Why are sales commissions taxed higher than salary?

[AcidSun]

Does anyone know why commissions are taxed close to 37% and regular salary is %25 (depending on income level?

 

[GasX]

because you salary is taxed as if you made that much in total for the year. The commisions are taxed to make up the difference when you hit a higher tax bracket.

or something to that effect.

 

[Zolty]

Something about sales people touching themselves at night.

 

[FoBoT]

i think you mean why is it withheld at that amount

almost/all bonuses/commisions/lump sum payments are withheld at the highest rate since you can't really predict what bracket the person will be in

so they withhold taxes at the highest rate to make sure enough is withheld to avoid the penalties for inadequate withholding

something like that, ask a tax dude

 

[spidey07]

Originally posted by: FoBoT
i think you mean why is it withheld at that amount

almost/all bonuses/commisions/lump sum payments are withheld at the highest rate since you can't really predict what bracket the person will be in

so they withhold taxes at the highest rate to make sure enough is withheld to avoid the penalties for inadequate withholding

something like that, ask a tax dude

Bingo. They aren't taxed any higher at all. Just bigger witholdings.

It's the same when people complain their bonuses or other lump sum payments are witheld at a higher rate. You are not taxed any higher, it's all taxed the same.

 

[CTrain]

Yup yup yup....just witheld more.
Think about it...a person ending up making $50K a year will pay the same amount of taxes as someelse making $50K a year.