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This question already has an answer here:

If my paycheck for my first week looked like this:

Period Start
7/1/2016

Period End
7/31/2016

Total Hours
40

Net Pay
$1,419.32

And, if my paycheck for my first month looked like this:

Period Start
8/1/2016

Period End
8/31/2016

Total Hours
173.33

Net Pay
$5,236.19

I would expect my monthly pay to instead be ($1,419.32 * 4) $5,677.28.

It would appear there is a difference of ($5,677.28 - $5,236.19) $441.09.

How could this be?

Note: I worked 40 hours all weeks. If I check my Fed Withholding for 40 hours, it is $147.99 and if I check it for 173.33 hours it is $1,433.02 which is 9.6 times higher whereas I would have expected it to be just 4-5 times higher. Could this be the discrepancy?

marked as duplicate by Mike Scott, Dheer, Pete B., MD-Tech, Nathan L Jul 9 '18 at 17:49

This question has been asked before and already has an answer. If those answers do not fully address your question, please ask a new question.

  • 7
    You list your paycheque for the first week as having a period ending 7/31/2016. That makes no sense. I'm also curious why you think there are only 28 days in July. You also need to do the calculation on gross pay, not net pay. – ChrisInEdmonton Aug 31 '16 at 17:10
  • @ChrisInEdmonton I updated the question with hours for clarification. If I check my Fed Withholding for 40 hours week, it is $147.99 and if I check it for 173.33 hours it is $1,433.02 which is 9.6 times higher whereas I would have expected it to be just 4-5 times higher. Could this be the discrepancy? – user1477388 Aug 31 '16 at 17:24
  • 2
    There are not four weeks in a month. There are (52/12=) 4.3333.. weeks. – chili555 Aug 31 '16 at 21:04
  • I'm sure we've addressed this exact issue, just need to find and link. – JoeTaxpayer Aug 31 '16 at 23:10
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You seem to be very confused about taxes. The withholdings from your paychecks are just the result of a reasonably educated guess of what your total tax liability will be at the end of the year. Your actual taxes aren't actually calculated until the end of the year when you gather up all of your w2s, 1099s and other documentation and file.

US Federal Taxes brackets indicate marginal increases, meaning (for single folks) you pay 10% on income up to $9,275, and 15% on income from 9,276 to $37,650 and so on. The $9,275 figure is based on taxable income, meaning after you calculate all your income and all your deductible expenses. There is also something called a Standard Deduction. Unless you have itemized deductions in excess of the standard deduction you'll just take the standard deduction.

Say person A makes $10,000 in a year. "A" uses the standard deduction of $6,300, which makes his taxable income just $3,700. He will owe $370 in federal taxes. This tax liability represents just 3.7% against gross income of $10,000.

Say person B makes $20,000 and also uses the $6,300 standard deduction making her taxable income $13,700. She will pay $1,591.25. This is calculated as 10% on the first $9,275 ($927.50) and 15% on the remaining $4,425 ($663.75). This tax liability represents 7.9% against gross income of $20,000.

For two times more income ($10,000 vs $20,000) you pay approximately 4.3 times more in taxes ($370 vs $1,591).

In your question you're showing July monthly hours of 40 and August monthly hours of 173.33. At $15 per hours these will represent approximate annual incomes of $7,200 and $31,140 respectively (40 hours times 12 months times $15 per hour). These two annual incomes will have drastically different tax liabilities.

Your employer is taking your income in a given period then assuming you will continue to earn at this same rate for the entire year. From that assumption it's calculating a tax withholding. But your employer doesn't know if you have another job or do some contract work on the side or own a home or have kids or any number of other things that could change your tax situation. This assumption and corresponding withholding is very rarely exactly correct. At the end of the year you will file your taxes and either owe a bit more or receive a refund.

