Questions About Advance Tax Payments
I’m experiencing some confusion with my taxes this year. Even though I’m on salary, my W-2 indicated that I earned more than my actual salary last year, so I started investigating. I’ve taken some payroll advances, and I’m unclear about how these should be taxed.
Logically, I assumed that advances wouldn’t be taxed since they’re deducted from my next paycheck, which is taxed instead. However, my employer seems to be calculating it differently. For a $180 cash advance, I was told there’s a $200 tax. How can the tax be higher than the amount I requested?
Ultimately, he issued a check for $354, which is supposed to leave me with $180 after tax, but then he deducts $354 from my next paycheck instead of $180. I’ve been in discussions with him about this for days. Can anyone help clarify what’s going on?
One response
It sounds like you’re in a complicated situation regarding your salary, payroll advances, and taxation. Here are a few key points that might help clarify things:
Understanding Payroll Advances: A payroll advance is essentially money you receive before your regular payday. It’s essentially a loan against your future earnings. Typically, when you receive an advance, your employer deducts that amount from your next paycheck, often along with any applicable taxes.
Taxation on Advances: Your employer should withhold taxes on the total amount you receive, including the advance, because it is considered taxable income. However, the way that withholding is calculated can vary based on your employer’s payroll system and the applicable tax laws.
Example Breakdown: If you received a $180 advance, your employer may have calculated your withholding based on your overall tax rate, which could lead to a higher deduction than expected. For instance, if they are withholding $200 in taxes, that could be an attempt to account for your total earnings and ensure they are compliant with tax regulations.
Next Paycheck Deductions: If your next paycheck is reduced by the full $354 instead of just the $180, it could be because your employer is recouping the entire advance amount plus taxes taken out when you received the advance. This means that the advance is considered part of your total income for that pay period, which can feel like double taxation.
Communication with HR/Payroll: The best course of action is to speak with your HR or payroll department directly. They should be able to clarify how the advance and tax withholding were calculated. It may also be helpful to ask for a breakdown of the tax withholdings.
Review Your Paystub: Check your pay stub to see how the calculations are laid out. It should show gross pay, taxes withheld, and the net pay. Understanding these details can help you make your case.
Tax Guidance: If you’re still having issues, consider reaching out to a tax professional. They can provide specific advice based on your circumstances and help you understand your rights as an employee.
Remember, it’s important to clarify these details with your employer to ensure that everything is being handled correctly. Good luck!