My wife had it happen to her today.
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Explain this better to non Americans please ?
When you start working for an employer, the first thing you do is fill out a tax withholding form. What you check on the form determines how much is withheld from your paycheck, these are called exemptions. Typically it's 0-3 exemptions. If you claim 0, you'll have more money withheld, which means you typically get a refund when you for your taxes. If you claim 3, you'll keep more money in your paycheck, but could end up owing money when you file your taxes.
Employers pay a payroll tax, so if you send more money to the IRS, then they have to pay a bigger portion. By increasing the exemption of employees, they can decrease their portion of the taxes coming out of your paycheck.
How can it be legal to change a person's Tax forms? That can't be legal.
I don't believe it is, but there's a possibility that this is all from the payroll tax holiday, and people just forgot about it, or misinterpreted the changes. I'm not sure though.
As a former business owner, I just want to clarify that employers have to match FICA (social security) and Medicare taxes paid by employees. These are flat percentages based on gross pay. Exemptions make no difference.
However, the employer takes out withholding (determined by employee exemptions) and pays that directly to the IRS on the employee’s behalf. Jacking up exemptions puts more money in the employee’s check and the employer pays less to the IRS. But, there’s no net cash advantage to the employer. The same amount of money is paid in total; it’s just been shifted from one bucket to another.
SO. Jacking up exemptions creates no cash advantage to the employer. But it does disadvantage the employee at tax time.
Therefore, the only reason a company would purposefully increase withholding exemptions would be to completely fuck their employees.
Thank you, that's why it's only occurring from major corporations. It only fucks over the economy. Watch the stock market crash when a Huge percentage of people have to pay rather than receive. It all makes sense.
I used to do the payroll taxes for our business. The company only matches SS and Medicare, your exemptions have no bearing on that. The exemptions cover your federal income tax withheld, so if you have less fed tax to pay then they still have to pay that money to you, less exemptions, they send it to the government. Either way they have to pay it out.
They didn't take out as much for taxes. People just spent a little more all year and will get a huge tax bill they can't pay.