How do Interns deal with Taxes??
This is probably a question other interns are wondering as well.
If you are working for a BB this summer, what are the rules with taxes. A few people have told me that if you're out of state, you can get a refund on most, if not all, of your taxes. Is this the case?
I've also heard people say that if you make below a certain limit, refunds are possible?
Definitely would appreciate any insight on this.
What Will Taxes Look Like as an Intern?
While we are not qualified to give tax advice at WSO, we can pass on what others have experienced. Remember that there are a number of factors that could affect how much your earnings are taxed including if you are a dependent, where you live, where you work, if you got a signing bonus, etc. Again, with any tax questions, it’s always a good idea to contact a professional.
Common themes:
- Signing bonuses and relocation reimbursements are taxed at a higher rate
- For an internship, you’ll probably be taxed at a rate for the annualized salary, but this means you’re likely to get a refund
WSO user @aachimp" details his experience:
- The first $8,025 is taxed at a 10% of income
- Any income between $8,025-$32,550 falls under the 15% federal income tax bracket
- Say you're making 15k for the summer. that's a little less than 2k in taxes
- Of course don't forget about social security taxes which are another 6.25%, leaving you with around 12k
- Each state has its own tax rates afterwards
Assuming you will be working in NY, aren't a NYC resident, and don't have a significant other income source, you have to pay NY taxes but don't have to pay NYC taxes. You will pay federal taxes, but should except to get a pretty significant refund, depending upon how much you allow the government to withhold from each paycheck. Your federal effective tax rate should be below 8%.
I didn't file a NY return when I interned, so I cannot speak to whether or not you'll get a significant refund from the state. I doubt you'll get a full one though. The only reason you may receive a large NY refund is solely due to the fact that you're in a low tax bracket--not your out-of-state status. Perhaps someone else can chime in here.
the first $8,025 is taxed at a 10% of income. any income between $8,025-$32,550 falls under the 15% federal income tax bracket. so say you're making 15k for the summer. that's a little less than 2k in taxes. of course don't forget about social security taxes which are another 6.25%, leaving you with around 12k. each state has its own tax rates afterwards.
NY, IL, CA all tax after federal taxes are taken into account.
seems like Illinois has the friendliest taxes with a flat 3% rate whereas Cali taxes around 3% for 15k but upto 9% for 45k. NY starts at 4% for 8k and goes to 6.85% for 20k.
see link for a table of state tax rates: http://www.taxadmin.org/FTA/rate/ind_inc.html
after or before federal taxes: http://www.taxadmin.org/fta/rate/inc_stp.html
During my summer I got taxed at an average of about 27% (federal and state and local combined). I think my firm was withholding at a level appropriate for someone making my salary for the entire year, not just the summer.
Of course, come tax time, I find out I'm getting $1000 back.
I am a NYC resident, got taxed for all three. Took home about 1720/2400 a month and will be getting close to $3,000 back for taxes.
You'll receive a significant portion of your withheld federal taxes back, since the firm will tax you as if you earned your salary for the whole year (i.e. 60k), whereas you'll really only be making ~15K gross. Can't speak to the state/city taxes since I'm in Tejas.
Why give the gov't that interest free loan?
If you're a SA and don't expect to earn much other income during the year, just file tax-exempt and pay your taxes the following year. This'll keep the gov't from withholding more than they should.
nystateofmind, can you do that?
what if you are making a significant amount throughout the year because of jobs in different locations? I wouldn't be able to file tax exempt, would I?
Let's hear more about that. Is it normal for an SA to do and how much should be set aside for taxes? I live and will be working in CA.
Guys... 5 min. on google for "tax exempt" will answer all your questions. I doubt that nystateofmind is a tax expert who can answer all your hypotheticals.
Guys - I was kidding (sort of). You're going to have significantly more taxes withheld than you should be paying and thus you'll get a significant refund come tax return time. I'm clearly no expert in taxes, but filing tax-exempt is definitely doable (i know several who did it). You'll end up w/ a tax liability if you do so. Was just throwing the idea out there for all those worried about the gov't keeping too much in taxes.
Having said that though - the government withholding more taxes than they should is you making the gov't an interest-free loan so don't get too excited about the 'refund.'
