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-   -   Are my commissions taxewd hire than my salary? (https://www.askmehelpdesk.com/showthread.php?t=140130)

  • Oct 13, 2007, 12:40 AM
    VanessaRose
    Are my commissions taxewd hire than my salary?
    I accepted a job that offers $2000 a month, which is low, with a 12% commission paid after I reach a certain sales amount per month. Why is such a huge chunk of each commission check gone in greater proportion than my salary check? I was told commissions are taxed higher. How can I change this? Is this even true? I am the top sales person, yet my coworkers are bringing home more income than me and I am frustrated.
    Thank you.
  • Oct 13, 2007, 07:54 AM
    ebaines
    Commissions are not taxed higher than salary, but if the amount of your commission is significant it can push you into a higher bracket for withholding. The IRS requires that tax be withheld at a rate that assumes the amount you make on any given check is the amount you will make on every check all year. In other words, when your company pays you $2000 for a monthly salary, taxes are withheld at a rate that assumes your total earnings for the year is 12 x 2,000 = $24,000/year. The taxes on that amount will be pretty low. But if you then get a separate commission check that's for, say, $5,000, the company is required to withhold taxes at a rate that assumes your annual salary is 12 x 5,000 = $60,000/year. The tax rate is higher for this higher level of income hence a greater percentage is withheld. Your co-workers may have declared more exemptions on their W-4 form than you did - you may want to review the level of tex withholding and change the number of exemptions if they're taking too much out. But be careful - while you don't want them to take out too much tax (which is like giving the government an interest-free loan), you also don't want to have too little taken out or you may end up owing the government a big tax payment come April, and possibly interest as well if your payments are insufficient.
  • Oct 13, 2007, 06:15 PM
    AtlantaTaxExpert
    Ebaines explanation is EXCELLENT. I have nothing to add.

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