How are bonuses taxed in Iowa?

Question

Lets say on top of your salary you get an annual $2000 bonus. How much of this will be taxed when you report it. What are the penalties for not reporting it? Fraud? How does your employer report it?

Answer 1

Bonuses are taxed at the ordinary income rate, but the amount withheld is at a slightly higher rate. So, it'll be about the same rate as the rest of your paycheck.

Your employer should include that in the W-2, so it'll raise flags if you don't report it. You could convince your employer not to do so and pay you under the table, but that brings up a whole different issue.

Answer 2

First all of it will be taxed. It should have about the same withholding rate as you regular paycheck. If you are over the limit for FICA it might be less. It also depends on what is on your W-4, if you filed exempt, they will just with hold fica and medicare.
If you don't report it and the IRS discovers this the penaties are pretty steep, but not that bad unless they determine that you are guilty of fraud and not a simple oversite, if that happens, you are in a truckload of problems.
Your employer should include it on your W-2, if they don't they are shady, and you two should have no trouble working out an agreement to get paid under the table, as it will save him payroll taxes as well.

Answer 3

The IRS recommends that supplemental wages (bonuses, etc) be taxed at a 25% rate. Depending on your usual tax bracket this could be quite higher than normal or around the same. I process payroll for a living and sometimes employers ignore the IRS recommendations and only withhold FICA taxes (social security and medicare) from bonuses. Ask your employer what their policy is on bonus taxation.

Answer 4

Ask your employer how they will be paying the bonus. If it is included in your regular paycheck, then income taxes will automatically be taken from the bonus.

Answer 5

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