Thu Oct 13, 2016, 06:21 PM
Lil Marky (549 posts)
I have a question for someone who knows about payroll and tax witholdings
So I was going through some paystubs for a company I do occasional work for, and I noticed that the percentage of taxes taken out varies from paycheck to paycheck. Now, of course, the amount would vary based on the total earned, but I'm curious how the percentage is calculated. The hourly rate stays the same but the total hours varies from paycheck to paycheck. I also didn't modify any sort of information about dependents or anything.
So my question is how the percentage this usually determined? Does the company decide this? Do they contact the IRS or something to see my entire earnings from everywhere? (I'm guessing no one that) Are there guidelines that all companies follow?
I've never really found any solid explanation about how this works. I suspect it's 'cause I don't the correct words to search for due to a lack of understanding.
5 replies, 376 views
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I have a question for someone who knows about payroll and tax witholdings (Original post)
|Lil Marky||Oct 2016||OP|
|Lil Marky||Oct 2016||#4|
|Lil Marky||Oct 2016||#5|
Response to Lil Marky (Original post)
Thu Oct 13, 2016, 06:50 PM
PuppetMister (227 posts)
2. If the amount you earn varies a good deal from paycheck to paycheck it might explain it.
And I mean the percentages, not just the total amount (like you pointed out).
It happens because of the different tax brackets. Assume you get paid $2000 every 2 weeks. Some of your income falls in the 10% bracket, some in the 15% bracket and some in the 25% bracket. The withholdings tables are designed to pull the appropriate amount out of each paycheck to handle that.
But say you get paid only $1000 during one pay period, and then get paid $3000 the next - this doesn't change your annual income, but according to the tables, when you got the $1000, it looks like you are only going to earn $26,000 for the year - and none of your income falls in the 25% bracket. However during the pay period when you earn $3000, it looks like your annual income would be more like $78,000 and then a big portion ends up in the 25% bracket.
If you have a single job, with steady pay it works out. Any other scenario it gets a bit weird.
This link has the info on how to calculate it.
Response to PuppetMister (Reply #2)
Thu Oct 13, 2016, 07:01 PM
Lil Marky (549 posts)
5. Ahhh, that's what it was looking like to me.
But that makes sense. Thanks for the link, I'll probably actually read it. Maybe even print it out and put in my bathroom just to confuse people.
Why do they make this stuff so 'icky' to read?