Most of my co-workers have filed their taxes and are receiving refunds on what they say is the OT alone, some have received from $2500 to $5000. We all make the same rate and have very similar amount of OT hours. I made about $48k for the year, and $7,835 in OT. On my W2 in box 14 it says "Qualified OT" is $2658. Everyone is saying that's the refund amount that I should be getting from the OT portion alone, because the amount has already been adjusted or something, but something seems off to me. Quick searches online seem to prove otherwise. I'd be surprised if I was getting that much just from some OT. Are they correct? Even when I input my info to freetax or TurboTax the refund doesn't go that high unless I click that the QualifiedOT is PremiumOT. I'm confused. Sorry for the long post.
Posted by Rodan1974
4 Comments
Your coworkers don’t know what they are talking about.
The $2658 is a deduction – it reduces the income on which tax is calculated.
Your federal tax savings on that $2658 deduction will be ~ $315 if you have no other income to report.
I.e. your refund should be increasing by ~ $315 with the OT deduction being included on your tax return.
Those big refunds by other folks are due to having kids/married with a spouse who does not work, or having over-withheld on their paychecks etc.
Tax items don’t give you refunds. A refund is the amount you *overpay* throughout the year, relative to the amount you actually owe. You can have a small or a large refund, regardless of anything else, simply by paying more or less money to the IRS during the year.
Perhaps more to the point, the “Qualified OT” in Form W-2, box 14 would be the amount that your *income is reduced* due to the “no tax on overtime” law (OBBBA), not the amount your *tax is reduced* (which would be that amount times some fraction, probably 12%).
However, neither number would correspond to any refund you receive, except that the reduction in tax (the 12% of $2,658 or whatever) would increase your refund by that amount if, all else equal, you were otherwise getting a refund.
There is an ingrained culture of overpaying the IRS in order to get large refunds, so such refunds are common and any multi-thousand-dollar refund on such income would be only minimally impacted by the taxation of your overtime.
Your coworkers are idiots.
You calculate your OT premium by taking the total hrs in the work year * times your time and half rate – total hrs in the work year * your regularly hourly rate and they will tell you your OT premium you can write off against your taxable income.