Flippy or anyone else that knows tax info...

[IgnoreMe 5,000+ posts]

Flippy, are you the resident tax guy? or just the financial guy? meh, ill shoot this out here anyways.

my buddy was recently talking to me about working overtime. he said "its pointless to work overtime, because you get taxed more on it. its like you dont even take anything home after its all said and done".

this got me interested and i started to read, but cant find anything solid (maybe i dont know how to word it into google so it finds the right article). i think its B, but if someone can clarify ill be stoked.

A) your normal gross income is subject to the normal tax brackets (ie, first X and X thousand is at 10%, next X and X thousand is subject to 15% etc etc), and all your overtime gross income is subject to higher tax levels completely independent of the regular gross income (X and X amount of the over time money is at XX% etc etc, just like the normal tax brackets, but higher). i hope this makes sense. ill try to see if i can clarify it in once sentence: what im saying is, is there separate tax brackets for "normal" income and "overtime" income.

or

B) its taxed just the same and all it does it add into your normal gross income and is taxed at such (which can put you into a higher tax bracket, coincidentally if the overtime is the only thing putting you into a higher tax bracket, it can SEEM like your overtime is taxed at a seperate higher rate)

Click to read more...

 

[Calikid 5,000+ posts]

I make 10 hours overtime a week and they take away almost half. :bastards:

 

[IgnoreMe 5,000+ posts]

I make 10 hours overtime a week and they take away almost half. :bastards:

im assuming you're going with A?

 

[montx 10+ year member]

Not working overtime is just stupid. You still get more net income than working your straight forty, but your net will suffer more working with tons of overtime because they tax that separately, unfortunately. Whenever I work 65 hours a week, I see that there is appx. 20% taken out. When I work 40, it's around 14-15% ( not exactly sure ATM). A lot of people where I work refuse to work over a set amount of overtime hours simply because of the outrageous taxation. Simply put - try and get your regular wage increased to minimize the over time reliance -- such as myself.

 

[Gauntlet 5,000+ posts]

Depends on which method the company uses to calculate withholdings, and whether or not overtime pay will then increase the withholding.

http://www.irs.gov/pub/irs-pdf/p15.pdf

Pages 38 - 59

 

[IamDeMan 5,000+ posts]

Your friend is a lazy retard. Yes they may tax more, but you are offsetting it greatly by making 1.5x. Not too mention this extra tax will more than likely come back to you at the end of the year. Your net income still goes up greatly giving you more money. When I was an hourly worker I worked OT and holiday any chance I had. It's ridiculous as an hourly employee and not work OT.

 

[IamDeMan 5,000+ posts]

In fact, lets use the percentages listed above as true.

Let's say the hourly rate we are talking about is $10/hr

If they only take 15% on your regular hours you are effectively making $8.50/hr net

Now during OT they take 20% which makes your net for OT hours $12/hr

 

[IgnoreMe 5,000+ posts]

Your friend is a lazy retard. Yes they may tax more, but you are offsetting it greatly by making 1.5x. Not too mention this extra tax will more than likely come back to you at the end of the year. Your net income still goes up greatly giving you more money. When I was an hourly worker I worked OT and holiday any chance I had. It's ridiculous as an hourly employee and not work OT.

my friend is FAR from lazy. i mean, like ridiculously far. he is just like flip though (or at least from what ive gathered about flip) and is always negative about even positive things.

besides, he's a greedy SOB. he works 12 hours a day pretty much, and a lot of weekends. he just would like to see his money go towards his family and kid, instead of just being taxed to hell and back.

 

[IgnoreMe 5,000+ posts]

Depends on which method the company uses to calculate withholdings, and whether or not overtime pay will then increase the withholding.
http://www.irs.gov/pub/irs-pdf/p15.pdf

Pages 38 - 59

hmm, so its both A and B then?

i read over that link, but it seemed to just give me a bunch of wages and then how its taxed. i didnt really see it mention how overtime is taxed, unless i missed it, which is very possible.

 

[Flipx99 5,000+ posts]

There is a difference between what is withheld and what you are taxed. The withoholding is indeed higher, but at year's end, the govt doesn't know how much you make an hour, or whether a particular hour was OT or straight time. All it knows is dollars.

Option B is correct.

I have never seen on any tax form the number of OT hours one has worked. The principle is the same for bonuses. They are indeed withheld at higher rates, but at the end of the year, it is taxed as ordinary income.

 

[Flipx99 5,000+ posts]

my friend is FAR from lazy. i mean, like ridiculously far. he is just like flip though (or at least from what ive gathered about flip) and is always negative about even positive things.
besides, he's a greedy SOB. he works 12 hours a day pretty much, and a lot of weekends. he just would like to see his money go towards his family and kid, instead of just being taxed to hell and back.

I am not negative...I am pragmatic. I try to see thing objectively.

 

[IgnoreMe 5,000+ posts]

There is a difference between what is withheld and what you are taxed. The withoholding is indeed higher, but at year's end, the govt doesn't know how much you make an hour, or whether a particular hour was OT or straight time. All it knows is dollars.
Option B is correct.

I have never seen on any tax form the number of OT hours one has worked. The principle is the same for bonuses. They are indeed withheld at higher rates, but at the end of the year, it is taxed as ordinary income.

cool. thanks flip

 

[IamDeMan 5,000+ posts]

There is a difference between what is withheld and what you are taxed. The withoholding is indeed higher, but at year's end, the govt doesn't know how much you make an hour, or whether a particular hour was OT or straight time. All it knows is dollars.
Option B is correct.

I have never seen on any tax form the number of OT hours one has worked. The principle is the same for bonuses. They are indeed withheld at higher rates, but at the end of the year, it is taxed as ordinary income.

True. I was thinking he was just talking about withholdings. The tax at the end of the year will still be determined on Gross income no matter what type of hours it was.