No overtime taxes.

[justoffal]

This is not quite correct.

IRS Publicatgion 15-T provides the instructions for calculation of Federal withholding.

While it is true that the pay period compensation is forcast to an annual amount (called the Annual Adjusted Wage Amount or AAWA), that figure is based on the pay cycle not the week. Pay cycles are typically Monthly, Semi Weekly, Bimonthly, and Weekly (although it can be a Daily cycle that is pretty rare). Secondly, that Annual Adjust Wage Amount is only used for that pay cycle for when wages/salaries are earned. The AAWA is cycle dependent and is recalculated for each payroll period.

The system's do this dynamically just to prevent the kind of "distortion" you suggest in your post. It implies if that 80 work week occured in the first week in January, the that tax bracket (rate) determination would apply for the full year causing what you call the "distortion". That isn't the case, the AAWA projection applies only to that pay cycle.

WW

https://www.irs.gov/pub/irs-pdf/p15t.pdf

Yes that's exactly what I mean...one week gets the higher rate and the next regular paycheck corrects. Most folks don't understand that everything evens out in the refund.

 

[hadit]

Yes that's exactly what I mean...one week gets the higher rate and the next regular paycheck corrects. Most folks don't understand that everything evens out in the refund.

In the meantime, the government gets to hold onto what I've earned for up to a year, only to give it back to me as payment for a no-interest loan.

 

[Concerned American]

Yes that's exactly what I mean...one week gets the higher rate and the next regular paycheck corrects. Most folks don't understand that everything evens out in the refund.

For years, I had more than Single, no dependents deduction from my pay because I didn't want to pay at the end of the year. Many people complain that is giving the gov't a free loan but the peace of mind of not having to sweat the taxes was worth it to me.

 

[WorldWatcher]

For years, I had more than Single, no dependents deduction from my pay because I didn't want to pay at the end of the year. Many people complain that is giving the gov't a free loan but the peace of mind of not having to sweat the taxes was worth it to me.

I’m on board with that. But we like owing a little bit.

What we do is manage our taxes so we are at the end of the year owing a small amount. This year we hit owing $300.

There is then a window between January and April where you can make an IRA contribution and apply it to the previous tax year for your return.

This year a few thousand from our “House Fund” over projected needs was moved dropping the total owed to $89. Which was pretty good.

WW

 

[Concerned American]

There is then a window between January and April where you can make an IRA contribution

LOL, if only. I've reached the age where they're forcing me to take minimum distributions from my retirement accounts.

 

[WorldWatcher]

LOL, if only. I've reached the age where they're forcing me to take minimum distributions from my retirement accounts.

Ya, your boned. LOL.

Seriously, and get professional advice, don't take my word as a rando Internet poster.

Look into what I call "Income Bracketing".

Let's say - just as an example - you are Single and in December you do a rough out on your taxes and have $150,000 AGI. That is the 24% tax bracket. It can make sense to take additional money out of your Deferred Compensation accounts and pay the taxes now instead of just taking the required RMD. This is because the next bracket (32%) doesn't kick in until around an AGI of $197,000. It's a way of lowering tax deferred assets now to not get hit with a higher bracket (rate) later.

Now if you are in the 24% bracket and have an AGI of say $190,000, you really don't have a lot of room before the next bracket kicks.

You can use the revenue to invest in similar non-tax deferred accounts and only pay income taxes on the dividends, or pay down the house, or setup a college fund for the grand kids, or over time "gift" money to the kids.

I'd advise - if you already aren't - investigate the rules for what happens to your 401K when you pass. They are significantly different if you have a spouse verses having "beneficiaries".

WW

 

[ThisIsMe]

How many workers actually get tips and or overtime?

About 6% of the country claims to work overtime.

So It brings up the question, as far as overtime, would it be a bad thing to cut it? It would be about 96B per year.

No taxes on tips would be about 100B per year.

So about 200B per year total.

Would that be a big enough loss in a budget that is in the trillions?

 

[justoffal]

About 6% of the country claims to work overtime.

So It brings up the question, as far as overtime, would it be a bad thing to cut it? It would be about 96B per year.

No taxes on tips would be about 100B per year.

So about 200B per year total.

Would that be a big enough loss in a budget that is in the trillions?

Drop in the bucket....
Nothing but financial fodder in the face of an ever-changing dollar value

 

[initforme]

The overtime pay rate also needs a good sized boost.

 

[justoffal]

The overtime pay rate also needs a good sized boost.

Most union shops are 1.5 between 8 hours and 12 hours then 2.0 after 12.

 

[initforme]

If one doesn't like paying overtime wages then don't offer overtime. If overtime hours are that necessary then simply pay more.

 

[Concerned American]

If one doesn't like paying overtime wages then don't offer overtime. If overtime hours are that necessary then simply pay more.

Overtime is offered as needed by the employer. Rates paid are commensurate with what is economically feasible when weighed against the cost of bringing on more employees. Your answer for everything is "kill the employer (golden goose)." It is a stupid stance and hypocritical because you won't pay your care givers what you believe is a fair wage.

 

[initforme]

Overtime is offered as needed by the employer. Rates paid are commensurate with what is economically feasible when weighed against the cost of bringing on more employees. Your answer for everything is "kill the employer (golden goose)." It is a stupid stance and hypocritical because you won't pay your care givers what you believe is a fair wage.

Well my caregiver is my wife, at home. She's been collecting her pension us social security for 25 years now. Paying overtime wages doesn't kill an employer.

 

[alang1216]

This is why I voted for Donald Trump:

Years ago, I thought to myself that taxing overtime pay at a higher rate was unfair to average workers. I had a wild thought: what if overtime pay was tax free? I mentioned this to one of my coworkers and he laughed. “Yeah, good luck with that”. Well, Donald Trump is floating that idea, and I think it’s a long time coming.

It must have been about twenty years ago, but I recall being told by the company I worked for that mandatory overtime was the new rule. All the salaried workers got the weekend off but regular rank and filers like me had to work Saturdays and even Sundays. One day I told my boss that I did not want to work on Saturday. He said, “No exceptions”. I said I was not working. About an hour later I got visit form higher-up who wanted to know what the problem was, in an Indian accent of course.

I told him I had other plans, and he said we work mandatory overtime here and if you don’t like it, you know where the door is. I worked Saturday like I worked every Saturday. I retired after 30 years there.

Overtime pay should not be taxed because it is essentially a punishment for working harder and longer especially if it is mandatory. I would like to see income taxes on overtime pay eliminated for workers today even though I will not benefit from it. Companies pay a higher rate for overtime pay and the government should not be entitled to steal that money through extra taxes that push a worker into a higher tax bracket. Does anyone recall any Washington swamp politician calling for no overtime taxes on average workers?

Donald Trump is doing that and he is known for saying what he means and doing what he says. Washington swampers are now being exposed for the kleptocrats they are, and they are not happy.

In theory not taxing tips or overtime sounds great but the devil is in the details and I wonder what changes this proposal would bring. If an employer had you work 20 hours/week with mandatory 20 hours/week of overtime you'd get a raise from the government so the employer could pay you less. Same for tips. Would every service job require tipping? If you went to a doctor would there be a mandatory tip on his bill?

 

[Concerned American]

Paying overtime wages doesn't kill an employer.

No, and I didn't claim it did. However doubling current overtime wages might and it definitely would be inflationary.

 

[initforme]

No, and I didn't claim it did. However doubling current overtime wages might and it definitely would be inflationary.

I doubt that. Workers receiving a few more dollars doesn't lead to inflation.