A question for any tax experts.

[Silver Owl]

Why are federal tax rates for weekly and bi-weekly different.

For example.
Someone makes $1000.00
The weekly federal tax with 0 dependants would be $112.55 or 11.25%
The bi-weekly federal on that same $1000.00 would be $74.30 or 7.14%

This situation is happening with my wife and I. With just my income getting paid weekly we get a nice refund but after adding in her bi-weekly income we owe money. I really don't understand why the different tax withholding amounts. Shouldn't both withholdings be the same?

[cartman]

Sounds like maybe the every two weeks system might have been doing its calculations based on twice a month.

[Masked]

Looks like you may be calculating the taxes in both cases for a $1000 paycheck. The bi-weekly paycheck should be half the weekly one so that over a year the total income is the same.

[Silver Owl]

Looks like you may be calculating the taxes in both cases for a $1000 paycheck. The bi-weekly paycheck should be half the weekly one so that over a year the total income is the same.

Shouldn't the taxes be the same on $1000.00 whether its weekly or bi-weekly? At tax time the weekly pay would get a refund but the bi-weekly would owe. Thats the part that doesn't make sense to me.

[Masked]

Shouldn't the taxes be the same on $1000.00 whether its weekly or bi-weekly? At tax time the weekly pay would get a refund but the bi-weekly would owe. Thats the part that doesn't make sense to me.

Your tax rate is based on your annual income. Saying your paycheck is $1000/week implies that your annual income is twice that of someone receiving a biweekly paycheck of $1000.

[dacman]

I was trying to respond, but everytime I thought of something concrete -- I thought of an exception.

Tax rules are so conviluded there could be any number of reasons why the withholding rates are so different. Weekly vs. Bi-weekly is not likely one of them though.

[Silver Owl]

Your tax rate is based on your annual income. Saying your paycheck is $1000/week implies that your annual income is twice that of someone receiving a biweekly paycheck of $1000.

Exactly, the weekly pay is $52,000 a year and the bi-weekly is $26,000 a year.
Shouldn't the federal withholding be the same for each paycheck since both are $1,000?

[Silver Owl]

I was trying to respond, but everytime I thought of something concrete -- I thought of an exception.

Tax rules are so conviluded there could be any number of reasons why the withholding rates are so different. Weekly vs. Bi-weekly is not likely one of them though.

Our tax situation is pretty simple I'm not sure what exceptions could apply here. It seems that the difference is Weekly vs. Bi-weekly but for the life of me I can't figure out why that would be.

[dacman]

Shouldn't the federal withholding be the same for each paycheck since both are $1,000?

Not necessarily.

Are you an exempt employee (salaried (i.e. not paid by the hour))?
Do you work for the federal gov't or armed forces?
Do you work for a non-federal (state, local) gov't?
Are you paid primarily by comission?
Are you paid primarily by tips?
Are you recently married (did you file single or married-filing-seperately last year)?
Have you claimed EIC (Earned Income Credit) on your taxes in the last 2 years?
Do you work for a charity or not-for-profit?
Do you work for a business in a free enterprise zone?
Do you work for an agricultural company (esp. a farm)?

If you or your spouse can answer yes to any of those questions -- that might be the reason(s) why the withholding rates are different. It could also just be an error on the part of one of the HR/Payroll depts.

[Masked]

Exactly, the weekly pay is $52,000 a year and the bi-weekly is $26,000 a year.
Shouldn't the federal withholding be the same for each paycheck since both are $1,000?


No - you have a different effective tax rate in each scenario.

Simple example assume a 10% tax and a 10,000 standard deduction. If your annual income is 52K, you pay a 10% tax on 42K for a total of $4.2K. Your withholding per paycheck is $4.2K/52 which is about $81. (Note your effective tax rate is $4200/52000 = 8%)

If your annual income is $26K, you pay a 10% tax on 16K for a total of $1.6K. The withholding per paycheck is $1.6K/26 which is about $61.50. (Your effective tax rate is ~6%)

[dacman]

No - you have a different tax rate in each scenario.

Simple example assume a 10% tax and a 10,000 standard deduction. If your annual income is 52K, you pay a 10% tax on 42K for a total of $4.2K. Your withholding per paycheck is $4.2K/52 which is about $81.

If your annual income is $26K, you pay a 10% tax on 16K for a total of $1.6K. The withholding per paycheck is $1.6K/26 which is about $61.50.


That's tax rate, not withholding rate. They are not the same thing (even though they are usually very similar).

[Masked]

That's tax rate, not withholding rate. They are not the same thing (even though they are usually very similar).

The tax rate in my example is 10% for both the weekly and bi-weekly scenario. The withholding rate is either 8 or 6% depending the frequency. I admit my example is simplistic and ignores a lot of other variables - however, I don't think those matter in this case.

[dacman]

Exactly, the weekly pay is $52,000 a year and the bi-weekly is $26,000 a year.
Shouldn't the federal withholding be the same for each paycheck since both are $1,000?

I see your problem. The withholding rates take into account the standard deduction and exemption, and to some degree tax rates, so the withholding on a $26,000/yr income is not the same percentage as on a $52,000/yr income.

It has nothing to do with weekly or bi-weekly pay, only overall pay. Both of the rates you quoted are the married withholding rates (which assume 2.4 kids or whatever the average is now), so the only real way to remedy this is for one of you to withhold extra.

[CU Tiger]

There are also the brackeets to consider.
I.E. the dreaded overtime principal. (Where you work overtime and bring home less)

I dont have the table in front of me. But $1,000 bi-weekly or 26K/annual with dependents is poverty level. $1,000k weekly or 52 k annual is in a different tax bracket.

Similar situation as anyone working on commission. Have a big sale and get a single check worth say 5k and the payroll program will extrapolate that over a year and assume you make $260K and tax you accordingly.

I'm not sure if I am making sense, bu all the payroll programs do not look at your YTD earnings they treat each transaction as a separate entity. Likewise they do not consider spousal earning. Solo you maybe in a 8% bracket but combined it may bump to a 12% bracket.


make sense?