Question about withholding

[Jay968]

What is the name of your state?California

I'm basically retired but I've been working part time for several months now. I sometimes work enough to earn over $500 in a 2 week pay period, and I sometimes work enough to earn only $50. It varies. I DO have some voluntary extra taken out to account for additional income above my social security checks and my wife's earnings.

I have never yet even once had any fed nor state withholding by my employer from any of my paychecks other than my own designated "extra" amount and a few dollars for medicare. I've been told that the reason is that I just do not make enough money for them to do so. Payroll also tells me that if I make less than $12,000 for the year, anything that they would have taken out, would be refunded to me anyway when I do my taxes and that this why they still don't take anything out if my paycheck grosses over $500.

Does this make sense? I've been shown the tax withholding tables and they do confirm what I am being told.
But has something changed in the past few years?
I have never once worked at a job in the past where absolutely nothing was taken out at all, no matter how small the pay was.

 

[adjusterjack]

Does this make sense?

Yes.

I've been shown the tax withholding tables and they do confirm what I am being told.
But has something changed in the past few years?

Here is Publication 15T for 2021. Go to the tables on Page 6. Depending on how you file, withholding appears to be -0- up to varying income amounts.

2021 Publication 15-T (irs.gov)

 

[Jay968]

Thanks for the reply.

I know I asked if it makes sense but my bigger question was "has something changed in the past few years?" Why have I had tax withheld from paychecks in my past that were far smaller than the checks I have nothing taken out of now? And why do I still know people who ARE having taxes withheld even from small paychecks?

I know about the tax tables. At a cutoff of about $12,000 what happens if a person happens to work an extra unforeseen amount of hours in December, putting him at say $18,000 for the year instead of his normal $12,000? Is his tax rate then based on an $18,000 salary $12,000 of which has had no withholding taken out of all year? Wouldn't this penalize him? Or is his tax rate based on ONLY on the $6000 over and above the $12,000? Or does the 1040 account for the fact that the first $12,000 are not taxable?

 

[zddoodah]

This appears to be basically a duplicate of this thread from nearly three months ago.

 

[LdiJ]

What is the name of your state?California

I'm basically retired but I've been working part time for several months now. I sometimes work enough to earn over $500 in a 2 week pay period, and I sometimes work enough to earn only $50. It varies. I DO have some voluntary extra taken out to account for additional income above my social security checks and my wife's earnings.

I have never yet even once had any fed nor state withholding by my employer from any of my paychecks other than my own designated "extra" amount and a few dollars for medicare. I've been told that the reason is that I just do not make enough money for them to do so. Payroll also tells me that if I make less than $12,000 for the year, anything that they would have taken out, would be refunded to me anyway when I do my taxes and that this why they still don't take anything out if my paycheck grosses over $500.

Does this make sense? I've been shown the tax withholding tables and they do confirm what I am being told.
But has something changed in the past few years?
I have never once worked at a job in the past where absolutely nothing was taken out at all, no matter how small the pay was.

It really depends on how you fill out the new W4. You can include your wife's income and your SS income on the form, which would cause them to perhaps withhold something, (if they actually understand how to do it themselves, many employers do not) but it really is just easier to tell them how much to withhold by using the spot for the extra withholding.

It is true however, that in general an employer is going to treat the wages as your only income unless you tell them something different, so if you are not earning enough for them to withhold any federal income taxes then they won't unless you tell them to withold "extra".

 

[LdiJ]

Thanks for the reply.

I know I asked if it makes sense but my bigger question was "has something changed in the past few years?" Why have I had tax withheld from paychecks in my past that were far smaller than the checks I have nothing taken out of now? And why do I still know people who ARE having taxes withheld even from small paychecks?

Yes, something has changed in the last few years. Congress substantially raised the standard deduction and the IRS completely redesigned the W4. The intent of the redesign was to bring people to break even on their withholding.

I know about the tax tables. At a cutoff of about $12,000 what happens if a person happens to work an extra unforeseen amount of hours in December, putting him at say $18,000 for the year instead of his normal $12,000? Is his tax rate then based on an $18,000 salary $12,000 of which has had no withholding taken out of all year? Wouldn't this penalize him? Or is his tax rate based on ONLY on the $6000 over and above the $12,000? Or does the 1040 account for the fact that the first $12,000 are not taxable?

The way withholding is supposed to work is by paycheck, rather than throughout the year. Here is an example:

Paycheck for two week period, gross pay 500.00. 26 pay periods per year would bring that to 13,000. A small amount of tax should be withheld.
Paycheck for two week period, gross pay 250.00. 26 pay periods per year would bring that to 6,500. That is below 12,000 so nothing withheld. It is much more complex for higher levels of income.

Basically that calculation should be done every pay period (and the tax tables do that for an employers if they use them properly), and tax should be withheld or not, based on that calculation. Any employer who uses a payroll service will have it done properly.

