kalyx522

I'm probably misunderstanding something here because I don't know much about taxes and if so I hope someone can clear this up for me...

I just got my paycheck today and it wasn't quite what I was expecting. So I checked all the math and realized that the tax taken off this paycheck was 21% of my gross taxable income. This paycheck was the largest I've gotten so far (My pay credit was over 150 hrs in Oct.) so 21% is a big chunk.
The problem is that I usually get taxed only about 11-12% of my paycheck. I don't know why this paycheck was taxed double the usual rate. So I went back to some of my previous paychecks, and sure enough, the tax rate changed every time. The tax rate for my first paycheck of the month is 11% (this is when I get paid half my monthly guarantee, so the paycheck is always the same). Then on my second paycheck which changes depending on how much I went over guarantee, the tax rate goes up also. Like last month, the tax rate was 17%.
I just didn't notice this discrepancy until now because my paycheck was relatively hefty this time.

Is this normal? It seems like I should be getting taxed the same percentage every paycheck. I know there are tax brackets, but I thought that was for the purpose of filing tax returns. Besides, my income bracket is 15%.

Can anyone tell me if this is normal or if my company has screwed up my taxes?

mccube5

if you credited 150 hours you grossed enough to push yourself up a bracket and were taxed accordingly. the more you make the more they take.

i've noticed the same thing, on a couple of my more respectable paychecks i've calculated them taking over 20% from me.

FighterHayabusa

Most company payroll systems aren't smart enough to know what you are on track to make at the end of the year. They play it safe by assuming all paychecks are the same as the one it is working right now.

So even though you aren't boosting your actual tax bracket when you make 1 check out of 24 that's really good, the program doesn't care, it will play it safe and assume you make that amount every time and tax you based on 24 times that, then revert back when you go to your lower pay check.

You'll most likely get it back in April, but the government would rather you get overtaxed up front than undertaxed so payroll systems will always play it safe.

kalyx522

You know what doesn't make sense though (to me)? Even though I made some nice change this paycheck, I don't think it changes my bracket... the way I understand it (and I could be wrong), the tax bracket for $0 - $7826 is 10%. I know for a fact that the first $8750 of your income is taxed at 0%, so the 10% applies if you make between $8751 - $16575 (8750 + 7826 = 16576). Right now I'm definitely below 16575 (yeah I know isnt that sad) so my tax rate should still be at around 10%... which it IS, on the first paycheck I get every month. Even if I'm totally misunderstanding this and I AM in the next tax bracket, the next tax bracket is only 15%, not 20%. I am really confused right now, I wish I had a personal accountant to ask these questions but I can't afford one!

FighterHayabusa

Doesn't matter what you are actually going to make. The payroll program is only smart enough to assume you make the same every paycheck.

if you make 3 paychecks a year:
1: $100 - program assumes you will make 300 per year, no tax
2: $20000 - program assumes you will make 60,000 per year and takes money from higher brackets from this paycheck.
3: $100 - program assumes you will make 300 per year, no tax again.

At the end of the year when you do your taxes, you get all the stuff from higher brackets back.

underdog969

you have to remember that when they withold that money from your paycheck, it goes towards paying your taxes in april. you arn't really paying anyone. in april, they figure out how much you made and tax you accordingly. if you're taxed more then you put into the "pot" you have to pay. if you are taxed less, you get a refund. This explanation is the super simplified way it works. Hell, if you wanted to, you could set it up so that no money is taken out of your paychecks each time. If you do that, you will have to pay a big chunk of change in april. I just try not to think about it. The government is screwing us one way or another. I'm just lucky i have an accountant for a wife.

JMT21

2007 Tax rate schedule:

Filing as single:

If taxable income is:
0-7,825 the tax is 10% of amount over 0
7,825-31,850 the tax is 782.50 + 15% of amount over 7,825
31,850-77,100 the tax is 4,386.25 + 25% of amount over 31,850

As previously mentioned, the computer was probably tricked and bumped you into the 25% bracket. If your gross income for the period multiplied by the number of pay periods in the year is greater than 31,850 this is most likely the case.

Navajo31

Here's the exact formula for single taxpayers:

(Income this pay period times annual # of pay periods) minus ($5,700 standard deduction + $3,000 per exemption claimed on your W-4) equals the annual taxable income. Tax is determined from the tax table and divided by the number of pay periods. That's your deduction this pay period.

Married tax payers take off $10,000 instead of $5,700.

The percentage will vary if your taxable income varies each pay period. The good news is that your actual tax bill is based on the annual rate, not the amount from this pay period.

Confused?.....thank the IRS!!!!

LJ-ABX

The IRS doesn't write the tax law, that job belongs to Congress. All the IRS does is to put the Congress' "great ideas" into practice. So, "thank" your Congressmen. "Thank" his early, and "thank" him often.

This plan is one of several that would simplify this a whole lot.

jungle

Marx and Lenin would be delighted with our current tax system. Enjoy the prospect of supporting those who won't support themselves. "From each according to ability, to each according to need...."