  • Wouldn't the taxes be the same since the hourly rate isn't changed on 40 hours vs 173.33 hours? Why wouldn't I simply be able to multiply times 4 weeks to achieve my expected monthly salary? Why does the federally withholding not simply multiple by 4 or 5 instead of the 9.6 times it increases? – user1477388 Aug 31 '16 at 17:45
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    @user1477388 No because there is some behind the scenes formula being used to determine annual income based on your rate of pay. 40 hours in a month vs 173 hours in a month are two extremely different annualized incomes. At $15 per hour it's $31,140 per year versus just $7,200. Those two incomes have very different tax liabilities. – quid Aug 31 '16 at 17:50
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    @user1477388 - for figuring the weekly amount, if you change pay period end to 7/7/2016 instead of 7/31/2016 and recalculate, your problem might go away. (Though then you may also want to use 4.3 wks/month instead of 4.) – TTT Aug 31 '16 at 18:13
  • @quid Thanks, that actually clears it up. I just figured it was based on hourly rate. – user1477388 Aug 31 '16 at 18:19
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    @Xalorous it is based on your expected pay based on that specific pay period. The tables don't consider any other paychecks earlier in the year, they always assume that each paycheck is a good estimate. – mhoran_psprep Sep 1 '16 at 10:08
1

I highly recommend you recalculate your paystub, every time you receive one, as follows:

  • Start from the base rate of pay that you expect from your job offer
  • Add on hourly benefits like vacation pay etc. (if applicable)
  • Multiply by the hours you think you worked (from your schedule, from your log book, etc.)
  • Add any other non-hourly pay bumps if applicable
  • Subtract your withholdings - including a recalculation of your expected tax withholdings from IRS.gov

The reason I recommend this is it seems you expect great mystery around how your pay is calculated. There should not be. Every line on your paystub should match your expectations, to the penny. If it doesn't, it is your responsibility to find out why it differs [legally your employer should be doing it correct, but it is always best practice to do this yourself].

Once you understand how your paystub is calculated, you will understand why there is a discrepancy between how much net pay you get when paid weekly vs monthly.

To actually answer your question: No, there should not be any difference between how your pay is calculated between weekly or monthly paystubs. If you see a difference, it is either because you are misunderstanding some element of your pay (for example, your withholding calculations), or because your employer made an error.

  • My numbers don't appear to be adding up. Why does the federal withholding increase by 9.6 times whereas I would expect it to increase just 4 or 5 times for the corresponding weeks? – user1477388 Aug 31 '16 at 17:49
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    @user1477388 See quid's answer on this. – Grade 'Eh' Bacon Aug 31 '16 at 17:58
  • You're right, thanks. I figured it based just based on hourly rate not hours worked per month. quid's comment clears that up. – user1477388 Aug 31 '16 at 18:20
  • "Every line on your paystub should match to the cent" FTFY. (If it doesn't, there has been a mistake, and it's worth tracking down why - it could be hiding a bigger problem.) – Martin Bonner Jul 6 '18 at 12:13
  • @MartinBonner Fair comment - I have changed. – Grade 'Eh' Bacon Jul 6 '18 at 16:39
0

The answer to your question depends on how you want to look at it. If you are paid by the week then in some months you'd receive more money, since some months have five weeks rather than 4. So in the months with five weeks, you might see it as having an extra paycheck. It all still equals out over time, mind you, but some people like to "feel richer" with the additional check in a given month from time to time. In the U.S., the taxes withheld from your paycheck are based on two factors (assuming you're paid hourly, not on an exempted salary) : how many hours you worked in the pay period, and how many pay periods there are in a year. So, for instance, let's say you're paid weekly (so there would be 52 pay periods), and you work your regular 40 hours for a week. Your taxes withheld are making the assumption that you will work that number of hours at that same hourly rate for every pay period for the year, so you are taxed accordingly.

But, let's say you work 10 extra hours in one given week. Then your taxes for that paycheck are based on the assumption that EVERY check in the pay period will be the at that same number of hours hours and pay rate, so your taxes will be higher in actuality for that pay check. You may get that money back at the end of the year, depending on your deductions and exemptions, but you still end up with less net pay in your pocket simply because of the higher notional rate you paid.

The point is, the longer each pay period is, the less your net pay is likely to fluctuate, because deviations in your work hours average out over time.

Overall, you won't really end up ahead by being paid monthly versus weekly, but there could be advantages in how you can more effectively budget your money based on which way you get paid.

I hope this helps.

Good luck!

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