
Originally Posted by
Melonie
It could be that your recent income levels have increased your annual total income to the point of bumping you up a tax bracket. For example, every dollar you earn up to $32,550 is taxed at a 15% rate (federal income tax). Every dollar that you earn over $32,550 (and up to $78,850 where it jumps even higher) is taxed at a 25% rate. Since your 'employer' can only withhold estimated tax money from current paychecks, it's possible that 25% of your earnings will be withheld from now until the end of december whereas only 15% of your earnings had been withheld prior to your last pay period.
For people whose incomes are more 'predictable' for their employer, estimated tax withholding would probably occur all year long at, say, an 18% rate. Ultimately, in this example your average tax withholding could also come out to be 18% over the entire year, but that will consist of 42 paychecks at 15% plus 10 paychecks at 25% instead of 52 paychecks at 18%.
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