Understanding Taxes, 401 etc
Jun 8th 2016, 5:32 pm
#16
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Re: Understanding Taxes, 401 etc
In the UK employer benefits are all quite simlar between different companies. In the US there can be many differences in the type of pension, vacation, healthcare etc.
Jun 8th 2016, 6:59 pm
#17
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Re: Understanding Taxes, 401 etc
I'd argue A 401k is more comparable to a UK SIPP than a shares ISA. An ISA does not have any restriction on age for withdrawal, whereas SIPPs or 401ks both do.
It's also important to point out that while 401k contributions are tax-free, US income tax is potentially due on payments out of a 401k. The value of a 401k is usually from having a lower average tax rate in retirement than during working life. That said, the tax situation would be different for a non-US taxpayer with a 401k, assuming you return to the UK.
And Mrken, I see those "three types of 401k" as just being subtle variations in how the company match works. They are still overall pretty similar.
It's also important to point out that while 401k contributions are tax-free, US income tax is potentially due on payments out of a 401k. The value of a 401k is usually from having a lower average tax rate in retirement than during working life. That said, the tax situation would be different for a non-US taxpayer with a 401k, assuming you return to the UK.
And Mrken, I see those "three types of 401k" as just being subtle variations in how the company match works. They are still overall pretty similar.
Jun 9th 2016, 6:37 am
#18
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Re: Understanding Taxes, 401 etc
Thanks all. My partner would be staying in the UK, although we do have a wedding planned for Sept 2018.
At this stage I'm not sure if I'll be permanently relocated to the US, or if it's a case of travelling between the US and UK.
At this stage I'm not sure if I'll be permanently relocated to the US, or if it's a case of travelling between the US and UK.
Jun 9th 2016, 8:23 pm
#19
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Re: Understanding Taxes, 401 etc
Afternoon all.....
I'm currently in talks with a UK based company about a job which would see me relocate to NYC for their new offices there.
Now whilst I love America, particularly NYC, and would like to think I'm familiar with culture over there etc, what I'm still trying to figure out is actual "living".
Now from my understanding, a 401k is similar to a pension here in the UK. I also believe you have to do your own taxes at the end of the year (rather than having PAYE like we do in the UK). Oh, and then there's health cover etc etc
What else do I need to consider? How much are taxes? What is a good 401k?
Any help, or links would be great (Google gives me links that aren't as useful as I'd like - either that or I'm using bad search terms).
I'm currently in talks with a UK based company about a job which would see me relocate to NYC for their new offices there.
Now whilst I love America, particularly NYC, and would like to think I'm familiar with culture over there etc, what I'm still trying to figure out is actual "living".
Now from my understanding, a 401k is similar to a pension here in the UK. I also believe you have to do your own taxes at the end of the year (rather than having PAYE like we do in the UK). Oh, and then there's health cover etc etc
What else do I need to consider? How much are taxes? What is a good 401k?
Any help, or links would be great (Google gives me links that aren't as useful as I'd like - either that or I'm using bad search terms).
You can get a good idea on taxes by using this calculator: Yearly Federal Tax Calculator 2016/2017 | 2016 Tax Refund Calculator
Jun 10th 2016, 6:56 am
#20
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Re: Understanding Taxes, 401 etc
Thanks.... Another question, can you pay your taxes monthly? I have always had the belief that you pay it annually.
Jun 10th 2016, 8:33 am
#21
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Re: Understanding Taxes, 401 etc
Each year you must file a tax return and you will either get a refund or pay more as the tax withheld is never exact.
Jun 10th 2016, 11:11 am
#22
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Re: Understanding Taxes, 401 etc
Don't forget the likely need for state tax withholding also. The state will have their own form.
Jun 10th 2016, 11:21 am
#23
Joined: Dec 2001
Location: Dixie, ex UK
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Re: Understanding Taxes, 401 etc
If you don't pay tax in the periods that you earn your income, there is a penalty for late payment, though not a large penalty. But you can't under-withhold taxes all year then pay a load of tax in December without the IRS noticing.The basic figure is calculated for you, and as Durham lad said, you can adjust it using a W4.
Last edited by Pulaski; Jun 10th 2016 at 11:29 am.
Jun 10th 2016, 11:29 am
#24
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Re: Understanding Taxes, 401 etc
Sorry, yes I did.... Think I'm trying to take too much in at once (I feel rushed lol).....
I've also downloaded that IRS form which I will have a good read through.
I've also downloaded that IRS form which I will have a good read through.
Jun 10th 2016, 11:43 am
#25
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Re: Understanding Taxes, 401 etc
I could be wrong, since it's been a couple of years since I had a significant capital gains tax bill, but I'm not sure that's true. There is a penalty for delaying paying estimated taxes (i.e. direct to the IRS, outside the withholding system), but I believe that you can skew your withholding towards the end of the year without penalty. Remember that your W2 form only shows total withholding, not divided up by quarter.
Jun 10th 2016, 11:46 am
#26
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Re: Understanding Taxes, 401 etc
I'm not sure this is information you actually need, but for completeness, there is a system for paying so-called "estimated taxes" every quarter (not every month). This is intended for covering taxes outside the withholding system, like capital gains tax, though you can alternatively change your withholding to cover it.
Jun 10th 2016, 11:54 am
#27
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Re: Understanding Taxes, 401 etc
I could be wrong, since it's been a couple of years since I had a significant capital gains tax bill, but I'm not sure that's true. There is a penalty for delaying paying estimated taxes (i.e. direct to the IRS, outside the withholding system), but I believe that you can skew your withholding towards the end of the year without penalty. Remember that your W2 form only shows total withholding, not divided up by quarter.
Jun 10th 2016, 12:11 pm
#28
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Re: Understanding Taxes, 401 etc
In the UK, I go to work, and then at the end of the month I get my wages into the bank, and a wage slip handed to me for reference.
Sorry for being a PITA.
Jun 10th 2016, 1:19 pm
#29
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Re: Understanding Taxes, 401 etc
A W4 is a form that you fill in. It tells them how much to deduct from your pay check (cheque) for taxes each pay period. You get a wage slip in the US, just the same, that shows how much was deducted for federal taxes, state taxes (if you live in a state with state income tax, and also deductions for health insurance premiums, tax-advantaged dependent care accounts and whatever else.
Jun 10th 2016, 1:20 pm
#30
Joined: Dec 2001
Location: Dixie, ex UK
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Re: Understanding Taxes, 401 etc
My employer has a tax-payroll web site that asks basic questions - mostly about your family and calculates a withholding figure. You can then request additional withholding.
Last edited by Pulaski; Jun 10th 2016 at 1:23 pm.