Why was I taxed at a whopping 38% of my income?

[Zeze]

I have a contract job.

I billed 68 hours last week. And I get paid overtime, but at 1.0x.

I did some basic math and it shows I was taxed at a whopping 38%.

Why did this happen?

$4216
-$1631
38%

Interestingly enough the week prior I billed 22 hours and was only taxed at 28%.

Before that 33 hours was taxed at 32%.

Before that 44 hours (my normal hours) was taxed at 35%.

So obviously my tax rates are fluctuating based on the hours, but why? Why isn't it simply taxed at the flat rate of based on my hourly income?

Sorry I suck with tax... I should at least have basic knowledge.

So do I get some of them back at end of the year?

 

[Drako]

You weren't "taxed", that's just withholding. :biggrin:

 

[Ns1]

one possible reason:

SDI and whatnot get reset in the new year


Certain statutory withholdings such as Social Security Tax and California State Disability Insurance (CA SDI) are deducted from your wages until a prescribed maximum has been reached. If and when you reach a maximum, deductions stop; those deductions resume at the start of the new calendar year at the rate prescribed by law and are subject to a maximum amount within that calendar year.

 

[highland145]

Taxed like that's what you make every week of the year...$219K. Or your HR people suck.

EDIT: Yeah, ss/medi are 7.65% of your pay.

 

[cheezy321]

They usually extrapolate it out for the year if you continue at that same pay. I get almost 50% taken out every paycheck when you account for 401K.

I spoke with a tax adviser this year and we are sitting down and figuring out how I can change this in 2014.

Edit: Yes you will get some of that back at the end of the year. My CPA said I should expect a substantial refund. Queue the 'INTEREST FREE LOAN TO THE GOVT KOOKS'

 

[KLin]

http://www.wsu.edu/payroll/taxes/howto.htm

 

[Drako]

Taxed like that's what you make every week of the year...$219K.

This.

$220K/year is the Federal 33% tax bracket. Whoever does your payroll just uses a simple formula that assumes you make a consistent wage week to week.

 

[zephyrprime]

You need to educate yourself about taxes a lot. How old are you? Tax rates are not flat. The increase the more money you make. That is why you are taxed more on some weeks than others.

 

[Zeze]

You need to educate yourself about taxes a lot. How old are you? Tax rates are not flat. The increase the more money you make. That is why you are taxed more on some weeks than others.

No doubt about that. I guess the rates assume I make that for the entire year. I see now.

 

[Drako]

No doubt about that. I guess the rates assume I make that for the entire year. I see now.

If you were working a 40 hour week every week, your withholding would be consistent week to week.

At ~130k you would be in the 28% fed bracket, and the 6.65% state bracket.

 

[Red Squirrel]

38% is not really that much, sounds fairly standard to me especially on a large amount like that.

I got a pay cheque once that was like 4 grand as I had done tons of overtime that pay period. I saw maybe 2 grand of that. Sucks but not much you can do.

I think the way it works though is at the end when it's tax season you get some of that back as they recalculate everything based on averages or something like that. I don't really know how it all works.

 

[Attic]

That's in line.

It's your right to avoid paying as much as possible, evading is what will get you in trouble.

Tax write offs for the "self employed" are where it's at. You can make what you did that week all year and more and pay under 20%.

Single, young, and working for a company,... this is what makes bureaucrats salivate, it's almost Pavlovian at this point. Bureaucrats know they are gonna get lots of money from your hard work. Best part is they'll blow most of it cause they never had to struggle/sacrifice to earn it.

 

[IEC]

38% is not really that much, sounds fairly standard to me especially on a large amount like that.

I got a pay cheque once that was like 4 grand as I had done tons of overtime that pay period. I saw maybe 2 grand of that. Sucks but not much you can do.

I think the way it works though is at the end when it's tax season you get some of that back as they recalculate everything based on averages or something like that. I don't really know how it all works.

Who cares how it works? What's important is that it funds our overlords who use that money to grease the wheels on getting even more legislation for X Y or Z passed. Because we can legislate our way out of a bad economy, out of bad healthcare, out of war (oops, never mind, we never declared war anyways), etc.

Meanwhile the overlords conveniently exempt themselves and their staff, because you know, they're different from us peons and shouldn't have to put up with all that BS.

/s

 

[Red Squirrel]

Best part is they'll blow most of it cause they never had to struggle/sacrifice to earn it.

That's the part that pisses me off about taxes. So much of it gets completely wasted. A company or individual that actually worked for their money will do what is in the best interest to use it efficiently. Not the government.

 

[schneiderguy]

38% is not really that much

Agreed. A rich person like the OP should be taxed at 70%, minimum. It's only Fair.

 

[Fern]

No doubt about that. I guess the rates assume I make that for the entire year. I see now.

Exactly.

BTW: Sounds like you're treated as employer, not a self-employed contractor.

Sounds like you're paid weekly. The W/H tables assume that weekly pay is consistent. I.e., that you'll be making $4,216 every week.

When you bill only 22 hrs, whatever that amount of pay is the tables assume you make that same amount every week.

Since it's only withholding you may get some back (a refund) upon filing.

Fern

 

[JEDI]

I have a contract job.

I billed 68 hours last week. And I get paid overtime, but at 1.0x.

I did some basic math and it shows I was taxed at a whopping 38%.

Why did this happen?

$4216
-$1631
38%

Interestingly enough the week prior I billed 22 hours and was only taxed at 28%.

Before that 33 hours was taxed at 32%.

Before that 44 hours (my normal hours) was taxed at 35%.

So obviously my tax rates are fluctuating based on the hours, but why? Why isn't it simply taxed at the flat rate of based on my hourly income?

Sorry I suck with tax... I should at least have basic knowledge.

So do I get some of them back at end of the year?

I kno how u feel.
working 12x7 right now. (client throwing $ at us).

fed+state taxes+ medicare/ss = 40+%

 

[SparkyJJO]

38% is ludicrous. I don't care how much you make. Legalized robbery by the state/fed.

 

[shortylickens]

Thats probably why so many contractors try to do shit under the table.

 

[TwiceOver]

Withholding assumes you make that much every paycheck of the year. You'll get it back at the end of the year.

 

[Fritzo]

Contractors get screwed on taxes because the company isn't picking up all those extra taxes they normally get hit with. I was taxed 35%-40% when I did contract work too.

 

[spidey07]

Contractors get screwed on taxes because the company isn't picking up all those extra taxes they normally get hit with. I was taxed 35%-40% when I did contract work too.

If he's W2, then the contract house is paying their SS and medicare portion of taxes. Otherwise his withholding would be much more.

Based on the withholding of only 40%, he's W2 and you likely were as well. Otherwise 15+% comes right off the top in social security alone upto HCE limits.

There was a few years when I maxed out my W2 contributions to FICA/SS and at the sametime was 1099, maxing that out. Was an interesting return to say the least.

 

[spidey07]

I kno how u feel.
working 12x7 right now. (client throwing $ at us).

fed+state taxes+ medicare/ss = 40+%

But, but, but! You're rich!

 

[Jumpem]

38% is ludicrous. I don't care how much you make. Legalized robbery by the state/fed.

Not at all. Tax rates used to be MUCH higher.

 

[nickbits]

38% is not really that much, sounds fairly standard to me especially on a large amount like that.

I got a pay cheque once that was like 4 grand as I had done tons of overtime that pay period. I saw maybe 2 grand of that. Sucks but not much you can do.

I think the way it works though is at the end when it's tax season you get some of that back as they recalculate everything based on averages or something like that. I don't really know how it all works.

That's because you're Canadian and they tax you to death to pay for your free healthcare.