I work a lot of overtime, sometimes 20 hours OT a week. My question:
Is there a tax difference between straight salary income and income from OT if the total gross pays of the two are same amount?
Hope a tax expert will answer this question. Thanks guys!
2006-12-22 11:26:30 · 9 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
No, there's no difference in tax paid on money earned on straight time than on overtime. It just is added together at the end of the year, and you pay on how much you make total. There's nothing on your W-2 or on your tax return that says how much of the money was made on overtime and how much on straight time.
Taxes are deducted from your paychecks, based on whatever you put on your W-4, as if you made that same amount every payday all year. So a check with a lot of overtime might have a higher percentage tax taken out than one where you didn't work overtime at all - this isn't because it's overtime, but because you made more total that pay period.
2006-12-22 12:12:04 · answer #1 · answered by Judy 7 · 1⤊ 0⤋
Tax percentages are based on the total amount of the check. As you pass certain levels the percentage goes up. The overtime pay is probably taxed at the higher level. Withholding is always based on the assumption that you will work the same hours every week. If it is a rare occurrence then you will get a refund of the extra tax withheld when you file your return.
2006-12-22 19:30:01 · answer #2 · answered by Barkley Hound 7 · 1⤊ 1⤋
Overtime is taxed at a higher rate than regular wages, because it is above and beyond your regular wages. How much more is taxed depends on where you hit in the tax bracket situation. If the overtime pay pushes your annual income to the next tax bracket then your amount to be with held will be higher. Check the IRS web site for information about tax with holding rates and the tax brackets. You can send them an email or call them if you want.
2006-12-22 19:30:57 · answer #3 · answered by hr4me 7 · 0⤊ 2⤋
Judy and Stephen F have the best answer in my opinion. I only have one exception to what Stephen F said. For paycheck purposes, a bonus would be taxed at either a flat 25% or 28% for Federal income tax when you receive it. However, at the end of the year, it all gets lumped into wages when you file your tax return.
If you don't beleive me, compare your last paycheck to your W-2 when you receive it.
2006-12-23 09:03:37 · answer #4 · answered by Steve 6 · 0⤊ 0⤋
The IRS has no idea if the income is from 'straight time', 'over time', or salary. BTW, salary means you are not paid by the hour, and don't get overtime pay. Withholding tables are bases on filing status, gross pay and frequency of pay (weekly, bi-weekly, etc.). They 'type' of pay doesn't matter.
2006-12-23 08:02:39 · answer #5 · answered by STEVEN F 7 · 0⤊ 0⤋
So often, overtime pay gets eaten up in taxes and social security contribution. Do the math on your next pay check stub and see if it's worth it.
2006-12-22 19:30:04 · answer #6 · answered by beez 7 · 1⤊ 1⤋
Look dude it's simple math. The more you make the more they take. No big secret. If you are really fed up with it vote Libertarian.
2006-12-22 19:34:30 · answer #7 · answered by Chupacabra! 2 · 0⤊ 0⤋
It always seems like they take a higher percentage of taxes from my overtime hours.
2006-12-22 19:28:48 · answer #8 · answered by FlyChicc420 5 · 0⤊ 3⤋
Im just replying back to your answer. Uhm no im not an old woman, im 11 years old.
2006-12-22 20:03:59 · answer #9 · answered by Nicole G 1 · 0⤊ 1⤋