Tax Rates

[threeputtpar]

Originally Posted By: JHZR2
Originally Posted By: surfstar
I'm really not sure what you're getting at by posting marginal tax rates and the table happens to come from:
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What Im getting at??? I mentioned it in the original post. I got some extra money, and only around 50% actually got into my pocket. I was a bit shocked because typically I attest gross vs what I get to the fact that I put a lot into my retirement savings, HSA, etc., then pay tax and everything else. Imagine my surprise when my extra money, which didnt contribute at all to retirement, HSA, etc. still came in at around 50%.

Thus why I looked at the numbers, found an example that explains why, and made the recommendation that everyone check just how much they are paying, especially if there is an ability to take some off the table in tax and not give a free loan to the government.

And as I said in the OP, DONT POLITICIZE this. The source of the chart is irrelevant, Ive found the data to be accurate myself, in fact we pay a bit more for various reasons.


If by extra money you mean a bonus, then your employer is required to withhold a fixed percentage of the bonus for taxes. It's 25% for Federal (maybe that's 28% now that the tax brackets are increasing) and in WI where I am the percentage is 6.25%. This is probably why only 50% of that bonus made it to you as take-home pay. Maybe you should suggest to your employer next year to gross-up any bonus payments so the amount they tell you you're going to receive as a bonus is what you actuall take home.

And WRT the accuracy of the chart you posted, it's grossly oversimplified and even more misleading. It's intent is to inflame and instigate, but I believe that that wasn't your intent.

 

[eljefino]

So what if the employer has to pay their share of your FICA, it's a price on your labor neither of you gets to see. The self-employed sure see it.

The issue with occasional overtime is that they have to tax it like you'll be getting those many extra hours on every check of the year. It mostly comes back with next year's refund if your OT is light most weeks.

Some jerkwad filed a tax return with my SSN a few years back so now my returns are delayed while they run things through their ID theft division. Although I get a pretty sweet 3% interest (?) I'd rather just have the cash. My W4 is set up properly; I guess I should be happy I can write so much stuff off.

 

[JHZR2]

Originally Posted By: threeputtpar
If by extra money you mean a bonus, then your employer is required to withhold a fixed percentage of the bonus for taxes. It's 25% for Federal (maybe that's 28% now that the tax brackets are increasing) and in WI where I am the percentage is 6.25%. This is probably why only 50% of that bonus made it to you as take-home pay. Maybe you should suggest to your employer next year to gross-up any bonus payments so the amount they tell you you're going to receive as a bonus is what you actuall take home.

And WRT the accuracy of the chart you posted, it's grossly oversimplified and even more misleading. It's intent is to inflame and instigate, but I believe that that wasn't your intent.


Not a bonus, just extra hours worked that I was compensated for. Not OT because it wasnt time and a half or anything, it was just straight payment for extra hours worked.

Only about 50% came home. 28%+6.25% (Or equivalent) does not 50% make. I hit the OASDI cap sometime back. Something is wrong, which is why Im on a quest here, not to enflame (though Im enflamed as to where my money is).

Which is why its probably smart for everyone to check to ensure things arent wrong...

 

[Coprolite]

Due to the company's tax issues, we can't pay as much and the stock is also worth less.

The practice to project the earnings to the end of the year is unfortunate, but helps protect the earner from an unplanned tax bill.

Sorry to hear about the fraud situation. In general, I like things to be as simple and quick as possible. Waiting longer would drive me crazy.

Originally Posted By: eljefino
So what if the employer has to pay their share of your FICA, it's a price on your labor neither of you gets to see. The self-employed sure see it.

The issue with occasional overtime is that they have to tax it like you'll be getting those many extra hours on every check of the year. It mostly comes back with next year's refund if your OT is light most weeks.

Some jerkwad filed a tax return with my SSN a few years back so now my returns are delayed while they run things through their ID theft division. Although I get a pretty sweet 3% interest (?) I'd rather just have the cash. My W4 is set up properly; I guess I should be happy I can write so much stuff off.

