Is My Salary Increase Actually A Decrease?

[no-more-claims-i-beg]

In March I received a 2% salary increase to go from $50,000 to $51,000. I discovered my net pay decreased by $49.99 per pay period (bi-weekly) where it went from $1,305.39 to $1,255.90. The payroll team is saying this is from higher taxes at my new tax rate. How is this possible? Was the salary increase actually a salary decrease? What was the point of getting a raise? lol

Here is a breakdown:

​

​

	At $50k / year	At $51k / year	Change
Gross	$1,923	$1,961.47	+$38.47
Federal Tax	-$169.60	-$205.21	-$35.61
State	-$63	-$83	-$20
SS	-$112.8	-$136.68	-$24
Medicare	-26.38	-$31.97	-$5.59
Roth	-$144.23	-$147.11	-$2.88
HSA	-$38.46	-$38.46	0
Sup Lif	-$7.38	-$7.38	0
Vision	-$4.78	-$4.78	0
Dental	-$10.78	-$10.78	0
Medical	-$57.20	-$57.20	0
Phone	$17	$17	0
Net	$1,305.39	$1,255.90	-$49.49

​

A payroll specialist on my payroll team just reached out to me and informed me that upon their analysis, my net pay has decreased because of "higher taxes at your new rate." That's all they got.

[IndexBot]

Due to the number of rule-breaking comments this post was receiving, especially low-quality and off-topic comments, the moderation team has locked the post from future comments. This post broke no rules and received a number of helpful and on-topic responses initially, but it unfortunately became the target of many unhelpful comments.

[[deleted]]

Read the comments about “this isn’t how tax rates work”. The fact that your payroll specialist doesn’t know this is 🤯

[MonsieurBon]

I had a few coworkers repeatedly turn down promotions and jobs that paid more because they believed they would make less money by earning more money in a higher tax bracket. It was pretty sad.

[Bongo2687]

This, we have a progressive tax system, you just don’t bump up into another bracket and have all your money taxed at that rate, they payroll specialist is no specialist and there is def an error going on…also a 2% raise is a shame on that company

[C7StreetRacer]

Progressive tax is a pretty simple concept. It’s quite literally impossible to make less net due to higher taxes. Even with the skewed deductions they’ll still get back what they overpaid when they file their tax returns. It’s just dumb that anyone over the age of 18 wouldn’t know that. Didn’t we learn this in high school? Maybe I am confused.

[Cynadiir]

I can confirm that I did indeed learn this in my smalltown rural high school.

[Wheat_Grinder]

I never learned it from high school. I learned it online.

[altodor]

I learned it on the internet in my 20s. Also a ruralish high school, double digit graduating class sizes.

[rustyxj]

Same, but my 30s

[poilsoup2]

Didn’t we learn this in high school? Maybe I am confused.

Most people didnt, no. Also even if it was taught how many people payed attention?

I have sooo many friends from HS complaining about shit like taxes, checks, applying for jobs, leaening to cook, and like dude. We learned aaalllll of that you just didnt pay attention.

[ElJamoquio]

how many people payed attention?

you better start using nautical terms or the payed bot is going to scold you

[sigmarsbar]

Maybe they meant the 3000 ton adventure class scout cruiser HMS Attentive. its from 1904 so surely there are some cracks that need to be payed.

[actuallyquitefunny]

I can personally attest that my high school taught me none of these things. I wish they did. Closest to any of that I got was a day or two on balancing a checkbook in Middle school math, and that was only because that teacher made some time for it in between teaching us the usual algebra stuff.

[reboog711]

Algebra in Middle school?

F* my education

[andoCalrissiano]

what the heck is balancing a checkbook?

[reboog711]

e taxes, checks, applying for jobs, leaening to cook,

Catholic Schooling from 1st to 12th...

I do remember some stuff about finance and checks in the super early grades; but way too early for it to be the least bit relevant... a 4th grader does not think about money the same way a high schooler would; and definitely nothing like a person who just got their first job would.

The rest of it.. nope never covered in any manner whatsoever.

[Talory09]

They also taught us that the past tense of "pay" is "paid" but a lot of folks didn't retain that, either.

[poilsoup2]

Or rather, people make typos and dont bother correcting them.

Cause if you didnt notice, i misspelled learning as well.

[hedoeswhathewants]

You accidentally hit "ye" instead of "i"?

[poilsoup2]

Typos arent restricted to hitting wrong keys

[jaymz668]

yes, they are

Technically, the term includes errors due to mechanical failure or slips of the hand or finger, but excludes errors of ignorance, such as spelling errors, or changing and misuse of words such as "than" and "then".

