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That's not how tax brackets work, but it is how some brain-dead payroll systems work! I have seen first hand a broken payroll system that simply extrapolates th

by vidanay 11y ago

That's not how tax brackets work, but it is how some brain-dead payroll systems work! I have seen first hand a broken payroll system that simply extrapolates the current pay period out into the full calendar year and then deducts taxes at that rate. This has the result of a small gross increase (usually due to intermittent overtime pay) resulting in a net decrease in pay for that pay period. This is very much an edge condition of an already broken model, but I have definitely seen it happen.

noxryan 11y ago
What you're describing is tax-withholding. In this situation you would receive the extra tax withheld when you file your tax return, so you're not really having extra tax taken from you. You could also always claim more allowances on your W-4.
repiret 11y ago
> extrapolates the current pay period out into the full calendar year and then deducts taxes at that rate For US Federal taxes, thats generally how its supposed to work - see [1], and for some exceptions [2]. > small gross increase [...] resulting in a net decrease in pay for that pay period If a payroll system is doing that, its not for the reason you cite. US tax rates are such that an increase in gross pay always results in an increase in net pay, and that doesn't change when you divide gross and net by 24 (or however many pay periods you have each year). [1]: https://www.irs.gov/publications/p15/ar02.html#en_US_2015_publink1000254685 https://www.irs.gov/publications/p15/ar02.html#en_US_2015_pu... [2]: https://www.irs.gov/publications/p15a/ar02.html#en_US_2015_publink1000236700 https://www.irs.gov/publications/p15a/ar02.html#en_US_2015_p...
aninhumer 11y ago
My understanding is that this is done so people get consistent monthly payments in the common case. Otherwise people who plan based on their monthly pay at the start of the year might end up in serious difficulty when it suddenly drops. If this results in your being underpaid for whatever reason, it will be corrected at the end of the financial year.

by vidanay 11y ago

noxryan 11y ago

What you're describing is tax-withholding. In this situation you would receive the extra tax withheld when you file your tax return, so you're not really having extra tax taken from you. You could also always claim more allowances on your W-4.

repiret 11y ago

> extrapolates the current pay period out into the full calendar year and then deducts taxes at that rate For US Federal taxes, thats generally how its supposed to work - see [1], and for some exceptions [2]. > small gross increase [...] resulting in a net decrease in pay for that pay period If a payroll system is doing that, its not for the reason you cite. US tax rates are such that an increase in gross pay always results in an increase in net pay, and that doesn't change when you divide gross and net by 24 (or however many pay periods you have each year). [1]: https://www.irs.gov/publications/p15/ar02.html#en_US_2015_publink1000254685 https://www.irs.gov/publications/p15/ar02.html#en_US_2015_pu... [2]: https://www.irs.gov/publications/p15a/ar02.html#en_US_2015_publink1000236700 https://www.irs.gov/publications/p15a/ar02.html#en_US_2015_p...

aninhumer 11y ago

My understanding is that this is done so people get consistent monthly payments in the common case. Otherwise people who plan based on their monthly pay at the start of the year might end up in serious difficulty when it suddenly drops. If this results in your being underpaid for whatever reason, it will be corrected at the end of the financial year.