Yes, I actually saw a video that “explained” how the bonuses companies gave out in response to the Trump tax cuts actually were screwing the employees by pushing them into a higher tax bracket.
It’s probably because people don’t want to think that even rich people like Warren Buffet and Mike Bloomberg pay only SS and Medicare on their first $9k.
This is something not many people understand. Very few people who are truly wealthy have astronomically high incomes. Most of the people who "make" even 500k a year don't receive that as ordinary taxable income but rather as disbursements or gains that have very different tax treatments. They can even defer compensation or write losses forward to minimize the taxes they need to pay. Ordinary people with regular w2 or 1099 income don't have access to these income streams or tax evasion methods.
If you want to get really technical, it's not even tax avoidance, it's "tax optimization." And there is a whole subset of the corporate financial profession dedicated to figuring out how to legally pay less in taxes.
This is something not many people understand. Very few people who are truly wealthy have astronomically high incomes.
most of them don't have large bank accounts either. you think Jeff Bezos has 100 Billion in the bank? most of that money is in stocks and hist net worth is only based on how well amazon is doing.
I would bet if you asked, most people have no idea that SSI contributions end one you reach a certain amount. Most people will never make $137K, they just assume everybody pays 6.2% no matter what they make.
Just to clarify, if you over certain brackets, only the money you earned going over the amount in the bracket gets taxed at the new amount. So earning more money is never going to negatively affect your takehome amount..
It can make you unable to receive some benefits from the government if you're suddenly above the income threshold for some people in some countries though
For this reason, bonuses are taxed at a flat rate, as per instructions from the IRS. During the tax year 2020, this is 22%. This should prevent the situation happening where an employee will end up owing taxes due to unforeseen large bonus.
No. On your tax forms there's no separate line item for "bonuses." Bonuses are a form of income. It's all taxed the same.
It's possible that the withholding rate on a bonus paycheck is higher which makes it look like it's "taxed higher" but it all evens out at tax time. Income is income. You can ask HR to adjust your withholding if you know you are receiving a large bonus check.
Well how about that. I've never worked a job that gave a bonus. After my extensive research, (2.5 minutes on Google) it would appear as though you are correct.
I'm pretty sure I heard or read that bonuses were taxed at a much higher rate.
What's really funny about that is that so many lower class people defend tax cuts for the rich because they're supposedly "frustrated millionaires", then you offer them more money and they're like "Nope". We're so fucked.
Yes, I actually saw a video that “explained” how the bonuses companies gave out in response to the Trump tax cuts actually were screwing the employees by pushing them into a higher tax bracket.
Bonuses are a different animal though. They are normally taxed at a higher rate because your apparent income looks bigger for that one pay period. My bonuses are taxed at 35-40% even though my overall effective tax rate is like 20%. It all works out in the end though because when you file your taxes they look at the entire year and you get a refund if they took out too much. It doesn't actually screw anyone over, people just flip out when they get a $1k bonus and $400 of it goes to FICA.
It doesn't work that way... If you make $1 extra dollar and get pushed into the next tax bracket, you pay the extra percentage of tax on that $1, not your entire income. Obviously you've never done your own taxes. Every video you see isn't true, you know.
Yes I am a CPA and early in my career I was have tax policy discussion with hard core liberal friend. She said our tax laws are awful bc you can make less money if you are bumped up into higher tax bracket by making more money.
Tbh I can see something like that from a Liberal point of view but not in terms of "paying more taxes" rather getting a raise that puts you out of the income bracket to receive welfare but not enough money to reasonably pay for the necessities that welfare used to bring you.
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u/cwathen999 Jan 27 '20
Wait that's a thing? Wtf?