4 ms·

how is that possible with tax being pulled out of paychecks?

wjossey 5y ago
Because you get a refund for taxes paid which you didn’t owe. You pay an estimate over the course of the year based on how much your employer thinks you’ll make, then they (the IRS) refund you the difference if you make too little, or have sufficient deductions to further lower your tax bill.
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Jtsummers 5y ago
At least two ways: 1. Refunds if you were overtaxed during the year. For instance, someone making $100k/year but was laid off in March or April when COVID closures started hitting may have had a large amount withheld that was refunded if they remained unemployed the rest of the year. 2. Your income is sufficiently low. If your income is below a certain threshold (or you just claim a lot of credits on your W-4) then nothing will be withheld. Common with minimum wage part-time jobs.
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chrisseaton 5y ago
> how is that possible Doesn't the US have a 0% tax bracket? And even if it didn't, whatever% of $0 income is $0.
daveslash 5y ago
Part of the article's point was that so fewer people even got paychecks in 2020. That, and pandemic relief in the form of tax credits, which reduced people's tax liability. But also keep in mind: not everyone who has income gets it from a paycheck; plenty of self-employed or small business people don't get paychecks; when they're paid, it's up to them to put money aside all year to pay taxes at tax time.
TheCoelacanth 5y ago
It's not. They aren't counting payroll taxes as federal income taxes.
niij 5y ago
Federal income tax on your paycheck is based on an estimate that you're responsible to calculate when you file the w-4 when you start working at a new employer (it can be amended at any time). Those paycheck estimated payments are added up and deducted from what you actually owe at the end of the year and result in either a refund (you overestimated) or taxes due (you underestimated). If your net federal income tax is $0 there is an exemption box on the w-4 you can check. That causes no federal income tax to be withheld, but the same end of year calculation may find you owe money if you made more than expected.

Because you get a refund for taxes paid which you didn’t owe. You pay an estimate over the course of the year based on how much your employer thinks you’ll make, then they (the IRS) refund you the difference if you make too little, or have sufficient deductions to further lower your tax bill.

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Jtsummers 5y ago

At least two ways: 1. Refunds if you were overtaxed during the year. For instance, someone making $100k/year but was laid off in March or April when COVID closures started hitting may have had a large amount withheld that was refunded if they remained unemployed the rest of the year. 2. Your income is sufficiently low. If your income is below a certain threshold (or you just claim a lot of credits on your W-4) then nothing will be withheld. Common with minimum wage part-time jobs.

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chrisseaton 5y ago

> how is that possible Doesn't the US have a 0% tax bracket? And even if it didn't, whatever% of $0 income is $0.

daveslash 5y ago

Part of the article's point was that so fewer people even got paychecks in 2020. That, and pandemic relief in the form of tax credits, which reduced people's tax liability. But also keep in mind: not everyone who has income gets it from a paycheck; plenty of self-employed or small business people don't get paychecks; when they're paid, it's up to them to put money aside all year to pay taxes at tax time.

TheCoelacanth 5y ago

It's not. They aren't counting payroll taxes as federal income taxes.

niij 5y ago

Federal income tax on your paycheck is based on an estimate that you're responsible to calculate when you file the w-4 when you start working at a new employer (it can be amended at any time). Those paycheck estimated payments are added up and deducted from what you actually owe at the end of the year and result in either a refund (you overestimated) or taxes due (you underestimated). If your net federal income tax is $0 there is an exemption box on the w-4 you can check. That causes no federal income tax to be withheld, but the same end of year calculation may find you owe money if you made more than expected.