Federal tax - how does it work?
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  Federal tax - how does it work?
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Plankton5165
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« on: March 18, 2018, 01:59:35 PM »

I'm aware there will be money taken out of the paycheck, and you have to pay more money before April 15.

Is the same federal tax (10-40%) a double whammy? (really, the 40% tax is actually 64%.)
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cinyc
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« Reply #1 on: March 18, 2018, 06:52:27 PM »

You only have to pay more money before April 15 if you haven't paid enough taxes (through withholding) for the year or you're self-employed. Most people probably get a refund on or before April 15, and likely think that giving the government an interest-free loan of their money is a good thing. It's not.
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Mr. Smith
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« Reply #2 on: March 18, 2018, 07:18:54 PM »

You only have to pay more money before April 15 if you haven't paid enough taxes (through withholding) for the year or you're self-employed. Most people probably get a refund on or before April 15, and likely think that giving the government an interest-free loan of their money is a good thing. It's not.

If you didn't make anything or didn't make anything significant, you won't have to pay anything at all...but you won't get anything back either.
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« Reply #3 on: March 19, 2018, 09:43:39 AM »

You only have to pay more money before April 15 if you haven't paid enough taxes (through withholding) for the year or you're self-employed. Most people probably get a refund on or before April 15, and likely think that giving the government an interest-free loan of their money is a good thing. It's not.

A lot of people can't avoid that. Like people who get paid heavily based on commission or people that get very different sized checks throughout the year due to bouts of overtime.
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True Federalist (진정한 연방 주의자)
Ernest
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« Reply #4 on: March 19, 2018, 07:07:38 PM »

You only have to pay more money before April 15 if you haven't paid enough taxes (through withholding) for the year or you're self-employed. Most people probably get a refund on or before April 15, and likely think that giving the government an interest-free loan of their money is a good thing. It's not.

A lot of people can't avoid that. Like people who get paid heavily based on commission or people that get very different sized checks throughout the year due to bouts of overtime.

Actually, it is avoidable.  If your wages are based on commission, and/or you reasonably expect to have those bouts of overtime, you can take fewer allowances and/or ask to have extra taken out of your paycheck.

Alternatively, if you don't expect to make much it is legally possible to avoid having anything taken out of your paycheck except for FICA taxes and also save yourself from having to file a tax return at all if you are a dependent and don't have ≥ $350 in investment income.  Fill out your W-4 as "exempt" but don't do it unless you expect to have less than $12,000 in earnings and that you'll be a dependent.  If you aren't a dependent you'll qualify for the EIC, but you can only get that if you file a return, so even if you don't make much you'll still want to file a return to get that.
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BRTD
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« Reply #5 on: March 19, 2018, 07:29:15 PM »

You only have to pay more money before April 15 if you haven't paid enough taxes (through withholding) for the year or you're self-employed. Most people probably get a refund on or before April 15, and likely think that giving the government an interest-free loan of their money is a good thing. It's not.

A lot of people can't avoid that. Like people who get paid heavily based on commission or people that get very different sized checks throughout the year due to bouts of overtime.

Actually, it is avoidable.  If your wages are based on commission, and/or you reasonably expect to have those bouts of overtime, you can take fewer allowances and/or ask to have extra taken out of your paycheck.

...that would just result in more being taken out and thus a return, hence the "interest free loan" even moreso.

I've been told by employees of Verizon retail stores that they receive two and sometimes three checks a month, but commission is paid only once a month. And commission is often half of their pay. In other words the check including commission is usually about three times the other check. There's no way to avoid paying way higher taxes on that commission included check.
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Blue3
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« Reply #6 on: March 19, 2018, 10:01:31 PM »

Also it's important to understand brackets.

Say there's three tax brackets: under $60k is 5%, $60k-$249k is 15%, $250k+ is 45%.

If you make $255k...
-your first $60k is charged with 5% tax, until you reach $250k the rest is taxed at 15%, and that last $5k over the 250-mark is taxed at 45%. NOT the entire income charged at 45%. That's how tax brackets work.
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True Federalist (진정한 연방 주의자)
Ernest
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« Reply #7 on: March 20, 2018, 06:42:29 AM »

You only have to pay more money before April 15 if you haven't paid enough taxes (through withholding) for the year or you're self-employed. Most people probably get a refund on or before April 15, and likely think that giving the government an interest-free loan of their money is a good thing. It's not.

A lot of people can't avoid that. Like people who get paid heavily based on commission or people that get very different sized checks throughout the year due to bouts of overtime.

Actually, it is avoidable.  If your wages are based on commission, and/or you reasonably expect to have those bouts of overtime, you can take fewer allowances and/or ask to have extra taken out of your paycheck.

...that would just result in more being taken out and thus a return, hence the "interest free loan" even moreso.

I've been told by employees of Verizon retail stores that they receive two and sometimes three checks a month, but commission is paid only once a month. And commission is often half of their pay. In other words the check including commission is usually about three times the other check. There's no way to avoid paying way higher taxes on that commission included check.

Then go the other way and have extra allowances so that less is taken out.  My point is that it is both possible and legal to adjust your withholdings so that you have the desired level taken out during the year.  Just don't overdo it the other way as if you have too little taken out during the year, you may get socked with a penalty.
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Plankton5165
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« Reply #8 on: March 24, 2018, 10:10:28 AM »

How much money do you need to make to have to pay before April 15, even if money is already taken out of the paychecks?
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True Federalist (진정한 연방 주의자)
Ernest
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« Reply #9 on: March 24, 2018, 10:49:21 AM »

It depends on how much you had taken out and how much you owe. That said, for 2017 you need to have made more than $6350 as a dependent to owe any Federal income tax. If you aren't a dependent, you should definitely file if you had any earned income. If it wasn't a lot, then you might not owe any tax, you'd qualify for the refundable Earned Income Credit, but you must file to get it.

Also if you got paid as a contractor (received a 1099-MISC instead of a W-2) you need to file.
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