Taxed 25% on first paycheck of this year, taxed 13% on last month of last year's check which grossed same amount. Employer says tax is higher at beginning of year. True?

[jolfers]

Grossed 7100 last check of last year, fed tax was 900 something (roughly 13%), then grossed 6900 for the first month of this year, fed tax is 1726 (25%). I verified with accounting my married and 8 withholding was the same tax scenario for both months. Texas tax calculator spits out $900 something is what the fed tax should have been. $800 me my wife and two babies need to survive for the month poof gone... Employer tells me tax is higher at beginning of year and goes down as the year goes on .. is this some kind of bookkeeping strategy?? I ask that because at my previous employer last year my year to date gross as of 2/21/17 was 11,200 and my year to date tax was $538! What is going on here? Is it true there is such a thing as a bookkeeping strategy that makes tax higher at the beginning of the year and go down as the year goes on?

[SweetieJean]

You sure it was Federal tax only, and not Social Security tax as well?  You may have reached the maximum SS during the year.

[SweetieJean]

"Employer tells me tax is higher at beginning of year and goes down as the year goes on"
Ask them for an explanation as to why this is. I wonder if they are perhaps illegally playing with cash flow.

[jolfers]

ok i uploaded pdf of december 2017 pay stub and january 2018 pay stub that i think will be helpful in your opinions of getting to the bottom of this. they switched payroll software at the end of the year is why the stub look different, and i wonder if this switch could have caused the problem. the stubs show exact breakdown of medicare, social security and federal tax, and you can see the dramatic difference in federal tax despite the similarity in gross income. your help and advice is greatly appreciated. the comptroller and general manager were the ones i talked to yesterday as the HR/Payroll lady was out of the office. the comptroller and general manager are the ones who told me tax is higher at the beginning of the year and goes down as the year goes on. I plan to talk to the HR lady Monday.

[SweetieJean]

Did you submit a new W-4 form for 2018?
<a rel="nofollow" target="_blank" href="https://www.irs.gov/newsroom/irs-statement-withholding-for-2018">https://www.irs.gov/newsroom/irs-st...>

[jolfers]

No, but accounting verified the 2018 check was same scenario as had been the case in 2017.. married filing separately with 8 withholdings. There was never a question or request to submit a new w4 form

[TaxGuyBill]

Your "Bonus" was much higher in January.

Employers sometimes have an option for this, but usually non-bonus income is based on your W-4, but Bonus income is withheld at a flat 25%.

However, that still would be too much withheld.  Because it is EXACTLY 25%, it seems like ALL of your income is being withheld at the flat 25% for Bonuses.  It is likely a mistake (either whoever does payroll or the software that does payroll).  You may want to speak to HR about it.

[jolfers]

Yes Sir thank you. I just hate that the comptroller and general manager basically lied to brush me aside by telling me taxes are higher at the beginning of the year.. I asked several people who if there were such a thing would know and none of them did. Then I couldn't find anything online to support what they told me. Anyhow thank you. I had read and suspected  about the bonus tax,  but what rate should I have been taxed for the $3600 in commission you think?

[TaxGuyBill]

It depends on how often you are paid, and if your W-2 claims "married" or "single".

Here are the tables (I have it starting on Married and being paid every two weeks, but you can scroll up or down for other options, the math calculations are on Page 45-46):
<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/p15.pdf#page=53">https://www.irs.gov/pub/irs-pdf/p15.pdf#page=53</a>

[Opus 17]

I don't understand your employer's argument, certainly there are no rules that more federal taxes should be withheld in January than December.  The formula doesn't change from week to week.  

You do need to be sure you are looking at federal withholding only, and not mixing it up with FICA (social security, 6.2%) and medicare (1.45%); those should be listed separately on your pay stub.  And it is true that FICA stops after a gross income of $127,000 and resets in January.  So if you make more than $127,000 per year, your total withholding will go up in January, but it's FICA, not federal withholding.

The tax table is here, you can calculate exactly what the withholding should be for your allowances and income.

https://www.irs.gov/pub/irs-pdf/p15.pdf

Note that the IRS will be releasing new tables in February to account for the new tax law changes, so you will want to review the new W-4 and see if the calculations are different.

If you did have excess federal withholding, you will get it back as part of your refund at the end of the year.  To get it back early is possible depending on how flexible and intelligent your employer's accountant is.

[jolfers]

thank yall for your answers.. how i can post pics of the pay stub for december 2017 and january 2018?

[Opus 17]

If you edit your original question there is a button at the bottom to attach images.  However, this is a public forum so make sure any names, SSN, addrsss, employee ID number etc is blanked out.  And there is no guarantee that the volunteers here will be able to double check the numbers for you -- we are just volunteers not official customer support.  For online tax help with a live CPA you would need to upgrade to the Turbotax Live version (most expensive).

[jolfers]

ok i uploaded pdf of december 2017 pay stub and january 2018 pay stub that i think will be helpful in your opinions of getting to the bottom of this. they switched payroll software at the end of the year is why the stub look different, and i wonder if this switch could have caused the problem. the stubs show exact breakdown of medicare, social security and federal tax, and you can see the dramatic difference in federal tax despite the similarity in gross income. your help and advice is greatly appreciated. the comptroller and general manager were the ones i talked to yesterday as the HR/Payroll lady was out of the office. the comptroller and general manager are the ones who told me tax is higher at the beginning of the year and goes down as the year goes on. I plan to talk to the HR lady Monday.

[mdc5113]

So your employer did not lie to you. Payroll taxes are higher the 1st few months of the year because of SUTA/FUTA. Tax is paid at 6.2% on the 1st $7,000. However, the employer pays this tax not the employee. Social Security however has a limit of $128,400. If your gross wages are higher than that, then your tax rate will decrease once it has reached that limit.  Your income tax withholding only changes if you change the number of exemptions. But your employer did not lie to you. They just didn't give you a complete response. 

Social Security Tax

• Social Security tax makes up one half of FICA (Federal Insurance Contributions Act). The tax rate for Social Security during 2018 was 6.2 percent of each employee’s salary, with the employer paying a matching amount. Both the employer and employee are only responsible for a limited amount of Social Security tax. This amount is paid for anything earned up to a wage base of $128,400 for the year 2018.

Unemployment Tax

• In addition to the payroll taxes listed above, employers must pay an unemployment tax for each individual that works at the company. This is called State and Federal Unemployment Taxes (SUTA and FUTA). The tax rate for FUTA is 6.0 percent, and it's applied to the first $7,000 paid in wages to each employee during the year. Employers who pay their SUTA on a timely basis receive an offset credit of up to 5.4 percent. SUTA taxes vary by state.

[Critter]

OK ... this thread is almost a year old ... and covers the tax law change period which happened in February 2018 ... the lower tax rate means the withholding was lower starting in Feb 2018 than in the prior years.  Also a bonus will also skew the withholding as well as when you reach the SS limit.  Also the poster mentioned there was a change in payroll companies ... so checking the withholding allowances to see if they transferred correctly or filling in a new W4 would be wise.

Now in the end ... all your income and withholding is entered on the tax return ... and once the tax is calculated if you paid in too much you get a refund.