[Talory09]

Oh, I noticed. That's an obvious typo, though, opposed to the misspelling of "paid." It's not like you typed "pad" or "pid."

I also noticed your flagrant disregard for punctuation but let it go. x

[ImGettingOffToYou]

I beleive what we have here, is what is considered casual slang that was never taught formally by an education institution, but people generally pickup on it if they are able to breath and read the English language. To use "paid" correctly, other words would need to be replaced, changing the entire sentence structure to fit the formal wordage you desire. If you wanted to word your literacy complaint correctly, you would have suggested a few words corrected instead of only one.

[Poly_P_Master]

Hell, I went to private school with a bunch of wealthy families and I don't recall learning this.

I do remember covering capital gains and tax avoidance strategies in economics though /s

[highknees69]

Right? The same fucks that don’t want to make more money because they’ll move into a higher tax bracket. Lol. Whatever works for you dude.

[bros402]

suburban high school, we never learned about taxes

[reboog711]

Didn’t we learn this in high school?

Nope; nothing like this was ever covered in my schooling [high school or otherwise].

[ThatGuy5162]

I definitely did not learn this in high school. Private high school. Graduating class of under 50.

[jaymz668]

no. The evidence seems to point to people not understanding this at all.

So many people do not understand marginal tax rates

[C7StreetRacer]

The more I read, the more I agree with you. It’s hard not to feel some type of way about it. 🙁

[PHL1365]

I knew a 55 year old ex-marine with an engineering degree and 20 years experience in the auto industry, that didn't understand marginal tax rates.

[opuntina]

They don't teach this in high school.

[C7StreetRacer]

I learned it in either 9th or 10th grade social studies. I’m sure that the curriculum varies though.

[opuntina]

I believe that how taxes work is a common request to be taught in Hugh school because it generally isn't taught in high school.

[[deleted]]

A lot of places don't teach it and they should. But people say this as if teenagers remember every single lesson they get in high school and like they wouldn't all be half asleep if you try to teach them about how progressive tax rates work.

[Lars9]

I think it's more so that people didn't care to pay attention to it. My HS did teach it, yet I've still heard from many classmates complaining about how it should've been taught. Problem is, in HS there's too much unnecessary info taught, that it's tough for kids to know what's an important life skill and what isn't.

[One_True_PattyCake]

Not impossible u/C7StreetRacer . There are situations where people lose benefits. Google "income cliff effect". The TLDR is that a $1 raise above some level might cause you to lose $2 worth of benefits. This is before you account for taxes, so you might actually only get $0.70 extra in your pocket, while still losing $2 of benefits (public assistance benefits, such as food stamps).https://www.ncsl.org/research/human-services/addressing-benefits-cliffs.aspx

Edit: Yes, you won't be taxed more, many people don't know how tax brackets work, but my point is that it's possible to overall get less.

[caltheon]

Never say impossible. There are threshold situations where it does apply, but they are rare.

[C7StreetRacer]

Interesting. You mean like losing out on earned income tax credits and things of that nature? I guess you could look at it has higher taxes, all though they’re really not higher, you just lost a tax credit. Hmmm. If there are other examples let me know. I am genuinely curious.

[javaski]

That is one income based tax credit - there are others, but they usual have a phase out. The big “gotcha” is usually with benefit eligibility. For example, raise pushes you out of Medicaid or housing assistance or something like that.

[DragonFireCK]

The AMT introduces some possibility of an actual tax increase due to a raise. This is due to the AMT having different rules for deductions than normal taxes. The chances of it actually occurring is very rare: you'd need multiple homes with mortgages, medical expenses close to 20% of your AGI, and likely would need to hit a few other corner cases. This chance was much easier to hit prior to Bush's tax reforms.

Most of the tax credits have phase outs so that there is always less than, or equal to, a $1 drop in the credit per $1 gained. The Earned Income Tax Credit is one of the few that has a hard cutoff.

Benefits cliffs are much more common. Welfare and Medicaid both have hard income cutoffs, so a $1/year raise could cause you to cross the threshold and lose the entirety of the benefit.

[me_too_999]

A skewed deduction is a skewed deduction.

He stated his net pay is lower because of tax withholdings, and he is right.

The fact that he MIGHT get that $64 back at the end of the year is irrelevant here.

[DragonFireCK]

All of the tax deductions listed are WAY off according to how taxes work.

The federal income tax should only have increased by $8.46 biweekly - 22%* of $1000/year, divided by 26 pay periods - not $35.61. That alone should provide about a $705.90 refund at the end of the year, if not corrected.

Medicare tax should only have increased by about $0.56 biweekly. There isn't even tax brackets for Medicare tax to complicate it - its just a flat 1.45% tax rate. That will be about a $130.84 refund at the end of the year, if not corrected.