I personally love my refund because it forces me to save- everything that is not going in my IRA is going to get boozed up, count on it.
Hahha, good man. I like your style.
I like the style of people with no self control or personal fiscal sense also.
This tells me one of two things:
60k in NYC is totally livable, don't get me wrong, but it is all about cash flow. There are countless banking/consulting analysts who should "know better" but essentially live month to month.
On a tangent, I love all the budgeting threads ($17 for dry-cleaning, $28 for meals, etc.) because that is all bullshit. Ideally, yeah you would cook a nice meal at home and pre-game before going out to optimize your budget. But when you're done with dealing with work bullshit all week and a bunch of analysts go to a bar near work with $8 beers and you want to get hammered, you really will stop caring that you just spent $100 on booze and it's not even 9pm.
I agree with ideating. Yes, it's an interest-free loan to the government, but honestly what were you going to do with that extra thousand bucks or so?
At best, you earn 5-10% interest which gets you an extra $50-100. At worst, it gets slowly eaten up among your living expenses (e.g. boozing) and you are screwed come April 15th.
Besides, think big picture: giving our government an interest-free loan means that they'll need to collect less taxes next year :-).
Take it easy homeslice, I'm talking about cash flow. If you've been staring at your models too long how about this - I think I can more efficiently allocate my capital than the government.
The "interest free loan to the government" is nice academic notion, but at the end of the day that is money you don't have in your checking account to spend. Interest is your reward for delayed consumption, so what is more valuable - consuming drinks tonight or consuming a vacation home when you retire.
Either way, when you pay more taxes than you should that is dollars that either aren't (a) in your checking account to consume now or (b) earning in your retirement account to consume later.
Ok... that is a reasonable argument but the point I am making is this.
I can either have $200/month extra in fiscal year 2007 or I can have a $2400 check in late April 2008. All you finance type-A students out there will whip up a nice little NPV and say "but ideating! you are wasting roughly $40 if you take the $2400 check."
The reality is an extra $200/month will easily get wiped out if I start getting used to it being there, and an extra $50/week is easily done. True, I could automatically set aside $200 every pay cycle but seriously, who does that? So I can either go out a little more for all of 2007 or I can buy a Macbook Air and settle up any minor purchases I need to make in April 2008. Your point about "drinks tonight or vacation home in the future" is so far off-base, especially given how small my current earnings are towards my total future net worth.
The reason behind all this is the way most analysts budget is to subtract expenses each month (rent, utilities, phone bill, student loan payments, etc.) and have the rest as discretionary income.
This reminds me of a friend who worked at a BB IB and continually blew too much money going out on the weekends. He had massive credit card debt until his first bonus finally came in - it was pretty funny though, since he always attributed his cash shortage to "minor seasonal working capital issues".
The bit about drinks/vacations was a bit of sarcasm, but it is a rational way of thinking about it. If the only way you will save is for the government to do it for you, so be it.
At least get a sense of humor likes smuguy's friend...
What really cracks me up are the analysts who do bottles before their first bonus clears. Takes the normally questionable analyst judgment to plain stupidity.
SA Stint Tax Returns (Originally Posted: 01/12/2010)
Hey Guys,
Does anybody know how much I should expect to get back from my Summer Analyst stint (at BB) in tax returns? I'm an international student and thus was withheld the maximum amount. A friend mentioned that she got back as much as 2k, but I don't know if it would be that high. I would appreciate the response of anyone who did a Summer Analyst program at a BB and what they got back in tax returns. Thanks...
Another question, I got my signing bonus last month, but no taxes were withheld. The firm told me that they were going to withhold the taxes from my next paycheck, which I assume would be during training. Does that mean that I have to pay taxes this year or the next on that bonus?
I got my return awhile back and I got a little over $3,000 (i think it was around $3,300). I got 2k for signing, 60k prorated and $3.5k bonus (after tax) at the end.You should get something similar if that's the only job you'll have for this year.
You got a those bonuses as a SA? Is that standard?
I think hungry was referring to the second question with the bonus thing. Anyways, 3k is a lot for tax returns, practically one third of my after-tax salary throughout the summer. That means I'm set for Spring Break!
help a summer analyst with tax rebates (Originally Posted: 03/21/2009)
I worked at a summer internship this past year and made over 10k. I've never filed my tax return form before so this is my first time filing. I just remember telling those guys to take out the minimum taxes they could. I think they took something like close to 13% or something small like that.
