging for a tax-refund preparation? I might just fire my CPA and give you the business...

[laowai]

@laowai:

How much are you charging for a tax-refund preparation? I might just fire my CPA and give you the business...

I do mine online, it's free and takes maybe an hour tops. Add into the mix that I have overseas capital gains, foreign accounts, investments in 3 countries and income which falls under foreign-earned income. This stuff ain't all that hard to do at all. I have never once *not* gotten a rather large refund regardless of how much or little was withheld. Absolute worst case, it's some stupidly complex year, I end up going through online using premium level trial access (doesn't cost anything till you file it), complete it all, error check it, then print up the forms from the IRS and mail it in for a few bucks from overseas. Like I said, this stuff ain't hard to do and I doubt your situation is more complex than mine.

[dsvochak]

From the horse's mouth:
IRS Withholding Calculator
Tax Withholding
Form W-4