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LVLAKERFAN Star Player
Joined: 24 Jun 2005 Posts: 5347 Location: United States
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Posted: Wed Jul 30, 2014 6:16 pm Post subject: Taxes/401k question |
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If I just increased my 401K from 3% of my salary to 20% of my salary, shouldn't the taxes I pay on each pay check decrease?
I believed they would since I was under the belief that my contributions should be deducted prior to being taxed. So far on my last two pay checks, the taxes being with held have not changed.
Am I missing something here? Any help would be appreciated. _________________ SCHROEDER/CARUSO/COOK
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choylaychunkuen Starting Rotation
Joined: 02 Dec 2011 Posts: 260
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Posted: Wed Jul 30, 2014 6:39 pm Post subject: |
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Yes, you should see a decrease in your salary. Only thing is, how long before your company can change your contribution. My paycheck is every two weeks and it takes a day or two before the changes are made. Check your policy on how long it takes before changes are made...if not then talk to your HR. |
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LVLAKERFAN Star Player
Joined: 24 Jun 2005 Posts: 5347 Location: United States
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Posted: Wed Jul 30, 2014 7:37 pm Post subject: |
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choylaychunkuen wrote: | Yes, you should see a decrease in your salary. Only thing is, how long before your company can change your contribution. My paycheck is every two weeks and it takes a day or two before the changes are made. Check your policy on how long it takes before changes are made...if not then talk to your HR. |
The company already changed my contribution. They are taking like an extra $390.00 out of my pay check every two weeks. The total taxes being withheld are still the same. The 401K contribution has increased, my total paycheck has decreased, but I'm still paying the same amount of taxes. _________________ SCHROEDER/CARUSO/COOK
MATTHEWS/KCP/THT
LEBRON/KUZMA/BABYGIANIS
AD/MORRIS/DUDLEY
GASOL/HARRELL/TINKLE
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Wolverine Star Player
Joined: 21 Mar 2004 Posts: 7846 Location: San Jose, CA
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Posted: Wed Jul 30, 2014 8:42 pm Post subject: |
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Tax owed is not the same as tax withheld. Your net tax owed which is calculated for the entire year will be lower due to your increased 401(k) contributions. However, the taxes that your employer withholds from your weekly/bi-monthly paycheck (most likely) doesn't factor in how much you contribute to your retirement. It's usually just based on your gross income and the number of exemptions you claim (for yourself and your family).
If you owe less tax (because of your increased contribution) but your withholding stays the same (because it doesn't depend on your contribution), that just means you'll get a bigger refund (or have to pay less) when you file your taxes next year. If you really want your tax withholding to also go down, you'll need to file a Form W-4 with your employer and possibly increase the number of exemptions (allowances) that you claim.
Last edited by Wolverine on Thu Jul 31, 2014 6:59 am; edited 1 time in total |
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safari_in_cali Star Player
Joined: 06 Oct 2002 Posts: 1029
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Posted: Wed Jul 30, 2014 8:49 pm Post subject: |
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Are you sure it's a traditional 401k plan and not a Roth 401k? With Roth your contributions are taxed, but your money grows tax free and you don't owe any taxes when you make a withdrawal. |
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mhan00 Retired Number
Joined: 13 Apr 2001 Posts: 32067
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Posted: Wed Jul 30, 2014 9:28 pm Post subject: |
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Cough . . . Tax refund . . . Cough. |
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mhan00 Retired Number
Joined: 13 Apr 2001 Posts: 32067
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Posted: Wed Jul 30, 2014 9:29 pm Post subject: |
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Or what Wolverine said. |
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