A
Allegra
Guest
Well, I’m not actually paying them back though. They simply aren’t paying me my last check, so the total amount of money will be the same and the taxes withheld will be the same as well.Actually, they still can be. That’s good because it’s similar to Australia, nevertheless.
**Scenario 1) **
Lets say they overpaid me by $2,000.00
I put an income of $22,000.00 and the tax rate is lets say 1% and withholding is 3%, come tax time, they will have withheld $660.00 and I will pay $220.00 in tax, receiving $440.00 back at tax time.
Therefore total after tax is $22,000.00 - $220.00 = $21,780.00
Now I lump sum pay them $2,000.00 to balance their books.
$21,780.00 - $2,000.00 = $19,780.00
Total = $19,780.00
Scenario 2)
No overpayment.
I’m paid 20,000.00, where they withhold 3% over the year being $600.00 and then come tax time, I pay 1% in tax being $200.00 and get $400.00 back.
Therefore total after tax is $20,000.00 - $200.00 = $19,800.00
Total = $19,800.00
See the discrepancies? balancing their books with a lump sum payment meant I paid $20.00 extra in tax then I should have and that’s just with tax, then you would have to work it out in regards to your retirement thing which may or may not work out in your favor. it’s never a good idea to balance the books with a lump sum payment in matters like this, because there are other calculations involved, it’s not a simple stand alone over-payment in which a lump sum payment would work.
I hope this has helped
God Bless You
Thank you for reading
Josh