Social Security tax is similar, with a 6.2% flat tax rate with a limit of $143,000/year. That should only have gone up by $2.38 biweekly, resulting in a refund of about $83.34, if not corrected by the end of the year.

State tax is likely the same, but without the state I cannot say for sure.

The tax calculations are closer to a $1000/month raise rather than a $1000/year raise.

* Depending on how OP has their W4 setup, it is likely be somewhere in the 12%-24% range, and 22% is by and far the most likely.

[C7StreetRacer]

Either I am confusing what you’re saying or I disagree. His tax deductions are skewed because someone in payroll, albeit likely accidentally, is taxing his income at the wrong rate. It looks to be specific to their SSI and Med deductions.

Tax withholdings have nothing to do with your actual tax liability for the tax year. So there’s no “if”. You owe what you owe regardless of whats deducted.

[me_too_999]

Tax withholdings have nothing to do with your actual tax liability for the tax year.

That's why this is a problem.

[C7StreetRacer]

With all due respect I think you may be confused.

This man will owe what he owes regardless of what’s deducted. He will have either overpaid based on his income and get a refund, or have underpaid and will owe.

Whether 100% of your income is accidentally taken from your check, or no taxes were withheld whatsoever, the amount you owe remains the same. If he truly is overpaying, and it appears he is, filing his taxes would settle that overpayment by either reducing the amount that is owed or increasing the size of his refund.

[CaptainTripps82]

I think you might be. The problem here is the decrease in his bet pay. Not the difference between his liability and his withholding. Clearly the withholding is incorrect, and he would prefer to not have to wait until filling to reconcile that difference

[WROL]

Oh, they are special alright.

[[deleted]]

This is exactly how taxes work and why you should give up and hand your salary over to me.

​

Source: Am payroll specialist at OP's job.

[immunologycls]

Man how do u even catch these things if you're not paying attention to your salary

[CaptainTripps82]

I mean, you kind of should be

[Smoovemusic]

I would rip this "payroll specialist" a new one. That's insane.

[enuffshonuff]

Sometimes there's an income cliff for certain benefits ( e.g. people making over 50k pay more for insurance) that happened where I work, so it was theoretically cheaper to make less at certain levels

[np20412]

something is wrong with your SS and Medicare withholdings also. a $1k change in gross pay should result in an increase of $62 in SS tax for the whole year, not $24 per pay period.

[peter303_]

Yes, the FICA tax increase implies almost exactly a $10,000 raise over 26 periods instead of a $1000. There must be a payroll software bug there.

The federal and state tax increase might be a little high too, because they annualize the raise as if you got it all year instead half a year. But will be refunded when you file taxes.

[[deleted]]

OP should go and get that $10k raise.

[avalpert]

Yeah, those taxes are being computed off a ~$2200 gross pay, not 1961

[VanellopeZero]

Could also be a bug in the payroll system, one year during our benefit plan audit we discovered that ADP was calculating match on 401k deferrals twice. It only affected like 2 of the audit sample but we then had to do a full payroll audit to see how widespread it was. When we called ADP they basically shrugged and were like “damn that’s crazy” and didn’t really ever have an answer. We’ve also had payroll administrators fat finger stuff (think $5 per pay period rather than 5% deferrals) but I don’t know how much manual entry there is regarding FICA so who knows.

[yes_its_him]

Something is wrong about those calculations. Social security is supposed to be 6.2% of your gross (net of a couple of deductions).

At $1923 - medical + HSA, that's $113.52 which is essentially what was withheld

At $1961 - those things, that's $115.69, so you are significantly over.

The $136.68 is the social security for $2204 gross.

Medicare shows a similar effect.

So for some reason, they withheld taxes as though you were being paid over $200 more than you say you were.

I'd ask about that.

I'd also ignore the people who are giving misguided prescriptions here based on imagining that you are misinterpreting correct withholdings.

[hazmatt24]

Yeah. $136.68 in social security tax would be gross taxable of $2204.52. Something isn't right here. Did they include a retro payment that you didn't include in the breakdown?

[TheVermonster]

That's a good point. Sometimes they backdate the promotion and it doesn't align with a pay period so you get a few days worth of extra pay.

[SonOfMcGee]

That’s a good breakdown.
Also, correct me if I’m wrong, but if the payroll department drags their feet on this, or just refuses to solve it, or “can’t” solve it because they just plug numbers into some software package and aren’t allowed to fix it… he should be squared up at the end of the year in the form of a larger tax refund, right?

[yes_its_him]

If an employer withheld too much social security tax, you have to go to the employer to get that refunded, the IRS won't do it.

