Is there a tax imposed on overtime specifically?

Question

I am a student set to make under $12k this year. I am working 40+ hours a week in a grocery store. Since I make under $12k, when I filed my W4 I submitted that I should have no deductions. On my first paycheck I only worked a total of 12 hours and was not taxed (Just got out of college). The next week, I worked 43 hours and was taxed for my entire paycheck, both federal and state. Is there a law anywhere that requires overtime pay to be taxed? Last year I made under $12k, my company withheld taxes anyways and I ended up getting nothing back thanks to them withholding incorrectly.

Answer 1

All wages are subject to taxation. There is no special "overtime tax" nor is there an exemption from taxation for overtime. When you get your W-2 at the end of the year, it's all lumped together in box 1 as gross wages paid.

Every paycheck that you receive (with most payroll systems anyway, some advanced ones are better) assumes that you will receive a similar paycheck for each pay period throughout the year. That's why little was withheld from the check for 12 hours. If your pay varies significantly from one pay period to another it's likely that the withholding percentages will vary from one pay period to the next. Some advanced payroll systems do track your total earnings and adjust your withholding amounts so that the proper amount is withheld at the end of the year based upon your total pay but even those aren't foolproof.

Contrary to what you stated, if you were zeroed out at the end of the year (no refund and no tax due or at least within $100 either way of even money) the withholding by your employer was exactly on the mark.

If you want a big refund, there's a price for that: Smaller paychecks every payday. For that "benefit" you give the govermnent an interest free loan for over a year. That's just plain dumb in my opinion, but it's your money and you're free to do with it as you please. If you want a $5,000 refund at tax time, just tell your employer to withhold an extra $100 each week. You'll get a smaller paycheck of course but you will get the big refund.

Answer 2

Depending on what you make an hour, it's possible that your gross check wasn't subject to Federal withholding. Not probable if you're filing single and 0, but still possible. Employers withhold Federal Taxes based on the information in the IRS's Publication 15-Employer's Tax Guide. Most payroll software is set up to use this information. Some amounts simply aren't required to have withholding taken out.

Check out the guide at www.irs.gov Click "Forms & Publications" on the left side of the scrren. Then, search by publication number.

It doesn't have anything to do with overtime. All income is taxed in the same way according to the above guide. I'm not sure what you mean when you say you made $12K and they taxed you anyways. There's no limit to where you start being taxed. Technically you start being taxed with the first penny you make. It all depends on how you're filing (single and 0) and how much your gross check is for. If you take a look at the guide, you'll understand what I'm saying, but they didn't do anything wrong in withholding taxes from you.

Answer 3

No, overtime is taxed the same way as regular time. But tax is taken out of each paycheck like you make that much every paycheck, so a paycheck that much would trigger taxes being taken out, a paycheck for 12 hours wouldn't.

If you submitted your W-4 as exempt, then taxes should not have been taken out. But be careful - if you make anywhere close to $12K, you are NOT exempt and will end up owing some tax. Being a student doesn't change that.

If more tax is taken out than you owe, you'll get the extra refunded when you file taxes. If not enough was taken out, you'll owe the additional.

Answer 4

Your employer withholds taxes based upon what you state on your W-4. When you say "no deductions", I assume you mean that you claim zero dependents, which will result in the highest rate of withholding. Your twelve hour paycheck was small enough to not trigger withholding on that particular check. Your check for the 43 hours was obviously larger, and that amount WILL trigger withholding.

As for your company withholding 'incorrectly' resulting in no refund, it sounds to me as they withheld perfectly. The general idea of withholding is to pay from each check an amount to the federal government which will result in a total which closely matches your tax liability at the end of the tax year.

Answer 5

They did not withhold incorrectly.

Each paycheck must be taxed as if you made that amount the entire year.

Both you and your employer have to pay an equal amount of income tax, and when you worked overtime, that put you over the "exempt" amount, so they, by law, have withhold the income tax and send it to the government, along with the employer share of income tax.

You will probably get it back at the end of the year. Welcome to the world of PAYING TAX!

And just think... when you are working hard for your money, and you see someone come in and buy the lobster tail and steak with those food-stamp credit cards... you are paying for it!

Answer 6

Tax is assessed on Gross Earnings. The Government earns Billions on the overtime people work. France is a Republic and their President is replaceable. Wait and see what the next one will do. Incidently some workers get days off in lieu of overtime so no money is paid to these workers. The UK Government would like to stop this practice.

Answer 7

Any and all income is taxed. I've been working in a gorcery store for 22 years. They don't like to let us have overtime, but when it does happen it's best not to get more than 8-10 hours of OT otherwise they just take too much out of you.