What is the Approximate Percentage of Federal tax that should be taken out ?

Question

I am on a small retirement annuity of $900.00 a month. I think too much tax is being taken out of my check. I claim zero. $334.00 is withheld each month is Federal taxes and the same amount is withheld for state taxes which leaves me with about $232.00. Is this the right amount of taxes? Thank you for the help.

Answer 1

Something is seriously wrong. Even if they incorrectly used the federal table for daily or miscellaneous periods, the withholding would not be that high.

For a monthly payment of $900, the correct federal tax withholding (claiming single with no exemptions) should be $71.40.

Since I do not know what state you are in, I cannot calculate the proper tax withholding for the state taxes.

You need to contact these people and have them explain what they are doing.

Answer 2

Wow, over 33%, for both federal and state? What state do you live in? I want to make sure I never move there.

In addition to your annuity, do you get social security? other investment income?

For a single person to be stuck in the 33% tax bracket on only $900 a month, seems way too high. I wonder if the annuity company is using the right pay period to figure your tax. I would think that 33% would be for a person receiving $900 weekly, not monthly.

Were your circumstances the same last year? And did you get a substantial refund at tax time? If yes, then by all means increase your exemptions and get more money in your pocket monthly.

Answer 3

33% is near the highest federal tax rate. $900/month should be in the lowest bracket. Unless you have other income you haven't mentioned, something is definitely wrong.

Claiming zero withholding allowances results in the highest withholding rate. You should definitely claim at least 1, probably more. The withholding you mention sounds high even with zero allowances.

Answer 4

They differ from state to state