ASP/ISP/MSP

[ActiveDutyNavy]

Why is the government withholding 28% of my special pays? I thought the typical/default is 25%. I've tried changing my withholdings without any luck. I've filed in the 15% tax bracket for the past 10 years.

Any insight or help? I'd prefer the government not keep my money on loan if I can avoid it. And, I'm already taking advantage of tax-deferred retirement accounts for my July special pays.

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[statusspasmaticus]

Just for this ISP or for the ASP in July as well? Haven't received me ISP yet but ASP had 25% withheld

 

[Perrotfish]

Why is the government withholding 28% of my special pays? I thought the typical/default is 25%. I've tried changing my withholdings without any luck. I've filed in the 15% tax bracket for the past 10 years.

Any insight or help? I'd prefer the government not keep my money on loan if I can avoid it. And, I'm already taking advantage of tax-deferred retirement accounts for my July special pays.

They witheld 28% of my asp and ISP as well. Its not good finances but I guess it will be nice to get a real tax refund for once.

 

[statusspasmaticus]

They witheld 28% of my asp and ISP as well. Its not good finances but I guess it will be nice to get a real tax refund for once.

Just received ISP and they only took 25% like usual. I claim 10 exemptions though so not sure if that changes it (in attempt to pay as little taxes upfront as possible).

 

[Chonal Atresia]

Just received ISP and they only took 25% like usual. I claim 10 exemptions though so not sure if that changes it (in attempt to pay as little taxes upfront as possible).

It still shocks me that medical special pays have not increased in 25+ years (even adjustment for inflation). One would think that sooner or later that fact would catch up with military medicine, since most specialists are already paid > 2 statistical deviations less than their civilian colleagues. The 1.3% 2016 pay raise is more like a 0.3-0.5% "raise" for military physicians, depending on how much/type of special pay one draws. Pretty sad.

 

[jabreal00]

It still shocks me that medical special pays have not increased in 25+ years (even adjustment for inflation). One would think that sooner or later that fact would catch up with military medicine, since most specialists are already paid > 2 statistical deviations less than their civilian colleagues. The 1.3% 2016 pay raise is more like a 0.3-0.5% "raise" for military physicians, depending on how much/type of special pay one draws. Pretty sad.

You would think people would leave in droves due to the pay discrepancy. However, I can attest from my wife who's just gotten out that it's not that dramatic when actually comparing take home pay. People underestimate how much taxes can reduce take home pay. She didn't pay state taxes and obviously BAH/BAS is not taxed while in the military. Granted for her civilian job she opted to work four days a week (as an outpatient anesthesia based subspecialist) so she is not getting a salary for full-time. Plus we live in a high tax state. She still takes home more than she did while in the military but it's not as dramatic (every 2 weeks). She is also working harder those four days because there's more accountability for work and revenue generation on the civilian side. Whereas in the military, one could make a relatively comfortable salary and not work hard at all. Many hide out in administrative roles. There is no such thing as blocking a consult or referral on the outside vs the military where it's more common.

For primary care (ob/gyn & peds included), psychiatry, neurology the difference in take home pay is close even after bonus if factored in. Most medicine based subspecialty (ID, endocrine, allergy, pulmonary, rheumatology) don't take home much more than their military counterparts. It's only really dramatic for some surgical specialties (and subspecalties), a few medicine based subspecialties (cards, GI, oncology, critical care), and other fields such as rads, anesthesia, and derm.

For the fields where they can make at least 2x as much, they'll work for it on the civilian side. However that may not be such a bad proposition for most because they are being compensated for their work (incentive bonus) and don't have to put up with a lot of the BS of being a military officer. There is also a greater deal of autonomy and control of one's destiny in terms of where they live and what they do with their free time.

 

[Chonal Atresia]

You would think people would leave in droves due to the pay discrepancy. However, I can attest from my wife who's just gotten out that it's not that dramatic when actually comparing take home pay. People underestimate how much taxes can reduce take home pay. She didn't pay state taxes and obviously BAH/BAS is not taxed while in the military. Granted for her civilian job she opted to work four days a week (as an outpatient anesthesia based subspecialist) so she is not getting a salary for full-time. Plus we live in a high tax state. She still takes home more than she did while in the military but it's not as dramatic (every 2 weeks). She is also working harder those four days because there's more accountability for work and revenue generation on the civilian side. Whereas in the military, one could make a relatively comfortable salary and not work hard at all. Many hide out in administrative roles. There is no such thing as blocking a consult or referral on the outside vs the military where it's more common.

