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Learyfan
It's the psychedelic movement!



Registered: 04/20/01
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The next tax bracket?
#21980716 - 07/22/15 03:41 PM (8 years, 6 months ago) |
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So my co-workers and I are hourly. We regularly work at least a little overtime each week. Some weeks we have to work a lot of overtime and we work so many hours that we actually get paid LESS than if we had just worked 40 hours. They say it's because at a certain point, we get thrown into the next tax bracket. I asked the HR lady in an e-mail at what point (how many hours over) that happens and she responds "No clue!". WTF.
Maybe you guys have experienced this and can shed some light on this. When we go to the next tax bracket by working too many hours and then actually LOSE money, do we recoup this money at tax time or what? Or is my company just fucked up and this shouldn't be happening at all? I've never experienced this at any other job.
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memes
Blessed



Registered: 01/11/05
Posts: 27,785
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Re: The next tax bracket? [Re: Learyfan] 1
#21980735 - 07/22/15 03:47 PM (8 years, 6 months ago) |
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Dear CFPB,
[Insert OP here]
Signed, LF
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Learyfan
It's the psychedelic movement!



Registered: 04/20/01
Posts: 34,086
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Re: The next tax bracket? [Re: memes]
#21980808 - 07/22/15 04:02 PM (8 years, 6 months ago) |
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Do you think we're being ripped off? Just to give you some more info, we're hourly, but they call us salary. It's "hourly salary" or something.
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Ahab McBathsalts
OTD Windmill Administrator




Registered: 11/25/02
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Re: The next tax bracket? [Re: Learyfan] 1
#21981247 - 07/22/15 05:43 PM (8 years, 6 months ago) |
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Likely not.
Tax brackets are on your marginal income.
So if you are making $20/hr at 2080hr a year your pretax income should be $41,600.
If taxable income is over-- But not over-- The tax is: of the amount over-- $0 $9,075 10% $9,075 $36,900 $907.50 + 15% $9,075 $36,900 $89,350 $5,081.25 + 25% $36,900 $89,350 $186,350 $18,193.75 + 28% $89,350 $186,350 $405,100 $45,353.75 + 33% $186,350 $405,100 $406,750 $117,541.25 + 35% $405,100 $406,750 no limit $118,118.75 + 39.6% $406,750
So the first $9,075 of income is taxed at 10%. for $908 The next $27,825 (36900 - 9075) is taxed at 15% for $4174 And the last $4,700 (41,600 - 36900) is taxed at 25% for $1175
(9075+27825+4700)= $41,600 is worth (908+4174+1175)= $6257 of tax for an effective tax rate of (6257/41600) = 15.04%
And then repeat the process for State taxes. Medicare comes of at 1.45%, and social security at 6.2%.
Because they are always taking a percentage of your total, if you work more hours there is never an amount where you should make less than working less hours.
You will have more taxes taken off if you work lots of overtime because payroll taxes assume your tax bracket at 26x that biweekly paycheque. If one week you make $5000, you would be in a (26 x 5000)= 130,000 bracket and they would take off taxes that correspond to that tax bracket. but the next week there isn't much work and you only make 300 (26x300) = 7,800, you're going to pay much much less tax, but only because you didn't make as much.
Some states apparently have an additional overtime tax, but again it should be marginal.
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Ahab McBathsalts
OTD Windmill Administrator




Registered: 11/25/02
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Loc: Wind Turbine, AB
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IRS says there is no State overtime tax.
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Learyfan
It's the psychedelic movement!



Registered: 04/20/01
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Last seen: 11 hours, 37 minutes
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Quote:
Ahab McBathsalts said:Because they are always taking a percentage of your total, if you work more hours there is never an amount where you should make less than working less hours.
Thank you very much for the effort you put into your very detailed answer. Thank you. But I think the above quote is what it all boils down to. It sounds right. There should never be a pay period when we get paid LESS for working MORE. But it happens where I work. And they just say "Well, you fell into the next tax bracket for this pay period" (bi-weekly). You feel my co-workers and myself are being wronged. Is that not what you're saying?
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Ahab McBathsalts
OTD Windmill Administrator




Registered: 11/25/02
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Loc: Wind Turbine, AB
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Re: The next tax bracket? [Re: Learyfan] 1
#21981782 - 07/22/15 07:59 PM (8 years, 6 months ago) |
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Yeah, someone in the office is fucking up. Likely though they are taking too much tax off because your payroll department is incompetent, and you will get a good tax refund in April.
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Ahab McBathsalts
OTD Windmill Administrator




Registered: 11/25/02
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Loc: Wind Turbine, AB
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Most people don't understand marginal tax rates. I had to get a degree in accounting to figure it out.
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Learyfan
It's the psychedelic movement!



Registered: 04/20/01
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Thanks again. And let me clarify just once more, you're saying that even though our corporate accounting is fucking up, we will get our money back in the end at tax time?
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Ahab McBathsalts
OTD Windmill Administrator




Registered: 11/25/02
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Loc: Wind Turbine, AB
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I know sometimes my supervisor has fucked up my timesheet and docked it off the next cheque.
But basically you should be able to figure out if the tax they are taking off is correct
This period you worked 100 hours at $20/hr.
Hours at straight wage $20 x 88 = $1760 Hours at over time $30 x 12 = $ 360 Subtotal $2120
$2120 x 26 = $55,120
Federal Taxes 55,120 - 36,900 = 18200
18200 x .25% (as above chart) = 4555 $4,555 + $5,081.25 (as above for first 36,900 of income) = 9636.25 $9636.25 / 26 pay periods = $370.63
State tax is similar but rates and income levels will change state to state.
Then your 6.2% S.S you pre-tax biweekly earnings.
Then your Medicare at 1.45%.
Excel would make this much easier, but you should be able to back out and calculate all your deductions manually (though with some effort)
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Ahab McBathsalts
OTD Windmill Administrator




Registered: 11/25/02
Posts: 35,107
Loc: Wind Turbine, AB
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Re: The next tax bracket? [Re: Learyfan] 1
#21981879 - 07/22/15 08:25 PM (8 years, 6 months ago) |
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You should get it back at tax time, unless they are really screwing you over, but its a lot of work to manipulate accounting systems.
Its 98% more likely they just aren't doing them right in the first place and will discover their error when they do end of year payroll statements (W-2s?, W4s?) Whatever they are called.
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DieCommie

Registered: 12/11/03
Posts: 29,258
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Your withholdings are not your tax bill. You had more withheld, your tax bill comes next year.
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