Re:The IRS Sets a Trap for Cryptocurrency Tax Cheats
by codedokode on Sunday September 27, 2020 @06:46PM
(#24610797)
Here in Russia we use another system: employees don't have to pay taxes from their wages themselves. It is company's responsibility to calculate and pay it. This system has an advantage, that most people don't have to bother with filling out complicated forms every year, but it has also disadvantages because people don't see how much money they give to the state.
That's because the hiring manager doesn't need to understand tax rates to do his job. He plugs the numbers into the black-box HR system, and the system spits out dollars, that he pays employees with.
The reason for why you have no idea how much the government will take in taxes, is because income taxes are progressive, and are charged based on total income earned per year.
So, someone working at a $200,000/year job for a year, will have a tax rate of ~26.5% (I'm ignoring Social Security).
But if they were unemployed for 9 months, and started working that job on October 1st, they will have a tax rate of ~16.5%.
What this means is that when you start a job, you have to guess what your likely annual tax rate is going to be, and set up withholding for that amount.
If you underpay by a large enough sum, the IRS will send you a bill, with an extra penalty next April. If you overpay, the IRS will send you a tax return.