Why are my Federal tax withholdings so high on my commission check?

Thanks for explaining! So does this mean I should expect all my commission checks to have this higher withholding rate? Is there any way to adjust this so I'm not giving the government an interest-free loan all year?

Yes, you'll likely see this higher withholding on all commission checks throughout the year. You have a couple options to adjust this: you could update your W-4 with your employer to include an additional amount on line 4(c) that would REDUCE withholding from your regular paychecks to offset the higher commission withholding. Alternatively, you could fill out a new W-4 with additional deductions or dependents to lower your overall withholding rate. Just be careful not to underwithhold and end up owing a penalty. The IRS has a good withholding calculator on their website that can help you determine the right amount.

Does it actually work with commission-based income? I'm in the same boat and our company switched payroll systems this year which made everything worse.

I'm hesitant about using online tax tools after getting burned by one last year. How does this compare to just using the IRS withholding calculator?

It's specifically designed to handle complex situations like commission-based income. The tool analyzes your specific pay structure and shows you exactly why certain deductions are happening the way they are. It was super helpful for me because my commissions vary a lot month to month. As for comparing to the IRS calculator, the main difference is that taxr.ai explains WHY things are happening rather than just giving you a number. It showed me the exact rules being applied to my commissions and explained the whole supplemental wage thing in plain English. Plus it gave me specific instructions for my W-4 based on my complete income picture.

How does this even work? Seems too good to be true. The IRS phone system is basically designed to prevent you from talking to humans.

This sounds like a scam. You're telling me you pay someone else to call the IRS for you? Why would that work any better than calling yourself?

The service uses a priority callback system that navigates the IRS phone tree and secures a spot in line for you. When they're about to connect with an agent, you get a call and they transfer you. You're talking directly to the IRS - the service just handles the waiting part. They have access to phone systems that can stay on hold indefinitely and navigate the complicated IRS phone menus. It's like having someone stand in line at the DMV for you - when they're near the front, they call you to take their place. Completely legitimate and saved me hours of frustration.

I didn't even think about the Social Security cap. My total comp should be around $140k this year, so I won't hit it, but that's good to know for future planning. Does Medicare also have a cap?

Medicare doesn't have a cap like Social Security does - you pay the 1.45% Medicare tax on all your earned income. However, there is an additional 0.9% Medicare surtax on earned income above $200,000 for single filers or $250,000 for married filing jointly. Just keep an eye on your year-to-date totals on your pay stubs. If you end up having a really good commission year and approach that $168,600 threshold for Social Security, you might want to readjust your withholding again since you'll suddenly have 6.2% more in your checks after you hit the cap.

This! The W-4 was completely redesigned in 2020. There's no such thing as "0 withholding" or "claiming 0" anymore. You need to fill out the new form which asks completely different questions.

Yes, definitely fill out a new W-4 with the current form! The 22% supplemental wage rate will likely still apply to your commission checks regardless of your W-4 settings - that's a separate calculation your payroll system does. However, updating your W-4 can help you adjust the withholding on your regular salary checks to better account for the overwithholding on commissions. The new W-4 form is much more precise and asks about your complete tax situation rather than just allowances. You can use it to reduce withholding on your regular paychecks to offset the higher commission withholding, or add extra withholding if needed. Since you're getting both salary and commissions, the new form will give you much better control over your overall tax situation throughout the year.

This is really helpful - thank you for breaking down the supplemental wage rate so clearly! I'm definitely going to update my W-4 to the current form since it sounds like I might still be using the old system. Quick question: when you reduced withholding on your regular salary checks to offset the commission overwithholding, did you have to recalculate this each time your commission amounts changed, or were you able to find a stable setting that worked throughout the year? I'm worried about accidentally underwitholding if my commission income varies significantly month to month.