DISCLAIMER/PARANOID thoughts: Don’t take this advice as its not meant to be advice…its my general ramblings about my favorite topic in the world. 

I just read Publication 15 which is  the Employer’s Tax Guide. I was trying to figure how my employer determines how much tax to take out per pay check. Between the Federal Govt., the State Govt. and the City Govt., I give away $143.25 out in taxes every two weeks without fail. I used the withholding calculator last year, but I only made the adjustments to my husband’s paycheck. I increased the withholding allowances based on student loan payments and retirement contributions. The tax tables for 2008 have not been published, but according to the 2007 tables, my tax should be 4,111 at my salary of $32,605 (assuming no deductions). And this apparently puts me in a 25% tax bracket. But that would mean I am giving $158.11 per paycheck just to the federal govt. alone. So this table didn’t make any sense to me.

In Pub 15 on page 46, my tax should be $53 per pay check (as a married person with 2 withholding allowances listed on my W4). But I get $54.25 taken out of every paycheck (based on taxable income, i.e after retirement and health care deductions which are not taxed). If I have 6 withholding allowances, my tax would be $0 (my new raise goes into effect next month…so I’m still surving on my student pay. New raise is $39,086, which in L.A would translate into $40,752 as I will be on the same pay scale when I move). Should I go to payroll office and harass them? I’m sure they’re going to tell me something about how the thing is automated and that they can’t fix software bugs, etc, etc. But I want my $1.25 dammit! That is $32.5/year which would buy a nice case of beer (or new beer making ingredients) or a nice dinner for two.

I reduced my retirement contribution to 5% after husband became unemployed and I get 100% matching to my 5%. I decided to increase the percentage to 6% for the next pay, and will probably increase it again if I feel comfortable on the reduced pay. If I increase the retirement contribution to 7% my taxable income falls and my federal tax per check will be $51. Or maybe $52.25.

The other pre-tax withholding is for health “insurance”. This is a high deductible plan (HSA) I wrote about previously. The deductible is $1500 and every pay day I put in $67.72 into an account managed by aetna which I can use to pay for medical things up to the deductible (if I understand how this thing works). I don’t know if I’m comfortable with aetna managing my funds…I think I can do that myself. This $67.72 is for both me and my husband. Currently the balance is $125.20 ($0.20 was the interest I earned for the month of February) and we’re saving up for a vasectomy (I think I’ve convinced my husband to do it, but he may chicken out…). The company is also slow in posting my payments into the fund. So the balance is off. Also the company has a crappy, buggy website and is in cahoots with Chase….which to me means trouble because chase is always doing bad things to their customers.

BTW, husband recently got a PT job that is perfect for him. And I’ve been stressing him out to get another job to pay down his loans…because I am the wife who hates debt. So he is looking for another job (either PT or FT that fits in with our freakin’ ethical and moral values, because I’ve already brought down our collective karma not having the right living down pat)

Edit: PA and Philadelphia has a flat tax and no opportunity for exemptions. Tax rates are: 3.07% for state and 4.219% for city.