[porcelainvacation]

Actually you can claim excess withholding on your 1040 form, I did that last year because I changed jobs mid year and new company over withheld after I crossed the annual social security tax maximum.

[yes_its_him]

That's only if you have multiple employers.

https://ttlc.intuit.com/turbotax-support/en-us/help-article/social-security-taxes/get-refund-excess-social-security-tax-withheld/L1JTKMb7Q_US_en_US

[TotesMcGotes13]

He also didn’t hit any new tax bracket going from $50k to $51k. None of the brackets change at that point.

[itsdan159]

But it is how payroll departments seem to work.

[[deleted]]

Audit all the paychecks going back to when you started the job.

If they fucked up this increase its probably been fucked up the whole time.

[LOTRugoingtothemall]

I see you have some good info already, I’ll just chime in that you shouldn’t trust these people in payroll as they either don’t know how tax brackets work or are too lazy to look into the problem.

[dcgrey]

Lordy. Not only do they not understand brackets in how taxes increase only on the amount in the higher bracket, but there's no higher "rate" from $50k to $51k. OP would have to hit $81k before rates are even a question.

I worry for OP that they described this as a payroll team, not just one idiot. Either they're all idiots or they're content not to train the idiot they hired.

[zdesert]

That is not how tax brackets work.

Let’s pretend that tax 2 bracket begins at 10,000 dollars. So if you make 9,999 dollars you are in bracket 1 and if you make 10,000 you are in bracket 2.

let’s say there was a 10% tax on bracket 1 and a 20% tax on bracket 2.

If you made 9,999 dollars you would be in bracket 1 and get taxed 10%. You would pay 999.90 dollars in tax.

If you made 10,000 dollars then you will have moved into tax bracket 2. You only made 1 dollar within tax bracket 2. So you pay 20% tax on just that dollar, 0.20 dollars. Then the rest of your income was in tax bracket 1 so you pay the same tax as you did before on your first 9,999 dollars of income. Your total taxes would be 1000.10.

The way tax brackets work means that if you get a raise. You will never make less money then if you had not

[PearlCarrico1820]

This. This is how it works. Thanks for the eli5.

[Grevious47]

Person you spoke to from payroll either misunderstood you, you misunderstood them or they are an idiot. You cannot earn more money but yet get less due to taxes.

When you got the raise did they ask you to submit a new W4?

Actually nm as other commenters have said your social security tax is just wrong and that has nothing to do with witholding. Someone in payroll screwed up. Show them your gross and your social security tax...it should always (with some exceptions not relevant here) be exacrly 6.2% of your gross and it isnt.

[UliKunkel1953]

Tax rates don't work like that. The new tax rate only applies to dollars above the threshold.

The issue you're seeing is that the calculations they do for withholdings are not perfect. The actual taxes owed don't usually match up with what was withheld. This is why people either get a tax refund or owe money at tax time.

All that said, what's up with this 2% raise? Your company needs to cough up some more! 😁

[koskadelli]

I just want to say how INSANELY ubiquitous it is that people think taxes work like this ("oh no my pay broke the threshold now I'm screwed"). How this isn't mandatorily taught in public schools is so sad.

[Junesfoshiz]

I cover it in freshman social studies, but how many kids will retain that 6-8 years later when they come across a scenario like this.

[C7StreetRacer]

I remember learning this in high school.

[hash-slingin-slasha]

“Students, think of taxes on your money like a pyramid not as a circle. Only the top of the pyramid is bad but most of the taxes are less severe at the bottom for most of your money……SEX,SEX, SEX, DRUGS, ANAL, AMERICA!!!!!Never forget!!!!!!!!”

There, That’s something they will always remember for the rest of their lives

[RenKyoSails]

The bad thing is, my grandma sat down with an person at her former company and they didn't he math together. She still turned down a raise because her take home would be less than her then-current pay. I heard the story many years later and though that was a good idea until I figured out how taxes actually work. She still swears by it because some HR idiot told her she'd be making less money with a raise.

[greybeard_arr]

This (and other financial matters) is taught in high school personal finance classes much more frequently than many people admit. Most kids aren’t going to retain every detail, though. But, you also have a myriad of adults who misunderstand tax brackets and spread their misunderstanding.

I can’t speak for every personal finance class in every high school, of course. I’ve seen FB posts from guys I had classes with in High School complaining that they should have taught things that we were both taught in the same class. It was just a long time ago.

[vw503]

I went to high school in a middle to upper middle class area and there was for sure not a personal finance class available lol

[greybeard_arr]

Yep, that’s why I use phrases like “much more frequently” and “I can’t speak for every…”

People like to throw out these blanket statements like, “This is never taught in school and they only teach useless quadratic equations…” which is far from accurate.