 

[SteveSRT8]

Originally Posted By: Drew99GT
Another misleading part of that table; half the payroll tax is paid by the employer.


So true.

We match both the medicare and the SS dollar amounts here. Federal witholding is the only thing we don't have to contribute to.

Anyone who doesn't think they pay that doesn't know how wages work. It simply reduces the amount we could pay our guys.

A good financial consultant or a sound knowledge of tax law is invaluable these days...

 

[JHZR2]

Originally Posted By: SteveSRT8
Originally Posted By: Drew99GT
Another misleading part of that table; half the payroll tax is paid by the employer.


So true.

We match both the medicare and the SS dollar amounts here. Federal witholding is the only thing we don't have to contribute to.

Anyone who doesn't think they pay that doesn't know how wages work. It simply reduces the amount we could pay our guys.

A good financial consultant or a sound knowledge of tax law is invaluable these days...


I understand that and concur that it is an issue with that table. Doesnt change the fact that taxes ripped 50% of my money.

 

[SteveSRT8]

^^^My sympathies are with you, as people in a higher earning position always pay a disproportionate share of taxes.

With the vilification of the 'evil rich' these days you're lucky the lynch mob didn't show up at your place...

 

[JHZR2]

Seriously... But since some would have my head on here... I didnt post that table to instigate. I saw what I lost, and the numbers sort of jived. Honestly with all the changes lately with ssi, additive taxes for ACA, etc., I could be paying 15.3% or whatever the number is... and not know it. AND, my employer may be paying more on top of it! You get it but others dont necessarily.

 

[SatinSilver]

Originally Posted By: JHZR2
Not a bonus, just extra hours worked that I was compensated for. Not OT because it wasnt time and a half or anything, it was just straight payment for extra hours worked. Only about 50% came home. 28%+6.25% (Or equivalent) does not 50% make.


That's exactly the bucket that the additional income fell into. The bonus bucket which has the higher tax rate. I'm not sure there's a legal requirement for the employer to hold it back but it's obviously their standard procedure. Someone in the payroll department might be able to do a retroactive adjustment but I doubt it. The income might be treated differently on your W-2. If not you'll just get a bigger refund or smaller tax bill. When payroll enters your salary then there's additional income entered it falls into this higher tax rate just like a bonus. Hopefully, on the W-2 it will be treated as ordinary income(all lopped together). Then you'll get credit for the higher amount taken out.

 

[Drew99GT]

Originally Posted By: eljefino
So what if the employer has to pay their share of your FICA, it's a price on your labor neither of you gets to see. The self-employed sure see it.

How so??? You can deduct half the payroll tax on our federal return if you're self employed.

 

[strat81]

Originally Posted By: Drew99GT
Originally Posted By: eljefino
So what if the employer has to pay their share of your FICA, it's a price on your labor neither of you gets to see. The self-employed sure see it.

How so??? You can deduct half the payroll tax on our federal return if you're self employed.


Deduct, yes. But it's not a credit.


While you guys are tallying up taxes, don't forget to toss in real estate taxes. And for the wealthy, you have a new tax this year: AMT Jr. That is, additional medicare tax.

 

[hattaresguy]

I have to pay both sides of SS since I'm self employed. My accountant is figuring out the damage for 2013 right now.

Luckily I can write off more than a W2 wage earner and shift some expenses around, K1's give you more flexibility.

I feel bad for W2 earners that make over $100k, they really get hosed, especially when you add up state, city, and federal taxes. But don't forget sales, taxes on vehicles, property etc. Its very easy to pay 50% of your total income in various taxes.

 

[gathermewool]

Originally Posted By: zzyzzx
Originally Posted By: gathermewool
I want as little back from Uncle Sam as possible. Ideally, i'd prefer to pay every year. To heck with giving out an interest-free loan...


It's not like your bank account is paying interest. I'd rather give an interest free loan than pay interest and penalties.


1. Any percentage return, even the piddling amount garnered from a savings account, is greater than ZERO.

2.I don't have a savings account, since my checking rate of return is just a little lower than that of the savings account. I try to keep most of what I need semi-liquid in mutual funds, which offer much better than zero rate of return (at least recently.)

