Monday - Friday workers chime in

[highland145]

Pay check > unemployment check.

 

[sixone]

Ok, how is that possible? If you get 1.5x time for OT and you assume the 35% bracket for the OT pay you take home 0.975x pay for those extra hours. If the rest of your tax burden for every other hour is less than 2.5% total then you get more pay per hour for OT even at the highest bracket. What am I missing here? With tax brackets no matter what happens if you make more gross you net more.

Your assumption may be false. If he's in a lower tax bracket, the overtime pay could bump him up to the next one.

 

[Ns1]

Your assumption may be false. If he's in a lower tax bracket, the overtime pay could bump him up to the next one.

Someone clearly does not understand how tax brackets work.

Understanding Marginal Tax Rates

Income taxes affect all working Americans yet myths and misconceptions about our tax system abound. Most involve the marginal tax rates whereby different tiers of income are taxed differently. Stop me if you’ve heard this one before:

Co-worker A thinks overtime is a waste of time, the extra money will just kick him into a higher tax bracket and he’ll take home less money than if he hadn’t worked the extra hours.

Unfortunately for your co-worker, he is misinformed.

The confusion comes in when we talk tax brackets, like the 15% tax bracket or the 25% tax bracket. This seems to imply an across the board tax rate that applies to all of your income. But really when we talk tax brackets or tax rates we are talking about marginal tax rates, which is the tax rate applied to the final dollar earned in a year.

In the US, income is divided into tiers with progressively higher rates applied as you move up the income ladder. The first money you earn has a rather low tax rate, only 10%. For 2009 every single person in the US, millionaire or minimum wage slave, pays 10% in tax on the first $8350 of income. The next tax rate, 15%, applies to earnings above $8350 but below $33,950. Most Americans fall into these two lowest tax brackets, let’s do an example using a single person with $30,000 in TAXABLE income for 2009.

Tier 1:
$8350 x 10% = $835

Tier 2:
($30,000 – $8350) x 15% = $3248

Total Tax Liability = $835 + $3248 = $4083
Effective Tax Rate = $4083 / $30,000 = 13.6%

So our example person falls into the 15% tax bracket yet only pays 13.6% of their income in taxes. For a person in the highest tax bracket (35%) a portion of their income was taxed at each of the lower rates along the way, they don’t pay 35% on all of their earnings.

So how would this break down for our overtime worker who is worried about being pushed into a higher tax bracket? Let’s take the same example person but now they have $37,000 in taxable income due to all those extra hours. The next tax bracket for earnings above $33,950 is 25%, which applies all the way up to $82,250 (for single filers).

Tier 1:
$8350 x 10% = $835

Tier 2:
($33,950 – $8350) x 15% = $3840

Tier 3:
($37,000 - $33,950) x 25% = $763

Total Tax Liability = $835 + $3840 + $763 = $5438
Effective Tax Rate = $5438 / $37,000 = 14.7%

Our overtime worker certainly is paying more in taxes, but not enough to negate the value of the extra work. Their income went up by $7,000 while their federal taxes increased by $1355, they still come out ahead. To the left you will find a table showing the 2009 tax rates for both single and married filers.

 

[CountZero]

Your assumption may be false. If he's in a lower tax bracket, the overtime pay could bump him up to the next one.

Doesn't matter. My point was that no matter what bracket his other pay was in even if his OT was in the highest bracket (35%) he still gets more money on his paycheck and more money per hour of OT worked assuming he gets 1.5x OT pay.

 

[xanis]

I'd do it. Having a day during the week to take care of personal business would be nice.

 

[HardcoreRobot]

having a weekday off would be great!
having to work saturday while my wife and kid are doing weekendy things would suck!

id be more into it if i were single i think. even then id prob prefer to be on the same schedule as my friends tho.

come to think of it, i couldnt work saturdays during college football season. so no, i wouldnt do it.

 

[mmntech]

What would you do if your boss asked you to start working on Saturdays? Say a Tuesday-Saturday shift or a half a day Friday and the other half on Saturday?

Would you tell them no and risk being fired or what?

I honestly wouldn't mind. Worked weekends for three years and worked Friday to Tuesday for most of that. My only stipulation is that I require two consecutive days off.

Mind you the downside is a lot of festivals and events happen on weekends. I used to cook more when I was able to go to the farmer's market on Saturday mornings. Now that I'm back on M-F, I can do that stuff again.

 

[Baked]

I work everyday, except public holidays.

 

[JD50]

Your assumption may be false. If he's in a lower tax bracket, the overtime pay could bump him up to the next one.

Stop giving out bad advice when you don't know what you're talking about.