How much are commissions taxed ?

Probably about 40 percent will be withheld. Before the Bush tax cuts it would have been more. Assuming that you have just one deduction.

Your payroll person will take your base (if you have one) times 12 months and then this check times twelve months and withhold as if you were making about a Million Dollars a Year.

Naturally you'll get a lot back in 2012 unless you actually do go ahead and make that kind of jack in 2011.

The MOST deductions that you can claim should still be eight, if you change your W4 to that amount then you'll see almost zero Tax withholding on a regular check. I can remember having $7K withheld (including FICA) from an $18K month during Clinton after jacking my exemptions up to 8.

As grim as this all might sound, collecting this kind of commission on a 1099 basis puts you in a much worse situation with the IRS, IMO. You almost have to register a business and start looking for expenses for your Schedule C at that point.

I agree with the overall tone of this - I am not qualified in the specifics. When I make commission (usually around $75K / year) I get way over-taxed on it at time of payment but end up getting a good sized refund on my tax return.

My base is small but my overall income should be around $160,000. Do you think I should claim 8 deductions to stop the higher deductions ?

Well, a commission check is just that, a commission check. So you should by definition be getting $85,000.

I'm assuming however you mean that is the gross compensation. It should be counted as wages (I'm assuming you are an employee). So yeah, whoever said 40% would be withheld is probably a good ball park albeit on the high end.

I would not declare eight deductions primarily because now you'll be past the FICA limit by March or April and then you'll be getting that 7.5 Percent added back to your subsequent paychecks anyway.

(That's unless you have something really gainful lined up that you can do with the extra money you would collect this month anyway? Like if you were buying a house or something? I can remember a guy who really slashed his monthly payment on a fifteen year fixed mortgage that way, he hasn't needed to work anywhere since 2006. When push comes to shove the difference between one deduction and eight will be around $7K-$9K, I reckon.)

What really steams the IRS is if you do something like this and then can't come up with the money to pay your tax obligations this time next year. They have seen that happen with commission earnings way more than you can possibly imagine. Not just in the movie Boiler Room either.

Back in the day there were lots of people who could barely speak Engrish making more than $200K selling 3rd party DRAM and these characters never even knew if they would still have a job at the end of the year. What's more their entire industry was going to disappear in 4-6 years and most of these individuals would never make more then $30K again in their lives. (The ones who did better bought car washes or liquor stores.)

A friend of mine got himself onto a never-ending IRS $hit list that way. He managed to repeat the process often enough that the Gubmint finally gave up on him but it took him almost fifteen years and he lost two houses doing it.

So he's probably collected twice as much comp as me over the years and my current net worth is at least six times his.

NEVER collect unemployment or disability insurance from one place and big commissions from another at the same time. People go to jail for that stunt all the time, especially on the disability insurance side. First offenders too.

I thought the IRS could fine you if you took exemptions during the year that you could not justify when you actually filed at yearend.

any accountants ? wrote:

I am getting a rather large { for me} commission check in March {$85,000} I am trying to plan how much I will take home, any tax guys out there ?

The most accurate method would be to simply have your employer withhold 25-28% federal tax (depending on your filing status etc), the 4.2% social security up to the wage base of $106,800, the 1.45% medicare and the state tax...if any...at the max rate for your state. They may be able to do this for you without a lot of gyrations with your W-4 form.

Essentially, all you need to tell them is you would like 25-28% federal tax withheld. The other withholdings will take care of themselves without any tinkering.

And by the way, the amount of tax you ultimately pay has nothing to do with how much you have withheld. The amount of tax you end up paying...when all is said and done...is determined when you file your tax return. The withholding is just an advance toward the total tax determined on your return.

Good luck...

I dont want 40% coming out, that is like giving a loan to the feds at 0 %. The check skews my income and I want more in my pocket while paying the amount I should for the year. I can't tell my company what to take out verbally, I have to go online which I am going to try and do. I thought the percentage that comes out was based on how many exemptions. I still have much to learn.