Hey all, while I realize it is currently IRS crunch time, this is not a question about THIS years taxes (those were submitted a while back) but rather what's going to happen for next year. So no big rush on getting an answer. So here we go: Since the beginning of this year, we've been very short at work, and I have been working a TON of overtime. Like, in a 40 hour week probably working 20-30 OT hours each week at time and a half. Needless to say, the $ is nice given the current hard times, but I'm guessing I'm being taxed at my base salary level-rate. If this type of OT keeps up, I'll likely almost double my base salary for the year, which'll certainly push me into a higher tax bracket when it comes time to file. My question is: will this end up causing me to owe on my taxes? All my income comes from wages, no assets or non-taxed earnings which are the usual culprits for having to owe later, but I am just worried about thinking how great it is making all the extra dough now and then ending up having to give half of it back next april. Can any financial people provide some general advice on this? EDIT: I just tried using the IRS's withholding calculator with estimates for the coming year and it looks like I'll actually overpay and get a decent return next april.. can anyone confirm that?
Penn, Really all depends on how your company withholds taxes. In my experience, when I've worked OT in the past, taxes are withheld from both base salary and OT earnings. If your company is the same way you should be fine. I'm assuming you claim 0 withholdings? That's the way to go if you don't want to owe at the end of the year. You'll have people tell you you're giving the government a tax free loan doing things that way, but when you factor normal human behavior into the mix, claiming 0 is the best option 9 times out of 10.
Whenever I work overtime, I seem to have a higher % held out of my paycheck, so I never end up owing $.
Yeah i claim 0. And yeah my OT pay is taxed. So i guess i am fine.. i havent worked out the %s stitches but maybe mine is thev same way i'll crunch some numbers today
It is all about what YOU claim....if you claim 0, or have dependants...and I mean through your work, not the tax paperwork... If you claim 0, they will take more every pay period, but in the end you get a refund.... The negative is you shouldnt really do it, you are giving essentially the federal govt, and interest free loan... the good thing is obviously you get some money back at tax time via the refund, which I do, because with that I use it for home heating oil payments, and any renovations/emergencies that arise... if that moeny is in my account normally I wouldnt save it..
Like I said before, it's all about human behavior. Forget about giving the Govt. an interest free loan. Even if someone was disciplined enough to save the extra money from their pay check, the interest they would likely earn on the money in a years time with these interest rates is inconsequential. People need to get past this notion of, "Anything that helps the Govt. is bad." But it sounds like you already agree with me, since you also claim 0. Like you say, we're more likely to do good, responsible things with a lump sum at the end of the year than we are small amounts in every paycheck.
This is how my payroll module works. We pay biweekly. It looks at the gross pay for the biweekly period and assumes you make that every 2 weeks. It will then tax it based upon that assumption. So when someone has a week with a lot of overtime, they end up being over taxed. You should have nothing to worry about. -Ed-
The govt shouldn't be involved in anything...everytime they do, it gets messed up or causes higher prices..... I am too lazy to call HR.....
A discussion better left for the POFO, but I can tell you if you had to go just one day without a few of the things your tax dollars pay for, and I'd bet you would change your tune in a hurry.
Yeah....I have issues supporting a government that tells me everything I believe in is wrong and advertises the fact that it is "free" when in reality you are only free if you want to deny yourself and live within the parameters of someone elses value system.
Dude... you already filed your 2012 taxes? and now you want to know about 2013? Penn... you do know I'm a CPA and could answer your question... for a fee...
companies are required to send the withheld tax funds to the IRS within 3 days. We send ours in the next day. -Ed-
Your actual withholding amount will vary from paycheck to paycheck according to how much OT you work those pay periods. In any case, you'll have withholding taken out of your total gross, not just your base alone. If your withholding exemptions are "correct" then you'll likely be "on target". Your overall tax bill will be higher due to the extra income, sure, but you shouldn't have to pay any extra next year. I saw down this page that you claim "0" exemptions, so you should be in real good shape with a nice refund. This is fine while interest rates are next to nothing but you might want to rethink the withholding when they [hopefully] go back up. Best of luck.
This is late, but as someone who use to prepare taxes for some very rich people, don't fret if you owe instead of getting a refund. Just put some money aside for it. You won't run into any underpayment penalties so don't worry about that. No way for any of us to know if you will owe or get a refund without knowing all of your other stuff (deductions, exemptions claimed etc.) You need a tax planning program there are decent ones out there, maybe even free. Estimate how much you will make at the end of the year. You're guessing here because you don't know exactly how many hours you will work, but do as best as you can. Than plug that total amount into a tax planning software. I think there are free ones out there. Than you might have to look at what rate they are taking money out for federal and state withholding. If you come up big in refunds, I actually recommend adjusting your exemptions because you're just giving the IRS money for a year or so. Withholding penalties come about when they don't collect enough. But the formula is generally 100% of last year's tax liability, or 90% of this years amount. Since you are set to make double last year, you don't worry about this because you will definitely cover 100% of last year's tax liability in withholding. And no company collects different than any other company. There are withholding tables that everyone must abide by. The only differences are how much you make, and how much you pay for pre-tax benefits and options (401k, medical, dental, deferred comp, etc.) Everyone of you can plug your numbers into here and it'll match 100% or off by a penny. http://www.paycheckcity.com/coAycoDetailed/netpaycalculator.asp Ignore the Ayco Fee stuff, that's just the company I used to work for. So if you are due to get a huge refund, or a huge underpayment, you use that calculator to adjust exemptions to fine tune your withholding.