vacation checks and payroll taxes???

[pab37]

What is the name of your state? michigan


i work for in a union. been their 10 years and this year new owners took over. vacation checks have always been done as a seperate check and with normal depends and so on taken out ( like an extra check.) This year , they ran us all seperate checks but using the classification of commision pay basically takin out 51% in federal taxes.

ie......
gross 2720.18

fed 680.05
medi 39.44
state 106.09
ss 168.65

949.23 total taxes 1725.95 net

can they legally do this?? took halve out in taxes. help

 

[pattytx]

Absolutely, the calculations are correct. Supplemental wages (basically, those wages paid in a lump sum and not related to a pay period or hours worked) can be taxed at the supplemental rate. In fact, using the employee's W-4 to tax a separate check (without going into all the details) is not an IRS-allowed method of calculation. It is the employer's option as to which IRS-allowed method of calculation is used (there are others).

The federal income tax rate on supplemental wages is currently 25% and Michigan's supplemental rate is 3.9%. So, with the 6.2% FICA and the 1.45% Medicare, that total percentage is 36.55 or $994.25, not 51% as you state.

$2720.18 - $994.25 = $1725.93, your net pay.

 

[Beth3]

The good news however is that if you are overwithheld, you will receive the excess back when you file your 2005 tax return.