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Why is it that the more I earn, the higher percentage of federal withholdings they take? (lemmy.world)

submitted 9 months ago* (last edited 9 months ago) by LemmyKnowsBest@lemmy.world to c/personalfinance@lemmy.ml

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One paycheck I earned only $77 and the govt withheld 9% of it.

Then I earned $2,000 and they withheld 26% of it.

Is everyone else experiencing this?

The less you earn, the less percentage-wise the govt withholds? The more you earn, the greater percentage they withhold?

At this rate, I fear that if I hypothetically would earn $8,000, they would withhold 100% of it. Do you see where this is going?

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[–] jonne@infosec.pub 23 points 9 months ago (1 children)

https://en.m.wikipedia.org/wiki/Progressive_tax

The withholding is calculated by extrapolating how much you'd owe in taxes if you earned this amount for every paycheck. If you know how much you're projected to earn over the year, you could ask whomever handles your pay to adjust it to the correct percentage. Either way, come tax time it'll be settled and you'll either get back however much you paid in excess, or you'll have to pay a bit extra at the end of the year.

[–] LemmyKnowsBest@lemmy.world -4 points 9 months ago* (last edited 9 months ago) (1 children)

If you know how much you're projected to earn over the year, you could ask whomever handles your pay to adjust it to the correct percentage.

earnings are highly variable. the best I can do is I keep a spreadsheet, on which I calculate hourly and weekly and monthly averages. And I've only been there a month so not enough data to extrapolate from yet.

come tax time it'll be settled and you'll either get back however much you paid in excess

well thanks, they are deducting so much from me (26% ?!) that I certainly would be due a refund. Were it not for another tragic turn in my personal circumstances, in which the IRS has been garnishing all of my tax refunds since 2014 because of something stupid my ex-husband did in 2009 😡

[–] chris@lemm.ee 2 points 9 months ago (1 children)

This is how the tax rate works. As for your fear of them taking 100%, they won’t. The max single-payer tax rate, as of 2023, was 37%.

[–] LemmyKnowsBest@lemmy.world 2 points 9 months ago

Thank you 🙏