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Old 10-30-06, 05:34 PM   #1
TexasGuy
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Payroll: Biweekly - weekly.

Say a person who is not salaried, e.g. he is given x amount of hours a week at y amount of money.

People claim that when his company stops paying him weekly and instead moves him to bi-weekly that they are going to take much more taxes out despite him remaining at the same pay rate.

I do not understand why this is, as tax is a percentage of money. 20% of 1000 bucks is always 200 bucks regardless of how it is given to you as long as that is what is given to you in the same time frame.
I also can't seem to find the proper terms to look up the tax legislation regarding this.

Can anybody clear this up? thanks.
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Old 10-30-06, 05:44 PM   #2
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tax bracket, if he is only making x amount a week they assume he is in a certain tax bracket, if you double that amoun thtey take more taxes
it is weird

it is like the way if you work more overtime past a certain point you end up making less moey cause you move to a different tax bracket
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Old 10-30-06, 05:54 PM   #3
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but that doesnt make any sense
Let's say He's making 200 a week. He's always making 200 a week. The amount of meony he makes weekly isn't changing. Just when he gets paid is changing.
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Old 10-30-06, 06:00 PM   #4
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In my experience (actually running payroll for a couple of companies) most software (i.e. Quickbooks)
assigns the tax withholding based on the assumtion that the particular amount you are being paid
will be identical for every check all the way to the end of the year. (Gross Pay from one check * #of Payperiods = Estimated Yearly Gross Pay).The number of days in a payperiod IS taken into consideration, so It really shouldnt matter.

TexasGuy- PM me if you need a hand with this. Id be glad to help.
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Old 10-30-06, 06:03 PM   #5
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Anyway- if you think they really are withholding too much, Its your right to
change the withholding by filling out a new W-4. You can find one on www.irs.gov click 'forms and publications'
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Old 10-30-06, 06:34 PM   #6
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Originally Posted by Hobartlemagne
Anyway- if you think they really are withholding too much, Its your right to
change the withholding by filling out a new W-4. You can find one on www.irs.gov click 'forms and publications'
Originally it waas just posed as a question - because everyboyd said "when you siwtch to bi-weekly payroll you autoamtically get taxed more" and I told them that should be baloney because you're pay rate is not changing and taxes is based off of a percentage of what you make.

Then after looking at his pay stubs and seeing the difference. 19~ versus 11-12~ I got worried taht they may not be taking enough out.
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Old 10-30-06, 09:14 PM   #7
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Quote:
Originally Posted by TexasGuy
Originally it waas just posed as a question - because everyboyd said "when you siwtch to bi-weekly payroll you autoamtically get taxed more" and I told them that should be baloney because you're pay rate is not changing and taxes is based off of a percentage of what you make.

Then after looking at his pay stubs and seeing the difference. 19~ versus 11-12~ I got worried taht they may not be taking enough out.
I suspect a problem when the setup on the change over occurred.
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Old 10-30-06, 09:17 PM   #8
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I suspect a problem when the setup on the change over occurred.
Actually they are currently 2 different jobs although he is now getting hired on and that company will pay him bi-weekly instead of weekly.
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Old 10-30-06, 11:16 PM   #9
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If I remember what my dad (who is an accountant) told me right, they treat each paycheck as if it represented what you make each week for the year (52 weeks) regardless of the actual pay period. The prorated annual salary determines your tax bracket. You account for the difference when you file your 1040 tax return. The difference could be really big if you counted your deductions wrong on your W-4...and if you counted too many or have excess income to declare, you could end up owing the IRS.

Tax brackets are somewhat complicated, but they are weighted so that low income households pay less. So despite what the alarmists say, the rich really do pay more taxes than the poor. Even after "tax breaks for the rich," they still pay more. For example, in 2006, if you're single and make between $0 and $7550 you pay 10%. If you make between $7550 and $30650, you pay $755 plus 15% of the amount over $7550. This creates a semi-smooth sliding scale.

For further illustration, if you make over $336500, your tax is $97653 + 35% of the amount over $336500. You only ever see about 2/3 of your earnings.

Oh...I just noticed Hobartlemagne already said most of what I did. Oh well.
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Old 10-30-06, 11:23 PM   #10
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I still don't get how that changes with weekly vs. bi-weekly. If you assume that the tax-bracket selected is based upon yearly-pay, then $1000-weekly x 52-weeks = $52k/year. The other way of getting it is $2000-biweekly x 26-payperiods = $52k/year. Same income should then result in same tax-bracket and same deductions right?
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Old 10-30-06, 11:43 PM   #11
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Let me clarify what I was saying (and I think it's right, but don't quote me on it without confirmation) with your example.

Your employer records a payment of $2000 salary. They don't care that you won't get another for 2 weeks. For whatever reason (I suppose it simplifies things somehow with the IRS), they prorate it as a payment that you would receive every week. So they calculate that your annual salary, based on that one payment, would be $104,000. They're still treating it as if you had 52 pay-periods. If the next two weeks you only work 20 hours/week and your check is $1000, the deduction for that check is calculated based on an annual salary of $52,000.

I know it sounds weird, but that's the IRS for you. Again, you reconcile the difference when you file your 1040 with your actual income.
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Old 10-30-06, 11:51 PM   #12
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Quote:
Originally Posted by TexasGuy
I also can't seem to find the proper terms to look up the tax legislation regarding this.

