2006-07-08 15:02:12 · 5 answers · asked by spstecher 2 in Business & Finance ➔ Taxes ➔ United States
Employer has an option to withhold at a flat rate of 25% federal tax for the bonus. There will also be fica tax at 7.65%. And there will be a flat rate for state tax also, with the rate varying by state, which could be around 7% so total could be around 40% if the employer goes with this option. Or the bonus could be lumped in with your regular pay and taxed accordingly, which would most likely be at a higher than normal rate.
2006-07-08 16:41:42 · answer #1 · answered by Oliver1010 3 · 1⤊ 0⤋
Bonuses are subject to a higher withholding rate than normal wages, but they aren't actually "taxed" at a higher rate. They are still lumped together with all your other income when it comes time to file your return and you are taxed based on your total income. The logic behind the higher withholding is probably that bonuses aren't taken into account when calculating withholding that comes out of your paycheck. Therefore, they have the potential to bump you into a higher tax bracket without a corresponding withholding adjustment. This increased withholding tries to insure that you do not end up owing money (and possibly underpayment penalties and interest) at the end of the year. The percentage withheld will depend on your income level/bracket.
2006-07-08 23:15:47 · answer #2 · answered by Tax Man 2 · 0⤊ 0⤋
The amount of withholding will be the same as how you are having income tax withheld from your regular wages. When you begin working for a company they will have you fill out a Form W-4. On this form you mark whether you are single or married and the number of exemptions you are claiming. The company then uses that information to calculate the correct amount of withholding based on the IRS withholding tables.
2006-07-08 22:10:25 · answer #3 · answered by Anonymous · 0⤊ 0⤋
The amount varies depending on the tax bracket you are in. The more you make, the higher the percentage. But as a rough extimate, most people will have about 35% of the bonus withheld as taxes and FICA.
2006-07-08 22:07:01 · answer #4 · answered by dewcoons 7 · 0⤊ 0⤋
Read Rich Dad Poor Dad By Robert Kiosaki..Everyone's paycheck has 18% taken off their check the more over time and bonuses you get the more the Government gets paid.(first)
That's why I'll pay myself first then everything else second.
Real Estate Investor
2006-07-09 00:34:12 · answer #5 · answered by innovativeinvest@sbcglobal.net 2 · 0⤊ 0⤋