Overtime pay and taxes

Nurses General Nursing

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I'm wondering how many of you all lose 35-45% of your overtime pay to taxes. I'm not exactly tax savvy but I have been learning over the weeks that picking up extra shifts is actually not worth it Bc majority of your overtime pay goes to taxes. I am so angry by this tidbit!! The example I've read is:

A nurse makes 20$ an hour and is offered OT, Only after taxes OT Ends up being 18$ an hour not time and a half----another perspective? Three hours goes to taxes.

Tell me, how many of you don't even bother with overtime because of this? I know that it also depends on the state you work.

I've heard that after 2001$ biweekly taxes eat your pay.

Ugh. You can't win!

Specializes in 15 years in ICU, 22 years in PACU.
Your employer taxes you on each paycheck as if that is how much money you will make every week though. It does happen that in the weeks that you make more, you pay significantly more in taxes. Emmy27 did an excellent job at explaining how things work.

No, you don't pay more taxes. As Emmy27 explained, more money is withheld in anticipation of paying more taxes. When actual taxes are calculated, if you don't work that overtime each and every pay period, you get the money that was withheld back as a refund.

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Specializes in 15 years in ICU, 22 years in PACU.
A lot of people I work with complain about this and I've tried to explain what EMMY27 explained very well. People who live pay check to pay check may have count on most of the OT to pay bills that are due and that's why it is frustrating to them.

Every paycheck will frustrate you if you just calculate your hourly rate times the number of hours you work (i.e I make $10/hr and I worked 40 hours this payperiod, so I have $400.00 to spend). Nope.

Same with OT. If you calculate (I worked 4 hours overtime, so in addition to my $400.00, I'll have an extra $60.00) you will be wrong again.

I always round down! Instead of calculating the overtime at $15/hr as in the example, I would estimate my overtime at more like $12/hr.

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Specializes in Cardiology, Cardiothoracic Surgical.

So if i'm married, filing jointly, what can I change my withholding to so I get most of my money back from taxes? I'm looking at doing some

OT over the holidays and I'd like to keep the $$$$.

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Specializes in Pediatrics, Emergency, Trauma.
So if i'm married, filing jointly, what can I change my withholding to so I get most of my money back from taxes? I'm looking at doing some

OT over the holidays and I'd like to keep the $$$$.

On the W-4, there is a way to calculate your withholdings and adjust in order to your needs; I adjusted mine to ensure that I at least get enough of overtime pay and still get the right amount of taxes taken out; it will be individual based. :yes:

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What about state taxes?

Do they deduct that from your paycheck? And what kind of state taxes (payroll related) does one have to pay?

We don't have state income tax where I live....

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Specializes in 15 years in ICU, 22 years in PACU.
What about state taxes?

Do they deduct that from your paycheck? And what kind of state taxes (payroll related) does one have to pay?

We don't have state income tax where I live....

Each state will withhold their share. I lived in Kansas City, Missouri and would work in Kansas on occasion. They withhold States taxes for each state and if you live or work in the city of Kansas City they withhold metro taxes as well.

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Specializes in Pedi.
No, you don't pay more taxes. As Emmy27 explained, more money is withheld in anticipation of paying more taxes. When actual taxes are calculated, if you don't work that overtime each and every pay period, you get the money that was withheld back as a refund.

Correct. I should have said they withhold more those weeks. Your withholdings are based on the premise that what you make this week will be what you make every week.

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Specializes in Pedi.
What about state taxes?

Do they deduct that from your paycheck? And what kind of state taxes (payroll related) does one have to pay?

We don't have state income tax where I live....

Yes. In Massachusetts we pay state income tax. With the same withholdings (federal and state) at the end of the year I typically owe the state and get a lot back from federal.

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Specializes in ED RN, PEDS RN, IV NURSE.

My allowances add up to 9.

I've allowed 2 on my w-4.

Hubby has allowed 0.

I think we are screwing ourselves...

I'm going to adjust to 7. Leave hubbys at 0. Thoughts?

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Specializes in PACU, pre/postoperative, ortho.
My allowances add up to 9.

I've allowed 2 on my w-4.

Hubby has allowed 0.

I think we are screwing ourselves...

I'm going to adjust to 7. Leave hubbys at 0. Thoughts?

By claiming so little, I assume you get a nice tax return at the end of the yr? Basically when you take such a small part of your allowance through the yr, you're giving the govt an interest free loan until they give it back when you file your tax return. You have to find a happy medium. If you take all your allowances, you may not pay enough in & owe money with your tax return.

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Specializes in Family Nurse Practitioner.
By claiming so little, I assume you get a nice tax return at the end of the yr? Basically when you take such a small part of your allowance through the yr, you're giving the govt an interest free loan until they give it back when you file your tax return. You have to find a happy medium. If you take all your allowances, you may not pay enough in & owe money with your tax return.

And it is all the same in the end. As a general rule I don't want anyone holding my money for free so I usually have to pay.

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By claiming so little, I assume you get a nice tax return at the end of the yr? Basically when you take such a small part of your allowance through the yr, you're giving the govt an interest free loan until they give it back when you file your tax return. You have to find a happy medium. If you take all your allowances, you may not pay enough in & owe money with your tax return.

You just touched on the other part of taxes that people don't understand. Many people get upset if they don't get a big tax return, because they were "counting" on it, or credit their big tax return to the "great" tax program they used, not understanding that what you get back is a reflection of what you pay in vs what you owe (and of course, utilizing whatever deductions and tax credits available to you).

I personally prefer not to give the government a free loan. My husband works unpredictable amounts of OT. Each year, we look at how much we get back, try to take a good stab at guessing how much he will earn in the upcoming year and then we adjust our state and federal withholdings, if we need to. Last year we came close to perfect to guessing state, with only a $50 return. Federal we still are getting about $1k, but hoping to bring that down.

For anyone who really doesn't understand where your money goes each paycheck vs what you get back at the end of the year, I would recommend trying to do your federal taxes old-school style (yes, by hand). It gives you a good visual of what affects your overall taxes owed. It shows you the huge distinction between a tax deduction and a tax credit. You don't have to actually turn in your work, if you don't trust yourself, but it is a good exercise.

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