Can anybody clear this up? thanks.
The definitive guide is "Circular E" at irs.gov.

You'll find there are differences in both the percentage method and the table method for determining witholdings for the different lengths of pay periods. This is so that the amount witheld over the course of a full year is the same, no matter which pay period is in use.

Errors in witholding can sometimes be traced to the employer using the wrong set of calculations or tables. This happens most often when switching from one period to another without changing percentages or tables used to calculate witholding.

The same thing applies to most state and city tax witholding.

Don't forget to also check garnishments, union dues and other voluntary payroll deductions as well.
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Old 10-31-06, 01:03 AM   #13
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I was switched from hourly to salary this past summer - no pay increase. I'm looking at 2 paycheck stubs here for approximately the same time period. We're all paid bimonthly where I work, whether we are hourly or salary. So, there's $27 more on my take-home pay from the hourly stub than the salary stub. The main reason for that is that I elected to have more mone taken out of my check for my 403B than previously. It looks to me like there's about a $2 difference in taxes between the 2 paychecks when you factor that in. Doesn't seem like much of a difference to me.
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Old 10-31-06, 07:21 AM   #14
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Quote:
Originally Posted by donnamb
I was switched from hourly to salary this past summer - no pay increase. I'm looking at 2 paycheck stubs here for approximately the same time period. We're all paid bimonthly where I work, whether we are hourly or salary. So, there's $27 more on my take-home pay from the hourly stub than the salary stub. The main reason for that is that I elected to have more mone taken out of my check for my 403B than previously. It looks to me like there's about a $2 difference in taxes between the 2 paychecks when you factor that in. Doesn't seem like much of a difference to me.
The one that i'm seeing on my bro's paystub is a near 7% difference. 11-12 versus 18-19
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Old 10-31-06, 07:56 AM   #15
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Quote:
Originally Posted by TexasGuy
The one that i'm seeing on my bro's paystub is a near 7% difference. 11-12 versus 18-19
If you're talking 11%-12% vs 18%-19%, chances are they're still calculating witholding with the weekly percentages or tables. If you're talking in dollars, then maybe they confused bi-weekly (26 pay periods/yr) with semi-monthly (24 pay periods/yr). Either way, something doesn't sound right.
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Old 10-31-06, 07:57 AM   #16
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Originally Posted by tsl
If you're talking 11%-12% vs 18%-19%, chances are they're still calculating witholding with the weekly percentages or tables. If you're talking in dollars, then maybe they confused bi-weekly (26 pay periods/yr) with semi-monthly (24 pay periods/yr). Either way, something doesn't sound right.
Yeah. My bad those are supposed to be percentages
11%-12% vs 18%-19%
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Old 10-31-06, 12:44 PM   #17
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Quote:
Originally Posted by iamlucky13
Let me clarify what I was saying (and I think it's right, but don't quote me on it without confirmation) with your example.

Your employer records a payment of $2000 salary. They don't care that you won't get another for 2 weeks. For whatever reason (I suppose it simplifies things somehow with the IRS), they prorate it as a payment that you would receive every week. So they calculate that your annual salary, based on that one payment, would be $104,000. They're still treating it as if you had 52 pay-periods. If the next two weeks you only work 20 hours/week and your check is $1000, the deduction for that check is calculated based on an annual salary of $52,000.

I know it sounds weird, but that's the IRS for you. Again, you reconcile the difference when you file your 1040 with your actual income.
I'm sorry, but I think you've been lead down the primrose path. They can't tax you on twice your salary. Think about what you wrote. Pay period is considered in the equation, somehow. Not sure exactly how, but it is. If you make $2k every other week, they don't tax you as if you're going to make $104K per year.

Maybe there some exceptions, say for people on commission or something with wildly varying salaries, but for your average hourly or salaried worker, it's based on your check and the pay period.

Otherwise, the guy making $52K per year taxed at $104 would take home probably around $20K and have to wait until refund time to get his refund of $15K? You'd have to show me some paystubs and W4s for me to buy this one.
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Old 10-31-06, 05:18 PM   #18
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Quote:
Originally Posted by c0urt
tax bracket, if he is only making x amount a week they assume he is in a certain tax bracket, if you double that amoun thtey take more taxes
it is weird

it is like the way if you work more overtime past a certain point you end up making less moey cause you move to a different tax bracket
I get payed bi-weekly, not sure what the problem is. The gov't has a set rate of taxes they are going to take out, no matter if it is every week or every other week the set percentage never changes. I could be wrong though.
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Old 10-31-06, 08:08 PM   #19
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it is like the way if you work more overtime past a certain point you end up making less moey cause you move to a different tax bracket
Many people think that this is true but it's not the case. As Iamlucky13 said, each bracket encompasses a set amount of pay and that pay is taxed at a certain rate. As for why the tax changes for a weekly versus biweekly rate, I've not heard that before.
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Old 10-31-06, 11:15 PM   #20
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Quote:
Originally Posted by TexasGuy
Yeah. My bad those are supposed to be percentages
11%-12% vs 18%-19%
I suspect your bro is getting too much withheld and needs to contact or pay a visit to Payroll.
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