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Started By
Message
re: Extra Pay...Question
Posted on 5/15/18 at 10:55 pm to SLafourche07
Posted on 5/15/18 at 10:55 pm to SLafourche07
Don’t work for Truck?
Posted on 5/15/18 at 10:56 pm to iAmBatman
quote:
Several pay periods =\= 10 years
I know, that's why I said it's an unrealistic and simplistic example. I just used it as a way to explain the progressive tax system in a few sentences. Said another way, every dollar of X is taxed at X percentage so spreading income over multiple tax periods can definitely impact effective tax rate. To say it doesn't matter it'll all end up being taxed the same at some point anyway is incorrect.
Posted on 5/15/18 at 11:11 pm to Mingo Was His NameO
I think some people are over thinking this, so I will give a few more details.
An employee has x amount of unused vacation time that cannot be used but must be cashed out before y.
So the question is better to take it all at once and get taxed at a higher rate or take it over a few pay periods where the upfront tax burden is less. The end of the year tax burden is the same as this will only be a fraction of the total income. Doing the math, over time sound better as it appears to save a few hundred bucks.
An employee has x amount of unused vacation time that cannot be used but must be cashed out before y.
So the question is better to take it all at once and get taxed at a higher rate or take it over a few pay periods where the upfront tax burden is less. The end of the year tax burden is the same as this will only be a fraction of the total income. Doing the math, over time sound better as it appears to save a few hundred bucks.
Posted on 5/15/18 at 11:15 pm to Tarps99
quote:
So the question is better to take it all at once and get taxed at a higher rate or take it over a few pay periods where the upfront tax burden is less
I don't see how the tax rate changes from paycheck to paycheck on this one.
Good luck.
Posted on 5/15/18 at 11:24 pm to Tarps99
quote:
Doing the math, over time sound better as it appears to save a few hundred bucks.
It doesn’t save you any money in the scenario provided.
Posted on 5/16/18 at 5:20 am to Tarps99
It won’t matter. Take the cash and call it a day. Again, depending on the circumstance, you may end up with a bigger refund at the end of the tax year, but I’m not sure that’s avoidable without making things more complicated, and I know the MT hates the whole “giving the govt a free loan”, but it’s really not a big deal in the grand scheme of things, imo. Don’t overthink this, keep it simple, take your bonus and enjoy it.
This post was edited on 5/16/18 at 8:13 am
Posted on 5/16/18 at 7:00 am to Tarps99
quote:
Don’t work for Truck?
It was worth a shot. Saw Tarps and "works in media"
But to answer your question, if you are hard up for money or would like it sooner then get it split on multiple checks.
Otherwise just get it now and it'll all wash come tax time.
Posted on 5/16/18 at 7:53 am to Tarps99
quote:
The end of the year tax burden is the same as this will only be a fraction of the total income.
Then who cares?
I’m not sure how the upfront tax is any less though. They’re going to withhold a certain amount of that extra income. The only way it would save you money is in the end of the year tax burden
This post was edited on 5/16/18 at 7:56 am
Posted on 5/16/18 at 10:22 am to Tigerpaw123
quote:
Nope, if that is happening it is because of crappy payroll software
well, just about every company i've worked with has had crappy payroll software then
every bonus I've ever received has had tax withheld as if it were a standard semi monthly or biweekly paycheck (or at least it has been withheld at a much higher flat percentage than my normal income)
This post was edited on 5/16/18 at 10:25 am
Posted on 5/16/18 at 10:26 am to Tarps99
to answer your question OP, you will probably see more immediate money on your paystub if you spread it out over the several periods, but after filing taxes next year, your tax burden will have been adjusted for either situation and all will be right
Posted on 5/17/18 at 4:28 pm to iAmBatman
quote:
Speaking in terms of ordinary income, it doesn’t matter.
If the amount is large enough and crosses multiple tax years, sure it can matter.
Suppose I get a windfall that bumps me into a higher bracket this year. But if I spread it out then I'm in a lower bracket over multiple years.
Posted on 5/17/18 at 6:16 pm to foshizzle
The OP stated it could be spread out over several pay periods, not several years. I was answering his question, not some hypothetical scenario that was never asked.
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