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I'm in Finland. The way income tax works here is that my employer withholds a certain percentage of my salary up to an annual upper limit, and a significantly higher percentage of the salary exceeding that.

I got my pay stub today, and discovered that my withholding rate for this year was calculated so that I actually overshot my maximum last month. This just means that I pay a just over double rate for November and December. When I filled in the electronic form to request a new withhold rate for December, the preview tells me I'd be paying approximately the same rate next month even if they recalculate.

So, the taxman is getting his, and the extra 120€ I have been bringing home each month has been going to mutual funds. There's also been an approximately equal stream to stocks and my rent/insurance/rainy day account. The downside is that I'll dip into my mutual funds for about 800€ in the next two months to offset the total 1200€ extra withheld in the same time.

My question is: If I get a similarly underestimated withholding rate next year, should I get the rate recalculated or keep doing what I have been (unknowingly) doing this year?

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  • This paragraph isn't clear - could you clarify with numbers (fake or not) showing what is happening now vs what would be happening with more accurate withholdings? "So, the taxman is getting his, and the extra I have been bringing home has been going to mutual funds. There's also been an approximately equal stream to stocks and my rent/insurance/rainy day account. The downside is that I'm dipping into my mutual funds for less than the aforementioned extra investment to supplement my income." Nov 18, 2020 at 19:22
  • @Grade'Eh'Bacon done.
    – HAEM
    Nov 18, 2020 at 19:43
  • Lots of Americans here. The two countries' tax laws are apparently so different that what you wrote makes no sense to us.
    – RonJohn
    Nov 18, 2020 at 19:43
  • @RonJohn If I'm reading this right, there's a tentative sum withheld and a percentage of the wage exceeding a given limit. In Finland, that tentative sum is another percentage of the actual wage and that limit is set for the whole year, with the higher rate kicking in toward the end of the year.
    – HAEM
    Nov 18, 2020 at 20:04
  • It sounds like what you are saying is that too little tax was withheld for most of the year, and you have been investing the additional take-home pay you received as a result, and now an end-of-year correction will result in too little take-home pay to cover your expenses, so you will be pulling some money from those investments. Is this correct? And your question is whether to do the same next year, or try to have correct withholding all year?
    – yoozer8
    Nov 18, 2020 at 20:23

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