I dont understand my DH reasoning....just a rant! - Page 2

[Herausgeber]

It's a federal tax issue. The standard calculations hold out money assuming that is what you make *every* week. You can still account for it by adjusting your withholdings.

[Longhorn]

Originally Posted by mightymoo

They don't, my salesmen brother and uncle both live there and the uncle moved specifically because there is no income tax (I was told he can pay his mortgage with what he saves in taxes over living in NJ). They both get paid mostly in commissions.

Youre right, we dont have state tax. I made a typo, oops. Ya, we lived in Colorado last year and they do have state tax and so we had alot more withheld, but yes, for some reason he has ALOT withheld even here in Texas. For instance he had a commission check last month for $2500 and we got about $1700? Seems kinda steep to me....hmmmmmmm.

I agree though, we do need to save more. And trust me I try, but I guess going downtown and hosting football parties are more important than saving for baby

[polyhymnia]

Originally Posted by Longhorn

Youre right, we dont have state tax. I made a typo, oops. Ya, we lived in Colorado last year and they do have state tax and so we had alot more withheld, but yes, for some reason he has ALOT withheld even here in Texas. For instance he had a commission check last month for $2500 and we got about $1700? Seems kinda steep to me....hmmmmmmm.

That seems a little high to me, but I think commissions are taxed differently than salary. It's only about 30% which is perhaps reasonable? I am not sure though. Definitely look into that, since getting a big refund check doesn't make sense!

[kijip]

Originally Posted by crayolaab

That seems a little high to me, but I think commissions are taxed differently than salary. It's only about 30% which is perhaps reasonable? I am not sure though. Definitely look into that, since getting a big refund check doesn't make sense!

Commission checks often get taxed at a higher rate because ANY estimated withholding is based on the tax bracket that you *would* have if you were paid that amount each and every pay period. It often results in a tax refund because it causes an overpayment of federal income taxes. This higher amount would apply to any employee that has FEDERAL income taxes withheld.

Case in point:

At my spouse's last job, he made around $500 a week gross. That put him in the 15% bracket, at $26,000 a year. His quarterly commission checks were often for around $3000 (sometimes more). A $3500 weekly paycheck pops him into the 33% tax bracket (3500 weekly for the entire year would have been $182,000). At the end of the year, his actual tax bracket was based on his base pay + his commission, usually the 25% bracket. You can opt to adjust your withholding amount by filing a new W-4 before you expect a commission and then filing another after you receive commission. Withholding amounts are based on estimated tax liability. At the end of the year, you will only pay the amount on all your income that you actually owe, either receiving a refund or paying the IRS a tax due amount.

[polyhymnia]

Originally Posted by kijip

Commission checks often get taxed at a higher rate because ANY estimated withholding is based on the tax bracket that you *would* have if you were paid that amount each and every pay period. It often results in a tax refund because it causes an overpayment of federal income taxes. This higher amount would apply to any employee that has FEDERAL income taxes withheld.

Case in point:

At my spouse's last job, he made around $500 a week gross. That put him in the 15% bracket, at $26,000 a year. His quarterly commission checks were often for around $3000 (sometimes more). A $3500 weekly paycheck pops him into the 33% tax bracket (3500 weekly for the entire year would have been $182,000). At the end of the year, his actual tax bracket was based on his base pay + his commission, usually the 25% bracket. You can opt to adjust your withholding amount by filing a new W-4 before you expect a commission and then filing another after you receive commission. Withholding amounts are based on estimated tax liability. At the end of the year, you will only pay the amount on all your income that you actually owe, either receiving a refund or paying the IRS a tax due amount.

Ah, that makes sense Thanks for the explanation! It's a shame it's so tricky. I should ask DP about this - do you know if quarterly bonuses are treated the same way? (ie is there a distinction between "bonus" and "commission" to the IRS?)

[beansmama]

If you make budget off just his income - use yours to pay off the small CC debt and it should only take like 2 months. Maybe.

I never understood it when people say babies cost so much money. If you co-sleep you don't need a crib. If you nurse you don't need formula, if you cloth diaper and can fight the addiction (lol) you'll save a small fortune. All babies need is clothes, boobies, a roof over thier head and YOU - oh, maybe a sling. And a decent rocking chair (like under $100!)

You don't need bottles, a breast pump (if you are a SAHM nursing...you don't need one! you can manually pump - as in use your hand - if you need to), baby einstien crap, a million blankets, a crib, a playpen, a bouncer, a swing..you get the point

[mightymoo]

Originally Posted by Longhorn

Youre right, we dont have state tax. I made a typo, oops. Ya, we lived in Colorado last year and they do have state tax and so we had alot more withheld, but yes, for some reason he has ALOT withheld even here in Texas. For instance he had a commission check last month for $2500 and we got about $1700? Seems kinda steep to me....hmmmmmmm.

I agree though, we do need to save more. And trust me I try, but I guess going downtown and hosting football parties are more important than saving for baby

Tellme about it. DH got a HUGE bonus last March and once it got deposited, we only got half! But we'll get some of that back at the end of the year when we max out other things like 401k contributions, etc.

[Valian]

Hope for the best, plan for the worst.

If you have kids and still claim that they don't have to cost a lot of money then it usually just means you have inexpensive kids or are really lucky. Some babies end up being very expensive and the truth is that you can't always know in advance which kind you're going to get.

I am not trying to be an alarmist but you can't predict now whether or not you'll have a NICU stay, if your baby will need special medications, surguries, have needs that don't permit an easy breastfeeding relationship, or even allow for bfing at all. We all like to think we're going to have perfectly healthy babies and for most of us that is going to be the case. But that is not everyone's experince.

That said, its not clear to me that your Dh really wants to delay for financial reasons or whether they are just a convenient reason.

[kijip]

Originally Posted by crayolaab

Ah, that makes sense Thanks for the explanation! It's a shame it's so tricky. I should ask DP about this - do you know if quarterly bonuses are treated the same way? (ie is there a distinction between "bonus" and "commission" to the IRS?)

The IRS treats every payroll dollar (holiday, vacation, bonus, sick, regular, Overtime, jury pay, commissions etc) the same WRT income tax liability. The only thing that affects the rate of income tax is your tax bracket. For singles that is:

* 10%: from $0 to $7,825
* 15%: from $7,826 to $31,850
* 25%: from $31,851 to $77,100
* 28%: from $77,101 to $160,850
* 33%: from $160,851 to $349,700
* 35%: $349,701 and above

That is on ADJUSTED gross income (AGI) so personal exemption, standard deductions, Child tax credits, plain IRA contributions (not roths), student loan interest etc could drop your income down into a lower bracket than your gross.