For primary care (ob/gyn & peds included), psychiatry, neurology the difference in take home pay is close even after bonus if factored in. Most medicine based subspecialty (ID, endocrine, allergy, pulmonary, rheumatology) don't take home much more than their military counterparts. It's only really dramatic for some surgical specialties (and subspecalties), a few medicine based subspecialties (cards, GI, oncology, critical care), and other fields such as rads, anesthesia, and derm.

For the fields where they can make at least 2x as much, they'll work for it on the civilian side. However that may not be such a bad proposition for most because they are being compensated for their work (incentive bonus) and don't have to put up with a lot of the BS of being a military officer. There is also a greater deal of autonomy and control of one's destiny in terms of where they live and what they do with their free time.

Nice Post - many good points.

My take-home pay this year will be double what it was my last year in the military (including moonlighting income). However, I average 45 patients a day in clinic, work 5 days a week and am a surgical sub-specialist. I wouldn't change it for the world - the more/harder I work, the better I'm compensated. I get ancillary income from my surgical center, hearing aid sales, allergy, imaging and sleep lab. None of those things happen in the military.

Military medicine is socialism. Capitalism is better than socialism any day of the week.

 

[Gastrapathy]

My take home is more than double. I'm working fewer hours (particularly weekend hours) but working harder when I'm there.

 

[Perrotfish]

It still shocks me that medical special pays have not increased in 25+ years (even adjustment for inflation). One would think that sooner or later that fact would catch up with military medicine, since most specialists are already paid > 2 statistical deviations less than their civilian colleagues. The 1.3% 2016 pay raise is more like a 0.3-0.5% "raise" for military physicians, depending on how much/type of special pay one draws. Pretty sad.

Thankfully our patriotic medical schools have ensured that the value of the HPSP scholarship has risen, and will continue to rise, by 7% a year.

 

[haujun]

Quite frankly I do not mind working hard for higher pay. I am NOT going let my children do HPSP which mean I am going to take that civilian job.

 

[HighPriest]

Ironically, while I like being paid more the pay isn't my biggest issue with the military - it's laziness and a lack of accountability. So if I can transition to a system where people are expected to work hard and are held accountable for their work - well, that's just magic.

 

[ActiveDutyNavy]

My withholdings are at 10 as well.
I'm at a lost for how the DOD determines how much will be withheld from special pays for tax purposes, and I'm guessing SDN is as well

 

[carlsbad]

No matter what I tried, 25% federal tax was always taken off the top of all ISP, ASP and MSP payments. I left active duty last year.

 

[pgg]

I have always had 25% withheld from the lump/annual special pays.

Which makes sense, because that's what the IRS says should be withheld from "supplemental wages" under $1 million:

Supplemental wages identified separately from regular wages. If you pay supplemental wages separately (or combine them in a single payment and specify the amount of each), the federal income tax withholding method depends partly on whether you withhold income tax from your employee's regular wages.

1. If you withheld income tax from an employee's regular wages in the current or immediately preceding calendar year, you can use one of the following methods for the supplemental wages.
   
   1. Withhold a flat 25% (no other percentage allowed).
      
      
   2. If the supplemental wages are paid concurrently with regular wages, add the supplemental wages to the concurrently paid regular wages. If there are no concurrently paid regular wages, add the supplemental wages to alternatively, either the regular wages paid or to be paid for the current payroll period or the regular wages paid for the preceding payroll period. Figure the income tax withholding as if the total of the regular wages and supplemental wages is a single payment. Subtract the tax withheld from the regular wages. Withhold the remaining tax from the supplemental wages. If there were other payments of supplemental wages paid during the payroll period made before the current payment of supplemental wages, aggregate all the payments of supplemental wages paid during the payroll period with the regular wages paid during the payroll period, calculate the tax on the total, subtract the tax already withheld from the regular wages and the previous supplemental wage payments, and withhold the remaining tax.
      