3. I don't understand what you mean we about paying interest and penalties. I claim the max amount of exemptions that I can, instead of claiming zero and/or having more withheld in order to receive a larger return.

I always get a little back, but would have less take a out each paycheck if doing so was legal.

 

[strat81]

Originally Posted By: gathermewool
3. I don't understand what you mean we about paying interest and penalties. I claim the max amount of exemptions that I can, instead of claiming zero and/or having more withheld in order to receive a larger return.


Not paying taxes in a timely manner will get you hit with penalties and interest.

Timely manner is a general term and their are various circumstances surrounding the payment of personal income tax, but for the sake of simplicity:
Let's say your annual tax liability for 2013 is $10,000. If you have withholding of $26 ($1 per bi-weekly paycheck) and you cut a check on April 15th, 2014 for the balance of $9,974, you would get a nastygram from the IRS along with a bill because you didn't pay in a timely manner. Quarterly estimated taxes are paid to avoid this.

Like everything else in the tax code, there are exceptions and special circumstances for a variety of situations, but the above is the gist of it.


Want to cause a tax rebellion in this country? End employer withholding. People would stroke out if they got their FULL paycheck and had to write checks to the IRS and state department of taxation, especially if 25-45% of their pay vanished.

 

[JHZR2]

Originally Posted By: hattaresguy

I feel bad for W2 earners that make over $100k, they really get hosed, especially when you add up state, city, and federal taxes. But don't forget sales, taxes on vehicles, property etc. Its very easy to pay 50% of your total income in various taxes.


Were way past 50% when you consider property, sales, etc. And when we try to get some deductions, then AMT strikes and takes them away. Cant win.

 

[Merkava_4]

The best way to enslave a man is to make him think he's free. Taxes are a form of slavery.

 

[Cujet]

Folks, that chart is NOT ACCURATE!

Case in point. California has a 9.8% state income tax and a 7.5%-8.5% sales tax (which is applied to many more items than other states)

While Florida has NO state income tax and a 6% sales tax (many items are exempt from sales tax)

In addition, California also has personal property taxes, and values items at a high rate. California property taxes have similar mil rates to other states, yet the value of the property can be 10X what similar properties are in other states. Let's not forget the 71.9c/gal CA gasoline tax!

The bottom line is that the CA tax burden far exceeds the 6% differential depicted in the chart. In many cases, it's much higher!

My company is moving from FL to CA. Our accountants show that a relative doubling of income is necessary to approximate the same standard of living. A large portion of this is the tax load.

 

[IndyIan]

Maybe the lesson is to take your overtime pay as time off? You don't lose half of that atleast...

 

[gathermewool]

Originally Posted By: strat81
Originally Posted By: gathermewool
3. I don't understand what you mean we about paying interest and penalties. I claim the max amount of exemptions that I can, instead of claiming zero and/or having more withheld in order to receive a larger return.


Not paying taxes in a timely manner will get you hit with penalties and interest.

Timely manner is a general term and their are various circumstances surrounding the payment of personal income tax, but for the sake of simplicity:
Let's say your annual tax liability for 2013 is $10,000. If you have withholding of $26 ($1 per bi-weekly paycheck) and you cut a check on April 15th, 2014 for the balance of $9,974, you would get a nastygram from the IRS along with a bill because you didn't pay in a timely manner. Quarterly estimated taxes are paid to avoid this.

Like everything else in the tax code, there are exceptions and special circumstances for a variety of situations, but the above is the gist of it.


Want to cause a tax rebellion in this country? End employer withholding. People would stroke out if they got their FULL paycheck and had to write checks to the IRS and state department of taxation, especially if 25-45% of their pay vanished.


Ah, so out of context and not applicable to my post, Aye...

 

[Kestas]

I once was employed by the government (Dept of Navy). I was surprised to see an extra 1.5% taken out of my pay for Medicare that wasn't deducted in the private sector. I asked about this and was told that Medicare was having funding problems, and they decided to fix the problem by tacking this deduction on federal worker pay.