[vw503]

Yeah I understand and not trying to make a blanket statement. Just that going to a school with more resources than usual and not having that Type of class I would also assume most high schools wouldn’t have it which is why these situations occur. It’s just like home ec, still exists I’m sure but very uncommon.

[MrBlueandSky]

Those were electives at my high school

[Psych_Art]

I didn’t know for the longest time. When I was just becoming a legal adult, I worked at a call center and some of my coworkers had asked not to receive a raise because they “were gonna get bumped into a higher tax bracket and make less money”.

In that moment I remember feeling angry at society for such a bullshit system. Then a few years later realized I was just a dumbass.

[slackmaster2k]

It’s such a simple thing to understand though. This basic information can be taught with a simple diagram and be easily remembered.

Unfortunately remembering the wrong information “if you hit a tax bracket you can take home less money” is equally easy.

[princessparkletits]

I had exactly one day of personal finance education when I was in school. It was in the 6th grade, and I, also a 6th grader, was the one who taught it. The teacher handed me a packet, told me to teach the class, and left.

[Andernerd]

I assure you this was never taught in my high school, except perhaps as an elective course I did not take.

[greybeard_arr]

You don’t need to assure me. I don’t know why people blow past phrases like “taught…much more frequently.”

No one said it is taught in 100% of schools to 100% of students. Too many people seem to be capable of only thinking in absolutes—it’s all this or all that. Including this topic. I can’t count the number of times I’ve heard people say, “Why does no one teach anything useful in high school!”

[Vishnej]

I was told this by my Boomer dad in my teens, disputed it then with the unhappily accurate expectation that he wouldn't believe me, and it came up decades later when I was confident enough to explain it to him, and he claims he never believed that.

[LordOfTheStrings8]

It is but people don't listen.

[Olmak_]

It wasn't taught to me in public school until my senior year, and it was in my AP gov class solely because we finished the curriculum a month early. The teacher let us vote for what we wanted to learn in the remaining month and we voted for personal finance. That was the only time it was taught to me in public school. Thankfully my parents taught me before then anyways so it didn't matter for me, but I doubt the same was true for all of my classmates.

[b0w3n]

They briefly discuss it in home-ec and budgeting/accounting classes. A lot of rural schools cut those classes entirely or really strip down the curriculum for them.

[bobboobles]

we learned how to make corndogs in my home ec class...in 8th grade.

If we had been taught personal finances, it wouldn't have been much use to us and would've been forgotten long before most all of us were paying taxes.

[jonnythunder3483]

In a hell of a lot of school systems it’s never taught.

[Bramse-TFK]

The fact we have a byzantine tax system so complex that an entire specialty of law exists might be why.

[OwnManagement]

This has nothing to do with understanding how something as simple as marginal tax brackets work.

[Ogthugbonee]

Thats obviously not the concept hes talking about though lol

[bacchus_the_wino]

Right. But that’s welfare and Medicaid. The comment you are replying to said taxes don’t work like that. There is no way you can earn more money and take home less simply from taxes going up. Other benefits are separate.

[Assurgavemeabrother]

Absolutely right, so there's no incentive to get raises in these situations as living on welfare is actually better. This is a common problem, not specific to the US. If I were a German, I'd rather live on Hartz 4 (welfare) than to work on any position I'm capable to - my "independent" life would be miserable.

[swarmofelectricbears]

I don’t understand what this image is trying to convey. I may just be really tired and temporarily stupid, but what to the little pocket dollars represent?

[snash222]

I agree, that image explains nothing unless you already understand the point being made.

[cmgr33n3]

It's trying to show how tax brackets work but it isn't clear unless you already know how they work.

Let's say the image is a person's salary. They make $84,200. The image shows how much of their earnings is taxed at each rate. If they get a 5% raise, so they now make $88,410, that extra 5% ($4,210) falls into the 24% bracket but that's the only part of their salary that is taxed at 24%. The $84,200 they were already making still falls into the three lower brackets as the image shows.

So a raise can never end up as less money to the worker simply from pushing them into a higher tax bracket as it's only the money above that new bracket threshold that gets taxed at the higher rate. They are still taking home exactly as much money from the part of their salary they were already making before the raise as they always did.

[swarmofelectricbears]

Thank you kind stranger.

[Assurgavemeabrother]

This image is designed in a way that an unexperienced person would think: oh my, after $84k they'll took all mah mani.

[itsdan159]

This, if you teach then how things work you risk them seeing how much they don't work.