2. If you did not withhold income tax from the employee's regular wages in the current or immediately preceding calendar year, use method 1-b. This would occur, for example, when the value of the employee's withholding allowances claimed on Form W-4 is more than the wages.

 

[DrMetal]

I have always had 25% withheld from the lump/annual special pays.

If we collect our bonus (GMO bonus is what I have in mind) while deployed in a tax free zone, will said bonus be taxed? If not, that could mean an extra $5K for me. That would be sweet.

 

[pgg]

If we collect our bonus (GMO bonus is what I have in mind) while deployed in a tax free zone, will said bonus be taxed? If not, that could mean an extra $5K for me. That would be sweet.

Don't confuse "what gets taxed" vs "what gets withheld" while deployed.

And don't confuse "tax free zone" (no such thing) with the "combat zone tax exclusion" which is a rigidly defined, finite thing that officers with special pays (like us) bump up against.

Certain things like re-enlistment bonuses are in a special "not taxed" category if received while deployed. That is the exception everyone thinks is the rule.


Officers get a combat zone tax exclusion that can not exceed the base pay of the senior-most enlisted person in the service. Footnote 4 of the 2015 pay table states

For the Master Chief Petty Officer of the Navy, Chief Master Sergeant of the AF, Sergeant Major of the Army or Marine Corps or Senior Enlisted Advisor of the JCS, basic pay is $7,894.50. Combat Zone Tax Exclusion for O-1 and above is based on this basic pay rate plus Hostile Fire Pay/Imminent Danger Pay which is $225.00.

What this means, is that if you were deployed to a combat zone in 2015, when you file your taxes in April 2016, you will get a deduction of the lesser of
1) [number of months you served at least 1 day in a combat zone] x $8119.50, or
2) your actual earned income during those months (base + special pays; not always-untaxed things like BAH/BAS/IDP/etc)


Base pay for an O3 >4yrs is 5,219.40 ... so your average fresh residency grad who gets deployed will have about $3K per month in excess CZTE room to apply toward medical special pays.

The best case scenario is that you'll receive one special pay or another while deployed, so you can at least take full advantage of the maximum CZTE. But don't get all giddy about collecting that $120K neurosurgery 4-year MSP/ISP lump while deployed, because most of it will still be taxed (albeit at a lower marginal rate than usual).

 

[pgg]

If we collect our bonus (GMO bonus is what I have in mind) while deployed in a tax free zone, will said bonus be taxed? If not, that could mean an extra $5K for me. That would be sweet.

To give you a less long-winded reply, odds are that your pay as a typical Navy GMO (junior O3 without ISP) is low enough that if you spend even a few months of the year deployed, the CZTE will knock your total taxable income down far enough that your federal tax liability will probably be right about $0 anyway.

[edit for correction, math is hard]

I just pulled up my 2006 tax return (last few months of my GMO tour, deployed Jan-Feb-Mar) ... adjusted gross income $38,306 and total tax liability of $0. No ASP in 2006 since I started residency in July.

On my 2005 tax return (deployed Aug-Sep-Oct-Nov-Dec) my adjusted gross income was a whopping $42,787 and my total tax liability was exactly $0. My July 2005 ASP payment was withheld at 25% but everything withheld was refunded.

 

[DrMetal]

To give you a less long-winded reply, odds are that your pay as a typical Navy GMO (junior O3 without ISP) is low enough that if you spend even a few months of the year deployed, the CZTE will knock your total taxable income down far enough that your federal tax liability will probably be right about $0 anyway.

[edit for correction, math is hard]

I just pulled up my 2006 tax return (last few months of my GMO tour, deployed Jan-Feb-Mar) ... adjusted gross income $38,306 and total tax liability of $0. No ASP in 2006 since I started residency in July.

On my 2005 tax return (deployed Aug-Sep-Oct-Nov-Dec) my adjusted gross income was a whopping $42,787 and my total tax liability was exactly $0. My July 2005 ASP payment was withheld at 25% but everything withheld was refunded.

Got it thanks. I'm an O-4 > 10 , so I might even see less, oh well, it'll still be a good chunk of chang.

