One of the perks offered by my new job was that they offered a fairly substantial amount of money for relocation. Which worked out great for us, because we tried to do things as inexpensively as possible, so that we could walk away with a little extra cash on hand. The amount was taxable, but that was to be expected. Besides, if they take out as much as they normally do, We’d probably lose 20-25%, right?
Wrong. Because they put the whole thing in one check as a lump sum, the amount of the check bumped it way up into another stratosphere of tax brackets. Where I lost about 20% per check normally to taxes, we lost over 40% of the relocation money. Most of the deductions were what I expected (CA state, SSC for example), but the federal withholding went WAY WAY up. In fact, the federal withholding on our relocation check was more than 25% of the check.
Now, I do understand that we’ll get most of that back come tax time, but I really hoped to use that money now to finally build myself a new computer. Most of you know that I’m a computer guy, but what might surprise most of you is that I have not in fact ever built a computer for myself. I’ve been planning and trying for the better part of 8 years, but life keeps getting in the way. Even now, when it was within my grasp, it has slipped away yet again.
I suppose I’ve waited this long, what’s another year. But who knows what else will happen between now and then…
I currently claim EXEMPT for federal income tax. They don’t take any of my money. I may end up owing a little at the end of the year but I don’t mind. I got tired of the feds keeping so much of my money all year. Sounds like that’s what you should switch to. I think the folks in payroll could take care of that for you. You may still end up getting a refund on what you gave them this year if you did that but stop the hemoraging now. It might save you enough each week to pay for a computer.