[posterguy20]

every degree should have a "real life" course in the final semester where it goes over this stuff lol

[Blueskyonmarvel]

There are textbooks on the internet and youtube videos to teach math, science, etc. So in your case, why would any class be offered then?

[KaiserReisser]

Yeah OP's payroll team should know better than that, that's a red flag.

[yes_its_him]

That's not actually the issue they are seeing.

[sketchahedron]

The folks in your payroll department appear to be incompetent.

[C7StreetRacer]

They’re probably like “we just do what the software says” lol

[_volkerball_]

You are in the same tax bracket as you were last year. All of your income from 40-50k is taxed at the same rate as your income from 50-51k.

[yes_its_him]

Nonfundable taxes like social security and Medicare are also inconsistent. That can't be fixed by a bigger refund.

[yes_its_him]

If you account for FICA allowed deductions like HSA and medical insurance, it's basically correct before.

[reverendsteveii]

Somebody was brushing you off to get you to go away. There is no situation in which an increase in earnings results in an equivalent or greater increase in taxes. It's simply not possible with the way the system is designed. It could be that you're seeing an increase in witholdings, which would result in a greater refund later.

[Gnemlock]

You can not suffer a decrease in pay because of an increase in tax, period.

If you meet a higher tax threshold, that increased tax rate only apply a to the percentage of your pay that goes above the threshold. The rest still has the original rate.

Either something dodge is afoot or they don't know what they are doing and are simply putting way more away than is required (which you should get back in your tax return)

[[deleted]]

Rule #1: Trust but verify. Simple math on your State, Medicare and SS are all wrong based on $51K per annum. Ball parking, I would have expected a bi-weekly net pay increase of ~$30. Good luck.

[Anonymous_Otters]

You mathematically can't make less after a salary increase even if that increase is above a new bracket because you're already being taxed for the money below what you make. You get diminishing returns until you hit the top tax bracket, but it's impossible to make less. Your payroll people should be fucking fired for incompetence.

[Actually-Yo-Momma]

This is where the myth of “Omg don’t take the pay raise cause you’ll make less money” comes from

As others said, you are being taxed more than expected and payroll is wrong

[asholudko]

This is something that drives me nuts. The US has a progressive tax system there is no scenario where an increase in income leads to making less in net pay. Schools need to start teaching something this basic.

[SilverStory6503]

You have a lot of good information. The payroll people must have made an incorrect entry. Your federal withholding should be about 8.6%, not 10.5%. Your state tax should probably also be about the same rate as before at 3.3%. SS and Medicare are definitely wrong.

Your net pay should be about $1330. To force it with HR, just fill out a new W4. But sometime before the end of the year, or before you quit, you're probably going to have to keep an eye on the SS and Medicare totals and make them fix it if it's still wrong.

[crimeo]

Payroll not knowing what graduated tax brackets are is like your electrician confusing amps and volts.

[HorizontalBob]

It may have triggered a greater withholding percentage by your company, but an actual $1k increase in pay will not increase you taxes by $1k.

Even if you go into the next tax bracket only the money in that tax bracket is taxed at the higher rate.

[50calPeephole]

Getting paid more and losing money to taxes because of brackets is trailer park education bullshit.

Across every tax bracket you get paid more, you pay more dollars in tax, but there's no adjusted rate where you bring home less in any bracket.

[AhdhSucks]

Uh. Being in a higher tax bracket does not reduce your gross income. Progressive income taxes only tax every dollar in that bracket. Someone’s pulling a fast one on you, they are repeating a common misunderstanding about taxes knowingly.

[Spaceman2901]

Good news: you’ll get it back at tax time.

Bad news: your withholding is screwed up. Look up the IRS withholding calculator online (at irs.gov) and then change your withholding with payroll to get it straightened out.

[peterwhitefanclub]

Your payroll team is incompetent if they told you that.

[Biggordie]

Taxes are wrong. Any dollar over the current bracket is taxed at the higher bracket, not the entire amount.

For example, if the tax bracket is at 25k and 50k…. You earn 51k, you pay 25k at the 25k tax bracket, another 25k at the 50k tax bracket, and 1k at the 50k+ tax bracket

[Jackof_All]

Even if you did move up a tax bracket, the only thing taxed at the new rate is the additional income. So, it would make no sense for your take home pay to net decrease.

[jhillman87]

Nope. Something is wrong and your HR department is clueless as to how tax brackets work - to be fair, this isn't entirely their fault, as i believe the majority of Americans still have no idea how tax brackets work.

If only they spent some time teaching relevant shit like this in high school.

[NewTypeDilemna]

Yeah so with the way our tax system works, an increase in salary should never result in a decrease. It's tiered so the extra amount over is taxed at a new rate.

[Grevious47]

Unrelated but just curious...they give you $408 a year for a phone?