 

[Chonal Atresia]

Don't confuse "what gets taxed" vs "what gets withheld" while deployed.

And don't confuse "tax free zone" (no such thing) with the "combat zone tax exclusion" which is a rigidly defined, finite thing that officers with special pays (like us) bump up against.

Certain things like re-enlistment bonuses are in a special "not taxed" category if received while deployed. That is the exception everyone thinks is the rule.


Officers get a combat zone tax exclusion that can not exceed the base pay of the senior-most enlisted person in the service. Footnote 4 of the 2015 pay table states


What this means, is that if you were deployed to a combat zone in 2015, when you file your taxes in April 2016, you will get a deduction of the lesser of
1) [number of months you served at least 1 day in a combat zone] x $8119.50, or
2) your actual earned income during those months (base + special pays; not always-untaxed things like BAH/BAS/IDP/etc)


Base pay for an O3 >4yrs is 5,219.40 ... so your average fresh residency grad who gets deployed will have about $3K per month in excess CZTE room to apply toward medical special pays.

The best case scenario is that you'll receive one special pay or another while deployed, so you can at least take full advantage of the maximum CZTE. But don't get all giddy about collecting that $120K neurosurgery 4-year MSP/ISP lump while deployed, because most of it will still be taxed (albeit at a lower marginal rate than usual).

120K 4-year Neurosurgery bonus? I'm sure private practice guys are chomping at the bit for that sweet piece of cash!

 

[pgg]

120K 4-year Neurosurgery bonus? I'm sure private practice guys are chomping at the bit for that sweet piece of cash!

Of course they wouldn't.

But I figured you'd be along to comment on that. I know you just can't help yourself.

 

[Chonal Atresia]

Of course they wouldn't.

But I figured you'd be along to comment on that. I know you just can't help yourself.

Looking forward to your cheerleading too, fellow USU grad of '02.

 

[pgg]

Looking forward to your cheerleading too, fellow USU grad of '02.

There are problems with the Navy, for sure. You'll never see me deny that.

The pay for physicians, especially specialists, especially surgeons, is ridiculously low. The non-clinical burdens can range from annoying to frankly offensive. It's no wonder the best tend to leave as soon as they can. I've been fortunate with duty stations and opportunities outside the Navy - some years I've made more moonlighting than from the Navy.

I think in the whole my posts here are pretty objective. The things I find lacking with the Navy, leadership, promotions, pay, lowest-common-denominator mandatory online training, non-clinical demands, I honestly and openly acknowledge.

Cheerleading? No. I'm just satisfied with what I've gotten out of the Navy, so far.

Sorry it didn't work out for you.

Do you really need to inject a snide, cynical comment in every thread? Hell, this one is (was) about taxes, and you still had to do it.

 

[Chonal Atresia]

There are problems with the Navy, for sure. You'll never see me deny that.

The pay for physicians, especially specialists, especially surgeons, is ridiculously low. The non-clinical burdens can range from annoying to frankly offensive. It's no wonder the best tend to leave as soon as they can. I've been fortunate with duty stations and opportunities outside the Navy - some years I've made more moonlighting than from the Navy.

I think in the whole my posts here are pretty objective. The things I find lacking with the Navy, leadership, promotions, pay, lowest-common-denominator mandatory online training, non-clinical demands, I honestly and openly acknowledge.

Cheerleading? No. I'm just satisfied with what I've gotten out of the Navy, so far.

Sorry it didn't work out for you.

Do you really need to inject a snide, cynical comment in every thread? Hell, this one is (was) about taxes, and you still had to do it.

I think the military screws physicians in many ways. My career was almost ruined by a consultant and his boss (chief of the medical corps) with both of them blatantly lying to my face about the necessity of a brigade surgeon tour. I won't bore you with specifics but it was underhanded to the nth degree.

So yes, I'm going to hammer military medicine 99% of the time and do everything I can to keep new med studs from making the same mistake that I did.

Your posts are informative; however, I just don't share your objectivity. From reading some of these posts, it sounds like the military has screwed you too. You're more level headed than me.

Maybe I should join MedicalCorpse !

 

[Gastrapathy]

Join him where? You find his bunker or something?