Federal Tax Deduction From Paycheck
December 11th, 2008Question: Is there a tax imposed on overtime specifically?
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: 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.
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