U.S. Federal Withholding on Paychecks

[Old One]

Nope, although I wasn't as clear as I could have been.

Jeff,

OK...looking back through my posts, I wasn't very clear either. My decade of experience in financial planning is that people confuse exemptions with allowances (so that if they have 2 exemptions, they automatically put down 2 allowances on their W-4), overpay their taxes, get big refunds and assume they are "getting over" on the government.

I am not advocating cheating/perjury on the W-4, merely strongly suggesting people actually take a few minutes and fill the form out correctly (using the worksheets) to minimize their over/under tax liability. If people don't want to go through the worksheets, the rule of thumb mentioned in one of my posts above works well for ~ 90%+ of cases assuming the same tax facts year over year. I would much rather see people have their money throughout the year to fund IRAs, 401(k) plans, college savings accounts or to pay down debt than provide the "Big G" with interest-free use of the money.

This is an issue that comes up virtually every year in the tax CE courses I take annually and I don't think I have ever heard, even anecdotally, of the IRS ever giving someone a hard time over their W-4 (not to say it hasn't happened).

~ OO

 

[Vraille Darkfang]

Social Security and Medicare is a total of 7.65% of your pay.

Actually.....

You end up paying around 15% of your pay in Social Security & Medicare. Ask anyone who is self employed how much the government yanks out of their checks.

The goverment just came up with this cool idea of saying your employer pays 7% & you pay 7%. Common sense would tell you that what that REALLY means is that you pay 15% for SS & MC, just that the government takes 7% before you ever see it.

But, no. Your employer is just helping pay YOUR taxes for you. I mean, if people thought the government was yanking 15% before any REAL taxes were applied.....

PS. Start saving for retirement now. Expect to see NOTHING from Social Security. If its there, bonus. If its not, your not screwed. Start now & you'll be amazed how just 5 bucks a week will grow in 10 to 15 years.

 

[Mystery Man]

Actually.....

You end up paying around 15% of your pay in Social Security & Medicare. Ask anyone who is self employed how much the government yanks out of their checks.

The goverment just came up with this cool idea of saying your employer pays 7% & you pay 7%. Common sense would tell you that what that REALLY means is that you pay 15% for SS & MC, just that the government takes 7% before you ever see it.

But, no. Your employer is just helping pay YOUR taxes for you. I mean, if people thought the government was yanking 15% before any REAL taxes were applied.....

PS. Start saving for retirement now. Expect to see NOTHING from Social Security. If its there, bonus. If its not, your not screwed. Start now & you'll be amazed how just 5 bucks a week will grow in 10 to 15 years.

Yep, I have 3 different things going that are going towards retirement funds. I expect my social security checks to be able to pay for groceries or gas or something.

 

[Angcuru]

PS. Start saving for retirement now. Expect to see NOTHING from Social Security. If its there, bonus. If its not, your not screwed. Start now & you'll be amazed how just 5 bucks a week will grow in 10 to 15 years.

Yeah, it's a damn shame. I wish I could just have that SS money taken out of my paycheck put into an untouchable IRA instead of put into a system that is going to be gone before I can make use of it. Good thing that I plan on putting AT LEAST 80% of each paycheck into a savings account while living with my parents. Even though a bunch of that will be taken out for college, that's money I'll be collecting interest on while it's in there.

 

[D-rock]

Course that's a no interest loan to the government when the extra money could be in one of your bank accounts earning interest for you....

Thats what everybody tells me, but then I tell them how much of a extra hassle I would have to go through for so little intrest at the amount I make.

 

[D-rock]

My oh my them W-4s....bah. Filled mine out today for the new job. Grant total of 1 allowance. Woohoo. Upside is that my employer can deposit my paycheck directly into my account, rather than doing the whole "get a check on Friday, deposit, wait a few days for it to clear" deal. Although I use Commerce Bank, which is speedy and reliable in just about everything, waiting is still waiting. Plus I get 3 ATM fee exemptions per month. Whee!

I never let my employer directly deposit my account. I don't trust electronics enough, and I don't want to find out weeks later that they didn't give me enough for that week. Plus if you have it in your hand when they hand it out at work you can complain immediatly.

 

[D-rock]

Is this weird? Or does the Federal Withholding % increase and decrease with the amount of money you bring in?

It isn't so bad, just be glad(hey that rhymes) that your making enough to be taxed at a higher rate.

 

[drothgery]

I never let my employer directly deposit my account. I don't trust electronics enough

As someone who pays virtually of all of my bills online or via automatic debit, directly deposits my paycheck and my tax returns, and uses a debit card or a credit card whenever possible (I wish I could in vending machines and the coin-op laundary machines), I've got to think you're being paranoid.

 

[IronWolf]

I never let my employer directly deposit my account. I don't trust electronics enough, and I don't want to find out weeks later that they didn't give me enough for that week. Plus if you have it in your hand when they hand it out at work you can complain immediatly.

Learn to enjoy the direct deposit. No worries if you are sick on Friday or out of town, the money will be in the bank ready for you. As for making sure you got paid, most banks have a way to access your account statement online. I know in my case I can check my account balance before I even head into work that day. Been doing it for years and love it!

 

[reveal]

I never let my employer directly deposit my account. I don't trust electronics enough, and I don't want to find out weeks later that they didn't give me enough for that week. Plus if you have it in your hand when they hand it out at work you can complain immediatly.

I've been using direct deposit for the last 12 years and have never had a problem with it not showing up.