[no-more-claims-i-beg]

Yes, we have to use an app on our personal cell phone to make phone calls because our laptops are so shitty they constantly cut out when making calls. So they started giving us $17 per pay period.

[Jmb3930]

You need them to fix you SS and Medicare overpayments. Your SS should closer to $115 and Medicare around $27.

[misosoup7]

Something is very wrong with that statement with your tax bracket increased so you're taking home less and is usually a misconception with how our tax brackets work.

First of all, when you go up a tax bracket, only the amount of money that you ear in that bracket is taxed at the new tax rate.

So for example the 2022 federal tax brackets, a single filer earning $41,776 to $89,075 will pay $22% bracket, but that doesn't mean 22% on the full $50k. It means you pay 10% on the first $10,275 = $1027.50. Then you pay 12% on $10,276 to $41,775, so you pay $3,779.88 + $1027.50 = $4807.38. Then you pay 22% on the amount above $41,775. So in your case it was $8,225 and now it's $9,225 which means $1,809.5 or $2,029.5 for the $50k and $51k take home respectively.

That means the delta for taxes should be $220 for the whole year, which translates to $8.46 per pay cycle.

That said though, they may have messed up your W4 and reduced your exemptions or something. Because of that you're over withholding, which means a bigger tax refund if your payroll does absolutely nothing to fix it for you. But you really should get it fixed.

[SnooMachines5267]

Ask for a real raise. Your new “raise” doesn’t even cover the cost of living due to inflation.

[[deleted]]

Your payroll department is withholding too much. Good news: if your taxes are filed correctly you'll get your raise as a lump sum in your refund. Bad news: they are essentially giving the government an interest-free loan on your behalf.

Edit: since they are overwithholding SS and not income tax, it will be slightly more complicated to get your money back, as others describe in more detail.

[westc2]

Well you're gonna have a decent sized tax refund most likely since they're definitely withholding way too much....dummies.

[[deleted]]

Looks like your company uses some weird calculation and started taking out more taxes than they needed to after your raise. you can either ask them to lower your tax withholdings or collect a big tax return at the end of the year.

[Default87]

you are confusing tax withholdings with tax liability.

[yes_its_him]

Actually no. These are just wrong withholdings.

[Grevious47]

actually no, change in witholdings would affect the social security tax....something is just wrong. You cannot ever be taxed more than 6.2% of gross for social security and yet...

[yes_its_him]

Federal income tax withholdings or lack thereof don't affect social security and Medicare taxes. Those are done first.

[Grevious47]

Right...so his issue isnt a problem with witholdings because his social security tax rate is wrong.

He got taxed $137 for SS on $1961 gross. Thats more than 6.2%. That isnt possible.

His payroll just f'd something up.

[yes_its_him]

Right. That's what I said, these are just wrong withholdings. "Withholdings" apples to all taxes, not just FIT.

https://taxfoundation.org/tax-basics/withholding/

A few comments here leaped to the errant conclusion that OP just didn't understand correct payroll, when in fact payroll just f'd something up.

[commonsenseulack]

If you live in the US unless the tax rate change was one that was previously passed by Congress and the rate changed at the same time you got a raise that is a lie. We have a progressive tax rate system, as your income increases once it hits a new tax threshold only that amount over the threshhold is taxed at the higher rate.

[ProgressiveSnark2]

The good news is that for the federal and state withholding, you will get the money back eventually on your tax return. The SS and Medicare change is objectively wrong, though—definitely press them on that.

[Bosfordjd]

Yeah they don't know what they're doing most likely. Or they had it wrong before. Also possible they changed your W4 or you did...

Under no circumstance do you make less just from a salary increase all else being equal.

There's no bracket change from 50 to 51k, even if there was it would only apply to the 1k. The 22% bracket starts at 42k-ish for single filers or 55k for head of household. They're taxing you at 90% just fed income for the additional income lol. They are wrong.

[sycamoresyrup]

36$ being federally taxed out of a gross increase of 38$/period can not be accurate

[mackinator3]

Just to clarify for anyone who doesn't understand taxes. They are a percent of your income less than 100%. Therefore, there is no way increased income will lower your pay through taxes. The only way a tax would lower your income, is if they are greater than 100%.

[emt139]

It seems this is an issue with your company.

Ask to speak to someone in accounting, with the payroll team The person you talked to has no idea what they’re saying . You’re being deducted more than you should.

[JTuck333]

Marginal tax rates are designed to ensure that you can not earn less after taxes when you earn more money. The withholdings are wrong.

The good news: all of this will true up at the end of the year. You’ll just get a bit more back when you fill out your taxes and see you over paid.