Now my accountant says I owe the IRS close to $250. Does this sound right? I thought I was suppose to get all my tax money back!
Are your parents claiming you as a dependent on their returns? If not, subtract the $3500 personal exemption and $5450 standard deduction from your income to get a rough estimate of your taxable income (if your parents are claiming you, don't subtract the 3500), and check this chart to see how much you would owe: http://www.irs.gov/pub/irs-pdf/i1040tt.pdf
Subtract how much was withheld from your checks from the # from the table to see how much you still owe.
When it comes to the part about getting all your taxes back from your summer analyst job - do not believe in any tax advice that you hear on WSO because everyone's tax position is different.
Give us some more details like:
Are you claimed as a dependent? Did you claim your rebate check last year or did your parents? Did you have any other income, scholarships in excess of tuition? Any other info that would affect your tax filing status.
I will tell you right now that if all you made last year was $13,500 and you witheld 13% federal tax (roughly $1700) then there is no way that you owe 250 to the government, unless you are including FICA (SS and medicare) as part of your 13%. You can PM me if you want with the info and I can help you out.
Im a dependent, made just over 10k last year and after my return my effective rate came out to just under 2%. TurboTax...
Tax returns for prior SA (Originally Posted: 01/28/2008)
So, how much did you get back on your tax return for your 60k prorated SA?
you'll get around 1700 every two week depending on which state you've declared you live in. this number may vary if you work for one of the few bulges that does OT pay for summers
He's talking about the money you get back from filing tax returns...not the biweekly checks you get during the summer you work.
SA pay + taxes question (Originally Posted: 05/09/2007)
Quick question.
I will summer at a bb in Illinois. I have been trying to figure out my post-tax pay or take home and ran into a few questions that someone on this board might be able to answer. We get a $2k relocation, pro-rated $60k = roughly $12k, and overtime after 40 hours. Figure $5-6k for the entire summer.
So around $19k for the summer. As far as taxes, I know NYC bonus is taxed at nearly 50% or more. Is this the case in Il? Also, since I only be earning $19k for the "year," does that mean that my income for the year will be $19k - putting me in the lowest/lower tax bracket? I heave searched the IRS and Il gov websites and haven't found anything concrete regarding the break down of tax expenses.
If anyone could help me, I would appreciate it. Also, on the payroll for bb's, do they cut every check net of taxes (for "bonus" and/or salary)?
Thanks for your time.
For New York the tax rate is 44% for bonuses...not quiet 50% but close enough. New York has insane taxes though, so my guess is that you'd be taxed significantly less in Illinois. As for your second question, yes your yearly income will be $19K so you should get a pretty nice paycheck from the IRS come April.
the tax rate in ny is 44% for bonuses? err, do you mean that the bonus will probably break the higher bracket so it gets taxed more? or do you mean that bonuses get their own special tax rate?
Sorry, I meant that the bonus will break the higher (highest I think) tax bracket. Basically, they will tax you as if your bonus were your monthly salary.
19K...
Here is my breakdown
The first 7K of that is not taxed. So, you're paying tax on 12K. I would estimate that at most you'll be in a 20% marginal tax bracket.
You will still take home 15 to 16K of that original 19K.
You're pretty lucky.
Assuming you aren't working during the rest of the year.
I assume most of that is coming back in April as tax returns? So is it correct that as a SA I'll still only be taking home a few grand given housing, random expenses and taxes?
damn what bank gives u 19k?!
just outta curiousity man...but looks like the comp has come a long way since i interned back in 04...i've heard about the sign-on's for summers, but wtf is the deal w/ paying for "overtime"? 40 hours? what is this, france?
your interning at some european bank i assume since those are the only banks ive heard of paying OT... for taxes, are you declaring yourself as independent or dependent - this matters a lot
Summer Tax (Originally Posted: 03/10/2011)
Just wondering, how much do summer analyst usually give up on taxes? Am I right in assuming that I will be basically giving away half of my summer compensation to the government?
FYI, my internship will be in NYC.
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