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Posted by speedlever on March 14, 2008, 6:21 am
Please log in for more thread options Thanks Howard. That makes sense.
I don't expect to have the multiple employer issue this year, but will
have some deferred compensation from last year due from my current
employer that will be paid this year. And with performance bonuses, it
becomes difficult to know how to predict income (and tax withholding
requirements).
snip
>
> You have multiple employers and each is withholding taxes using tax
> tables based on their individual payments to you. However your taxes
> are calculated on your total income. As tax rates rise as income
> increases you are seeing the mismatch due to increasing marginal rates
> on income. Simple example assume the tax rate is 10% on the first
> $10,000 and 20% on all other income. Say each employer pays you
> $10,000 (each) and withholds $1000 (each). your total income is
> $40,000 and your tax due is $1,0000 times 10% and $30,000 times 20% or
> a total of $7,000. Thus you still owe $3,000 ($7,000 - $4,000). Only
> you (and the IRS) know you have multiple sources of income, unless you
> tell the employer by changing your W-4. You can adjust one or more of
> your W-4s to reduce dependents.
>
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