Comments on: Bonus Time: How Bonuses Are Taxed and Treated by the IRS

By: Gilbert Barrow

Gilbert Barrow — Wed, 24 Apr 2013 23:48:37 +0000

The check date determine the FY, thus, if the check was issued in 2013, then it would be report on your 2013 w2.

By: TurboTaxLisa

TurboTaxLisa — Tue, 16 Apr 2013 02:16:40 +0000

Hi,
Yes, your employer will deduct 25% federal withholding from your bonus when it is issued and then when you prepare your taxes the bonus will be added to your other income and all income will be taxed at your tax bracket.
Thank you,
Lisa Greene-Lewis

By: bill

bill — Tue, 16 Apr 2013 01:32:00 +0000

as mentioned in one of the comments above, it is my understanding that regardless of which withholding method is used, at the end of the year bonuses are NOT taxed differently. they are added to income and the effective tax rate is a result of all income combined. for people in the 15% tax bracket their bonus will most likely be taxed at 15% or less.

By: Laurie B.

Laurie B. — Mon, 15 Apr 2013 19:10:38 +0000

Is there a penalty on the company if it does not withhold 25% of the supplemental wage (the “Bonus”)? What if the employee wants to skip Federal Withholding on the Bonus because he knows that he will satisfy some of the safe-harbor testing (will pay at least 110% of last year’s taxes, etc.) requirements?

By: AK

AK — Thu, 11 Apr 2013 16:46:41 +0000

It’s two witholding options, not tax options. They only get less until you do your taxes. After that both methods leave you with the same amount of money overall.

Otherwise you’d be exactly right–why two options for paying tax? And why would your employer get to make the choice for you??

By: AK

AK — Thu, 11 Apr 2013 16:36:15 +0000

My 2011 bonus was paid to me in 2012, and it was added to my gross pay for 2012.

The pay check where you got the bonus will show a higher number for gross income because of the bonus, it’s added to the tax year for that pay check.

By: rdoc

rdoc — Tue, 09 Apr 2013 15:57:59 +0000

if my bonus for 2012 is pd in 2013 which year does it get added to my gross pay?

By: Tina

Tina — Mon, 01 Apr 2013 12:20:27 +0000

I agree with Clint. What I don’t understand is how can they take more taxes out my bonus than my regular pay, If the bonus is a gift why would you take it right back. Can’t win.

By: clint

clint — Fri, 22 Mar 2013 23:40:47 +0000

i dont understand why anybody would use the aggregate method if given a choice? Why would the government allow you to do the percentage method if they get less? What if your bonus is 1099ed?

By: Bakera

Bakera — Thu, 21 Mar 2013 15:43:14 +0000

The aggregate method is useful so that employees can defer a portion of their bonus to a taxed deferred retirement plan such as a 401k. If the bonus is in a separate check the employee may not be able to defer a portion to their retirement. This is the case with certain state employers.

By: Mimi

Mimi — Fri, 15 Mar 2013 02:51:00 +0000

My company didn’t allow me to change my withholding status on my bonus even though my payroll check reflected the change . Is this legal? Prior to this year the change always went through. None of the employees were allowed to to the change. I work for a Fortune 500 company with millions of employees .

By: AK

AK — Tue, 12 Mar 2013 15:56:11 +0000

Nevermind, my browser is broken. I only see half the posts on here until I actually post something :\

By: AK

AK — Tue, 12 Mar 2013 15:54:26 +0000

I’m not sure why my comment was deleted, but I think it’s important to clarify that bonuses are only withheld differently, they are not actually taxed differently in the end. After doing your taxes for a given year, you end up paying the same amount in taxes regardless of whether you made $30k in bonuses + $30k salary, or just $60k salary. (Else why would employers have two “options” for how it’s taxed?)

I welcome anyone to convince us otherwise.

By: Trevor L.

Trevor L. — Mon, 11 Mar 2013 16:34:44 +0000

Thank you for the great article, clarified exactly what I needed to know!

By: Anish

Anish — Wed, 13 Feb 2013 03:42:27 +0000

Good post. I learn something new and challenging on blogs I stumbleupon every day. It will always be helpful to read through articles from other writers and practice a little something from other websites.

By: Dane

Dane — Wed, 30 Jan 2013 02:09:34 +0000

Two questions:

What state should I claim performance bonus income in if I moved mid year, received the actual $ in my new residence, but was awarded the bonus for performance while working in the previous state.

On the topic of moving, what state do I claim a relocation bonus? The state I moved from? or the state I moved to?

Please provide a source.

By: TurboTaxLisa

TurboTaxLisa — Fri, 28 Dec 2012 18:35:33 +0000

Hi,
Glad you liked the article and thank you for your feedback.
Lisa Greene-Lewis

By: D.C. al Fine

D.C. al Fine — Wed, 26 Dec 2012 15:07:30 +0000

This article is all that Pastor J said, but it also includes a bit of unseemly blame-shifting. The higher withholding is not so much the employer’s choice as because the IRS will want much more in taxes when the return is filed.

By: Pastor J

Pastor J — Sat, 15 Dec 2012 04:44:19 +0000

This is a really good, easy to understand article and explanation fo this issue! Thanks so much…