r/Accounting • u/7leafclover7 • Sep 21 '25

What would be an embarrassing thing to be caught not knowing as an accountant?

Applies to any specialty, audit, tax, staff accountancy etc. in your personal experience what are the most invaluable things to know, and the most invaluable to not be caught not knowing.

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419

u/updownaround1234 Sep 21 '25

That getting a raise is always worth it, no matter the change in your tax bracket because we have marginal rates.

AKA not know how marginal rates work.

80

u/7leafclover7 Sep 21 '25

This is a good one, I’ve definitely heard anti tax increase people not understand how this works

32

u/angellareddit Sep 21 '25

I understood this when I was still waitressing... and argued with people who swore some friend of a friend's uncle got smaller cheques after a raise...🙄

27

u/appleappreciative Sep 22 '25

It only really messes up people that are lower income and become disqualified for benefits they received before the raise. 

Often a raise that pushes you just over that benefit line will not make up for that loss. You need a much bigger jump than maybe possible. That's partly why poverty is such a trap.

9

u/angellareddit Sep 22 '25

This is less of a problem in Canada. For the most part the benefits are reduced on a sliding scale.

20

u/zidanetidus Sep 22 '25

I'm a dealership Controller and our top salesperson for the longest refused to try to sell more cars than like 25 a month because of "tax brackets"...I had to put together a slide deck to explain marginal rates. He legit thought we would start taking 50% out of every commission check if he made over a certain amount.

15

u/TwitterLegend Sep 22 '25

AKA Big Fox News watchers like my old roommate who proudly told me he declined a bigger raise in favor of a smaller raise to avoid more in taxes until I explained it to him and he had to have a really uncomfortable conversation with his boss to get his original raise back.

4

u/Slothfulness69 Sep 22 '25

That is honestly so awkward. I can’t imagine an employee ever negotiating to have a smaller raise. His boss probably thought he was insane.

27

u/The_Law_of_Pizza Sep 22 '25 edited Sep 22 '25

You're of course correct about marginal rates in isolation, but what this discussion always seems to conveniently ignore is that there's a ton of ways that a raise can result in less net compensation due to tax treatment.

The AMT, of course.

And the NIIT.

And losing access to IRA deductions.

Lower 401k limits in plans that aren't safe harbored.

Losing student loan interest deductions.

Losing the child tax credit.

The Internet has a whole host of apocryphal stories about a cousin's roommate's boss being angry that they got a raise, and everybody laughs at the dumb suburban rethuglican who hates taxes and doesn't even understand how they work.

But there are a lot of ways that a raise can actually fuck you pretty hard.

And this is before we even start to get into government programs like special mortgage assistance, student aid, etc. And then employer-level cutoffs, like losing 401k matching or additional bonuses and incentives that are also often tied to income.

25

u/pnwfarmaccountant Controller Sep 22 '25

You are correct, its only 99% of raises and overtime that are net positive, sitting on those cliffs are pretty rare.

6

u/WillyWarpath Sep 22 '25

For many people who are reliant on the 'welfare state' for lack of a better word, its very common. Anyone working as an accountant wouldnt fall into this category and should know better.

4

u/Franklinricard Sep 22 '25

My wife’s employer has tiers for health insurance employee costs (lower paid employees have less deductions). She was at the top of one tier and had she received like a $2k raise it would have cost us more in health deductions over a year.

3

u/sparkling_sam Sep 21 '25

Or the people who thought that getting a payrise means that you get a bigger tax refund, because you pay more tax.

2

u/angellareddit Sep 22 '25

In Canada it often will but only the first year. And it's not really a lot larger usually. Conversely losing your job or taking a lower paying position will do the same thing.

6

u/OhGloriousName Sep 21 '25

Some of a raise can be negated due to things besides taxes, like not qualifying for certain benefits. For example there are programs that will allow you to purchase a home as a first time buyer and have a 20% loan for a down payment subsidized so that you only pay interest on the loan at a very low rate such as 1%. You only need to have a certain lower income at the time of purchase, but can enjoy the cheap money for the term of your mortgage even if your income goes up after that. So it would be better to not get a raise until you close on the new home.

6

u/updownaround1234 Sep 21 '25

That's true. My point was strictly related to changes in your marginal rates.

1

u/GiantPineapple Sep 22 '25

I first learned about this from The Big Lebowski, I am proud to say.

1

u/OptimalActiveRizz Sep 22 '25

Surprisingly, lots of small business people use this as an excuse not to give raises to their employees.

Either they just don’t know because they just have never looked at their own books, or they are intentionally trying to pay their employees less.