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Posted by RFI-EMI-GUY on July 15, 2008, 6:51 pm
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I was pleased to get a bonus this year - until I saw that the net was
reduced by $1350 in federal taxes. I called payroll and learned that the
taxable amount (good thing a portion went to my 401K) was taxable at 25%
per the Supplemental Tax Rate.
Will I get this back in next years tax refund (married plus a dependent)
or is it reported separately and maintained at 25% rate?
--
Joe Leikhim K4SAT
"The RFI-EMI-GUY"©
"Treason doth never prosper: what's the reason?
For if it prosper, none dare call it treason."
"Follow The Money" ;-P
--
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Posted by joetaxpayer on July 15, 2008, 7:08 pm
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RFI-EMI-GUY wrote:
> I was pleased to get a bonus this year - until I saw that the net was
> reduced by $1350 in federal taxes. I called payroll and learned that the
> taxable amount (good thing a portion went to my 401K) was taxable at 25%
> per the Supplemental Tax Rate.
>
> Will I get this back in next years tax refund (married plus a dependent)
> or is it reported separately and maintained at 25% rate?
Well, if you were on track to be exactly right, no refund, no money due,
then it depends on your tax bracket. see
http://www.fairmark.com/refrence/index.htm for where you land and/or
look at last year's return. If you are in the 15% bracket, you'll get
back $540. If 25%, they withheld just right.
Joe
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Mark Bole on July 15, 2008, 10:01 pm
Please log in for more thread options joetaxpayer wrote:
> RFI-EMI-GUY wrote:
>> I was pleased to get a bonus this year - until I saw that the net was
>> reduced by $1350 in federal taxes.
You mean "gross", not "net". You also mean "federal tax withholding",
not "federal taxes".
>> I called payroll and learned that
>> the taxable amount [...] was taxable
Yes, the taxable amount was taxable (sorry, couldn't resist). However,
at this point you are concerned about withholding.
>> at 25% per the Supplemental Tax Rate.
Withholding rate, not tax rate.
>> [...] is it reported separately and maintained at 25% rate?
No, it is not "reported" (I think you mean "taxed") separately. All of
your taxable wages, including bonus, will go on Line 7 of your Form
1040, and from there will be combined with all your other income and
adjustments and deductions to yield your actually taxable income.
> Well, if you were on track to be exactly right, no refund, no money due,
> then it depends on your tax bracket. see
> http://www.fairmark.com/refrence/index.htm for where you land and/or
> look at last year's return. If you are in the 15% bracket, you'll get
> back $540. If 25%, they withheld just right.
Joe is exactly right. Regardless of your over or under withholding, you
will end up paying just the correct amount of tax when you accurately
prepare your return, and any difference between your tax and your
account balance with the IRS will be refunded or billed, as appropriate.
Usually, an annual bonus will be over-withheld by default, and will
result in a larger refund or smaller balance due than you were
expecting. Essentially, your inflated pay for that one pay period will
be withheld as if you earned that much *every* pay period, which of
course you don't.
-Mark Bole
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by joeu2004 on July 16, 2008, 5:23 pm
Please log in for more thread options > I was pleased to get a bonus this year - until I saw that the
> net was reduced by $1350 in federal taxes. I called payroll
> and learned that the taxable amount (good thing a portion
> went to my 401K) was taxable at 25% per the Supplemental
> Tax Rate.
> Will I get this back in next years tax refund (married plus a
> dependent) or is it reported separately and maintained at 25%
> rate?
No one can say one way or the other now. It all depends.
But to put your mind at ease, note that the actual taxes
due for the year are computed only at the time you file
your tax return. At that time, you subtract whatever you
paid during the year to determine the amount of refund
(paid too much) or payment due (paid too little).
So the only harm in the large supplemental withholding
is that you might prepay more taxes earlier than
necessary and it might put you far over the actual taxes
(again, determined when you file), resulting in a large
refund. It is simply a cash flow issue and an opportunity
cost (you have less cash inflow to invest), not a matter
of paying more actual taxes.
If you believe the large supplemental withholding will
put you far over the actual taxes for the entire year,
you have the option now of submitting a new W-4 to
your employer to reduce the amount of normal withholding
for the remainder of the year. You accomplish that
by increasing the number of allowances stated on the
form.
But be careful not to go too far. Remember: if you
grossly underwithhold (or otherwise prepay) taxes
during the year, you may be subject to a penalty
when you file your tax return. Although the penalty
is relatively low and nothing to lose sleep over, it is
yet-another form to file, and it is relatively complicated
for most people. (But no problem at all if your taxes
are prepared by a professional.)
If this sounds complicated, simply ignore the comment
and don't worry about the large supplemental withholding.
At worst, think of it as an interest-free loan to the federal
government :-(.
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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