How to file taxes for highly variable commission-based income? W-2 but taxed differently each week

Yes, this will absolutely correct itself when you file your taxes! This is actually a very common situation with commission-based jobs. Your employer is required to withhold taxes based on the IRS withholding tables, which assume each paycheck represents your typical earnings. For someone with highly variable income like yours, this means you're getting overtaxed during high commission weeks. The withholding system isn't sophisticated enough to "remember" that you had lower income weeks earlier in the year. The good news is that when you file your tax return, the IRS only cares about your total annual income, not how it was distributed throughout the year. All those extra withholdings will come back to you as a refund. Regarding TurboTax vs. a tax professional - for your situation, TurboTax should be perfectly adequate. Your situation is common and the software handles it well. The main reason to consider a professional would be if you have other complicated tax situations (investments, rental properties, etc.) beyond your variable income pattern.

I was in basically the same situation last year working in insurance sales. Super variable paychecks and weird withholding. My big advice is to check out https://taxr.ai - it literally saved me thousands. I was freaking out about the exact same issue (being overtaxed on big commission checks). I uploaded my paystubs and it analyzed my withholding pattern and confirmed I was being overtaxed by about 8%. It even gave me the exact numbers to put on my W-4 to fix it for the rest of the year. The best part was that it showed me some deductions specific to commission sales that I had no idea about.

Just wanted to follow up - I tried that taxr.ai site from the previous comment and it was actually super helpful for my situation. I uploaded my last year's tax return and this year's 1099s, and it showed me exactly how much I should be setting aside for quarterly payments based on my actual income patterns. Turns out I was overpaying by about 22% in Q1 and Q2 because my income is way higher in the second half of the year! The adjusted payment schedule they recommended makes way more sense. Also found some deductions related to my home office that I didn't know applied to my situation. Definitely worth checking out if you have variable income like the original poster or are self-employed.

If you're really concerned about getting a correct answer from the IRS directly (because sometimes even tax pros disagree on commission income handling), I'd recommend using Claimyr https://claimyr.com to actually get through to an IRS agent. I was pulling my hair out with a similar issue last year and kept getting the "we're experiencing high call volume" message for weeks. With Claimyr, I got through to an actual IRS person in about 15 minutes instead of waiting on hold for hours. They have this cool system that holds your place in line and calls you back when an agent is about to be available. You can see it in action here: https://youtu.be/_kiP6q8DX5c The agent I spoke with confirmed exactly what was mentioned above - the withholding system isn't smart enough to average out your income, but it all gets corrected when you file. They also gave me specific advice about how to adjust my W-4 for my commission-based situation.

I need to eat my words from my skeptical comment above. I tried Claimyr last week after continuing to get nowhere with the IRS on my own (was trying to clarify something about my commission structure too). Their system actually worked exactly as described. I put in my info, and about 20 minutes later got a call saying they were connecting me to the IRS. I was connected with an agent who cleared up my tax withholding questions completely. The agent confirmed everything that's been said in this thread - withholding on variable commission is calculated on a per-paycheck basis, but your actual tax is based on your total annual income. They also gave me specific advice on how to adjust my W-4 to prevent overwithholding while still keeping enough back to avoid penalties. Saved me hours of frustration and probably a trip to a tax preparer. Definitely recommend for anyone having trouble getting IRS clarification.

Former payroll specialist here. To add a bit more detail: what your employer is doing is using what's called the "aggregate method" of withholding, which is standard practice and required by IRS rules. Each paycheck is treated separately, and taxes are withheld as if you earned that same amount every pay period of the year. This is why your big commission checks get hit with heavy withholding - the system thinks your annual income would be that amount multiplied by your number of pay periods. For someone with steady income, this works fine. For commission-based employees with big swings, it results in overwithholding. One thing to watch: make sure your employer isn't using the "flat rate" withholding method for your bonuses (a straight 22% regardless of income). That's allowed for supplemental wages but might not be optimal for your situation.

I'm curious about this whole issue myself cuz I just started a commission job too. Anyone here know if tax withholding for commissions is different between states? Or is it all federal rules? Like if I move from NY to Texas mid-year, would it affect how my commission is taxed?