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This might just be me in a tin foil hat, but something seems rather odd right now with the IRS. I just got my bonus, and the HR department told us that the IRS is now forcing us to take a 25% flat tax cut on the bonus check. This means my total tax withholding is 38% on a $2500 check(state and federal). That's insane! I lost nearly a grand of the check just in taxes, but only up front. Why? Bonus's are not counted separate at the end of the year, they are lumped into your total earned income on a W2. If I normally don't claim that high, why am I forced to pay it up front? I know it might be a different tax bracket, but the red flag here is that we no longer have a choice of how much to withhold as in previous years. I know my bracket isn't that high, so I don't need to pay that high, however, I have no choice now. I have seen two things lately that is really making me go hmm.
#1. A majority of federal tax refunds were held back for 1-2 months. A lot of tax refunds of a sizeable amount have tax credits to achieve it, such as earned income and child tax credits. Those are refundable credits, which is why someone making $30k a year with 4 kids still gets back 4 or 5 grand when they didn't pay in anything. Refunds with these credits were held back until the first of march, regardless of how soon you filed.
#2. Bonuses are being forced to be taxed at 25% federal regardless of your normal filing status, but at the end of the year it doesn't get counted like that, so you get that money back.
It appears to me the government is running out of money, and they are doing whatever they can to hold back money up front. I could be wrong, but it sure looks that way. I know they claim the tax refund part was to crack down on people falsifying to get more refunds, but shouldn't that have just taken more time in general per household, not a fixed time? I filed the end of January, but my brother didn't file tell the end of February. I got the child tax credit, and he got both earned income and child tax so we had to wait. We got our federal refund the same day in March. It sure didn't take as long to figure out my brothers as it did mine. I don't buy it.
It seems like the same tactics a person uses to avoid overdrawing. Mark a bill paid in the ledger, but don't actually pay it until the money comes in.
#1. A majority of federal tax refunds were held back for 1-2 months. A lot of tax refunds of a sizeable amount have tax credits to achieve it, such as earned income and child tax credits. Those are refundable credits, which is why someone making $30k a year with 4 kids still gets back 4 or 5 grand when they didn't pay in anything. Refunds with these credits were held back until the first of march, regardless of how soon you filed.
#2. Bonuses are being forced to be taxed at 25% federal regardless of your normal filing status, but at the end of the year it doesn't get counted like that, so you get that money back.
It appears to me the government is running out of money, and they are doing whatever they can to hold back money up front. I could be wrong, but it sure looks that way. I know they claim the tax refund part was to crack down on people falsifying to get more refunds, but shouldn't that have just taken more time in general per household, not a fixed time? I filed the end of January, but my brother didn't file tell the end of February. I got the child tax credit, and he got both earned income and child tax so we had to wait. We got our federal refund the same day in March. It sure didn't take as long to figure out my brothers as it did mine. I don't buy it.
It seems like the same tactics a person uses to avoid overdrawing. Mark a bill paid in the ledger, but don't actually pay it until the money comes in.
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