Sorta, but maybe not exactly correct. Your tax withholding is based on your current paycheck and the frequency of your paychecks. So, if you make $35/hour and get paid every two weeks, then your gross should be ~2800/paycheck. That's extrapolated to an estimated $72,800/year which falls in the 25% tax bracket, so your tax withholding will be calculated based on an expected annual income of 72.8K. Now, if you work 20 hours of overtime (at straight pay) your gross paycheck will be $3500, which extrapolates to an estimated 91K/year. That falls into the 28% tax bracket, so some portion of that paycheck will be taxed at 28%, therefore your effective pay rate (after taxes) will be slightly lower. Of course, some of that may be refunded to you if you don't maintain that level of income and your actual gross salary for the year comes in below 91K.

That's also why it seems like you pay a buttload of taxes if you get a one-time bonus. It seems like those are taxed at the highest rate possible.

 

+1, but that doesn't include social security, medicare, property taxes, sales tax, etc.

 

OP didn't 'give' the government anything. They just took it from him.

 

Indeed, $78,850 is the delineation between the 25% and 28% brackets. Assuming a normal 80 hours every two weeks gets you exactly to that level, the 19 hours additional would get you... the same as if you worked only 18.2 hours at the lower tax rate.

 

Best advice I ever got:

"You get a paycheck regularly, and money will be taken out of it whether you like it or not. Now, do you want to have something in return for that money given out, or are you content with just giving your hard earned money away to the government and getting nothing in return?"
-My Dad

Most people just give the gov't their money, we call them suckers.

Let's say the gov't took $800 from a paycheck. If you owned a business you could have invested $800 into it, making it better, increasing it's profits, and ultimately having the gov't return the $800 you gave them (because it's a tax write-off). You are going to have to spend the $800 no matter what, but at least if you had some kind of investment you can have it work for you. If I gave $800 to the gov't I get nothing back. If I gave the $800 to my business I better the business that I own, which means I can sell it for more ontop of the increased profits that may have resulted.

If you made over a million a year, you think you will just sit back and let the gov't take a chunk of taxes out of your paychecks? Why do you think celebrities open charities, buy islands (land), do sponserships, and own various businesses (like a clothing line). These are all tax write offs.

Just because you make under $100K/yr doesn't mean you shouldn't look for ways to write off your taxes and maximize the money you make.

 

 

oh wow...
wait, I am a little slow when it comes to these taxes and crap!

Wouldn't that mean I ask my employer to not cut any tax on my paycheck and give me the whole thing, and then I spend that money towards my business, and when I file taxes, instead of paying govt. thousands of dollars at the end of the day, I get all those write offs and not pay what I would normally pay?

 

Yes that is exactly right, but you don't have to spend all your money towards your business, just enough to equal the amount of taxes you would've paid over the course of a year.

The money you gave to the government can be given back to you if you have accumulated enough tax-deductible credits. The catch is that these tax deductible credits require money to be spent, but at least you are getting an asset or something back for that money rather than just giving it away for free. So, looking at your last year's taxes, if you paid $x,xxx in taxes in 2008 then you should have $x,xxx in tax deductibles accumulated. The gov't then sends you a check for all the money they took from you in 2008.

 

Simple scenario:

Buy a yacht and make it into a party yacht. People can rent it out and have crazy parties, or use it for travel or whatever. The profits will be used to pay off the loan on the yacht, and the maintenence and gas and all of that would all become business expenses, which in turn become tax deductibles. I now have something I can throw my money at so that I don't have to pay the government, and better yet, I now have a yacht instead of nothing!

You just need an asset, any kind of asset, to invest your money into. Buy a small home and rent it out to people, open a bar, rent out jet ski's near the lake, start a business from your home, buy and sell used cars, etc.

 

^ Sounds like you're oversimplifying. Tax deductible is not equal to tax credit, and I think "tax deductible credits" is ambiguous. If you spend $1000 of your income on a business, and that $1000 is tax deductible, then you really only "get back" $250 from the govt (assuming a 25% tax rate). So, you still spent $750.
Plus, the money that you received by renting out the yacht is income and that's taxable, too (minus your deductions, of course).