Looking at my paystub I noticed when I work alot of hours I get more taxes taken out percentage wise.
My question to you is. What is the (U.S.)dollar amount that bumps one into the higher tax bracket?
Here’s a link to a web page that lays out the tax brackets in an easy to read form (it’s still loopy stuff though). Mind you, this is for federal taxes, not state.
Also, keep in mind that taxes are figured per check as if that pay rate was annual.
For instance:
Say you earn $15/hour. Your tax rate is calculated as if you will earn $31,200 for the year.
Now say you work over a holiday and earn double time…$30/hour. For that paycheck the taxes will be calculated as if you earn $62,400 for the year. Even if this is a one time deal and you’re earning $15/hour the rest of the time. That sucks but that’s how it works.
When you file your taxes at the end of the year you tell them what you actually earned for the year at which point you get a refund or pay the difference and it all works out as it should.
Based on your question, it probably isn’t a function of the dollar amount, but is due to the fact that you’re earning what the Feds call “supplemental wages.” Overtime is a form of supplemental wage.
Employers are required by law to make deductions from the pay of their employees for federal income tax, for Social Security tax under the Federal Insurance Contribution Act (FICA), and for Medicare tax. The government provides detailed tables for the computation of these withholding amounts. It’s pretty complicated, but in a nutshell, if you’re being paid overtime, and your employer identifies the overtime separately on your paycheck, then a flat 28% of the amount that is overtime is withheld. That may be a larger percentage of what is witheld from your regular wage. How much of your regular pay is witheld depends on how many exemptions you claimed on the W-4 you filled out when you got hired.
If you feel like wading through all the jargon, you can go to http://www.irs.gov/forms_pubs/pubs.html and retrieve “Publication 15, Circular E, Employer’s Tax Guide” and find all this stuff.
Another thing to remeber when trying to figure it out is exemptions. The exemptions you claimed on your W2 correspond to eventual deductions when filing. Which results in the first dollars you earn being non-taxable. So effectively your first earned dollars are in a 0 percent(non-taxable) bracket, then the next ones are in a 15% bracket(technicialy there is now a 10% bracket added in the last few hours ) then the next ones in 28% bracket and so on if you make enough.
So as long as you are out of the non-taxable range, any increase in pay, will correspond to a higher total percentage taken out, since the first part was taxed at 0 percent and the higher amount will be taxed at at least 15%. I hope that makes sence.
Thanks for the info. Now I see why it looks as though I am getting hammered on taxes.