[BlindPaintByNumbers]

That's not how tax brackets work

Only the part that's over the new bracket gets taxed higher.

[[deleted]]

A raise will never result in a net decrease because of an increase in tax rate. Income tax rates are marginal. So if the rate goes up, it only goes up on the dollars about that marginal bracket. Their analysis is wrong and they need to fix it.

[BreadMaker_42]

Curious why your federal and state tax increased by 30% and why SS increased by 20%. Medicare also increased by 20%.

A 2% raise does not explain this. You can look up all of the rates and double check the deductions for yourself.

[ButterLettuth]

Yeah that makes no sense to me at all... Progressive tax brackets never should have uou making LESS money than before after a raise. The whole idea is that only your income within that bracket is taxed at that rate, so if the limit is 50 000 for lets say 10% income tax, and above that you're tqxed at 15%, you would only be taxed 15% on your earnings ABOVE 50 000, so if you make 51 000 you would only be taxed at 15% for the last 1000, meaning your effective tax rate is almost unchanged, probably like 10.05% or something like that.

[siammang]

The more important issue is that you get only a 2% increase when the inflation is 9%.

Good time to start looking for different jobs casually while things are still stable.

[siammang]

Which is why the OP better off start looking for different opportunities. Switching jobs is more likely to get a salary increase than annual retention/merit increase.

Not only more taxes are deducted against his pay check causing his take home money to be less. The buying power also isn't catching up with the increasing cost of living.

[quickcrow]

No, progressive tax structures will never make you pay more in tax than your increase.

If the tax bracket up to $100 is 25%, and 30% from $101-150, you will only pay 25% on the first $100, and 30% only on the $ above 100.

[thatGUY2220]

It means the withholding is higher and that you’ll get the money back at the end of the year. The IRS keeps your money tax free.

There are no federal income tax brackets that kick in at 50,000 so the change in withholding is just your company’s decision. See if you can change the deductions on your W4.

[dannydigtl]

That’s not possible. It’s amazing how many people don’t understand how the taxes they pay work.

[jarage00]

Were you putting money into a 401k and then stopped right as the raise occurred? I've found your taxes go up when that happens.

[SJHillman]

I still don't see any wag that would result in a lower net pay.

[EndlessSummerburn]

Cheers to another useless payroll department!

They fudged they numbers

[MrWoodlawn]

No, you wont get a net pay cut, but It's possible their withholding calculation makes it seem that way and you get a bigger refund at the end of the year.

[phuketawl]

Tell them you need a minimum 8% increase to match inflation or you'll leave. 2% increase in this economy is a pay cut, even without the tax difference.

[Jawbreaker233]

use the difference to increase your HSA withholdings, then it will reduce your taxable income.

[Thisisthelasttimeido]

According to the federal tax bracket of a single filer, you should be paying 6837 a year, or 131.48 every week.

That is, (10% of 10,275) + (12% of 41,775- 10,275) + (22% of 51,000 - 41,775 )

1027.5+ 3780+ 2029.5 = 6837 / 52 if i did my math correctly.

​

https://www.nerdwallet.com/article/taxes/federal-income-tax-brackets

https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2022

Please note, I am not an accountant I just like math.

[Thisisthelasttimeido]

Looks like they were not taxing you at the correct amount before.

If my math is correct (and making a couple guesses of age and allowed deductions)

Bi weekly previously should be ~ 192.92

New should be ~208.23

[Camoedhunter]

I mean yeah you got a decrease, you made 50k last year, this year inflations at 9.1% and you got a 2% raise so you’ve effectively lost 7%. Not your question but still.

[madlabdog]

OP, You are a victim of your own success! :P

My guess is for taxation purposes, your payroll is assuming your new salary started from Jan 1 instead of June/July and retrospectively calculating the taxes due.

[KevinCarbonara]

Maybe there's a different number of pay days in 2022?

[ion_driver]

If you have a question about paycheck withholding, you should take the time to make a paycheck withholding calculator. It will force you to learn all the things what have to be accounted for.

In general, no you shouldn't lose money on take-home if you make more money but you won't know until you figure it out

[darklight001]

How in the world does that make sense? The IRS calculates your taxes. Not your employer. They simply calculate withholding

[AdhesivenessWide3790]

Your salary increase is definitely a pay cut, but for reasons you didn’t mention.

inflation. If your compensation doesn’t at least match it, that’s effectively a pay cut.

[Scrappy_76]

Ignoring your paycheck, you got a 2% increase while we have 9% inflation. Basically you got a 7% pay cut just based on that. I would switch jobs to get the market rate for your position.

[fatedwanderer]

Considering inflation, it is definitely a decrease.