 

[Jay968]

This appears to be basically a duplicate of this thread from nearly three months ago.

Not really. I thought I had everything resolved back then. They told me that my checks were too small back then but I have gotten a few sizable ones and they STILL have no withholding. They are very unwilling to give me explanations so I come here. Now I am just wondering why, even after I get a $500+ check I still have no withholding even though I have had it on much smaller checks all my life. So my question here basically is, has something changed? Is it the tax reform from 2019 that changed things?

I've even gone to HR Block and asked them. Basically they say the same thing..have more "extra" taken out. However even they do not answer my question as to why this is happening when in the past I have NEVER had no withholding on a check. One HR person did say to me that it's basically a scam that the govt is doing in order to not have to give so many refunds and instead cause situtaions wherby taxpayers end up having to pay penalties on money not having been withheld. Problem with me designating more "extra" is that on occasion my paycheck is so small, that I can conceivably end up working a day or two and end up with no take home pay at all.

When I first posted it was prior to my getting $300 to $500 checks which I have since gotten...STILL no withholding!

 

[Jay968]

It really depends on how you fill out the new W4. You can include your wife's income and your SS income on the form, which would cause them to perhaps withhold something, (if they actually understand how to do it themselves, many employers do not) but it really is just easier to tell them how much to withhold by using the spot for the extra withholding.

It is true however, that in general an employer is going to treat the wages as your only income unless you tell them something different, so if you are not earning enough for them to withhold any federal income taxes then they won't unless you tell them to withold "extra".

As I have said, I KNOW THIS. So why have I not gotten anything withheld on $500+ checks? What has changed to prompt this non action? I've always had money withheld in the past no matter how small the check.

 

[PayrollHRGuy]

YES! That's exactly what I have always assumed and I just do not understand what has changed to make it different! I have never in my life gotten a paycheck in which no withholding was made. When I ask them, they either get defensive or ignore me.

The payroll department has somebody they answer to at the company. Ask them.

 

[LdiJ]

YES! That's exactly what I have always assumed and I just do not understand what has changed to make it different! I have never in my life gotten a paycheck in which no withholding was made. When I ask them, they either get defensive or ignore me.

Many, people get paychecks with no federal income tax withholding. That was true before the changes and is true after the changes. Are you saying that they are not withholding SS and medicare taxes and state taxes also? Can you clarify that?

 

[Jay968]

The payroll department has somebody they answer to at the company. Ask them.

That's exactly who I have been talking to.

 

[Jay968]

The way withholding is supposed to work is by paycheck, rather than throughout the year. Here is an example:

Paycheck for two week period, gross pay 500.00. 26 pay periods per year would bring that to 13,000. A small amount of tax should be withheld.
Paycheck for two week period, gross pay 250.00. 26 pay periods per year would bring that to 6,500. That is below 12,000 so nothing withheld. It is much more complex for higher levels of income.

Basically that calculation should be done every pay period (and the tax tables do that for an employers if they use them properly), and tax should be withheld or not, based on that calculation. Any employer who uses a payroll service will have it done properly.
[/QUOTE]

Yes, that's what I have thought but that is not what is happening. Example...I got a $550 check, all that was withheld was my "extra" amount, a few dollars for medicare and something like $15 for a retirement fund which I will never be vested in and have no opt out. No fed and no state withholding other than my "extra."

 

[PayrollHRGuy]

That's exactly who I have been talking to.

Looking at the 2021 Publication 15-T (irs.gov) linked above the withholding about is ZERO for a married filing jointly until you get to $975.00 in a biweekly pay period.

 

[Jay968]

Many, people get paychecks with no federal income tax withholding. That was true before the changes and is true after the changes. Are you saying that they are not withholding SS and medicare taxes and state taxes also? Can you clarify that?

The only deductions on my checks at all are:
1 - My own "extra" amount that I designated on the W-4
2 - A few dollars for medicare
3 - Anywhere from about $12 to $20 for a retirement fund that I will never see because I will never work there long enough for it to be vested.
No Federal (other than my "extra,") no state, and no SS (It is a local city govt. so they say they do not take out SS).

 

[Jay968]

Looking at the 2021 Publication 15-T (irs.gov) linked above the withholding about is ZERO for a married filing jointly until you get to $975.00 in a biweekly pay period.
[/QUOTE

Someone else here said I should have had something taken out of a $550 check because it's based on a bi weekly check. (Seems right to me).
$550 bi weekly comes to over $14,000 a year.

I emailed HR yesterday asking about this. So far, they are ignoring me.
As I said elsewhere, even HR Block avoided a direct answer.

It's kind've unbelievable to me really that I may actually end up having to hire a tax attorney to get answers on this! It used to be that the W-4 took maybe 30 seconds to understand and fill out. Then we got a brilliant new tax bill a couple of years ago!