2006-12-15 09:43:57 · 11 answers · asked by c p 1 in Business & Finance ➔ Taxes ➔ United States
Bonuses are deemed to be ordinary income and are so taxed as such. Employers withhold on bonuses just like they do on ordinary paychecks and herein lies the rub. To figure withholding computers go into a table with the gross amount of the check, number of exemptions, and type of pay period - monthly, weekly, semi-monthly, etc. Out pops a number and this is what is withheld. Now comes the bonus. Everything is the same except that the gross amount is considerably higher. So, while you might have been withheld based upon a 25% marginal bracket on the regular checks you get hit like the rich guys in a 35% marginal bracket for the bonus check.
Does it matter? Not really because withholding is simply a deposit to be applied to taxes due in April. So, you get the over withholding back as part of the refund. Still there is a way around this but I wouldn't suggest it unless the bonus is big enough (>25% of base pay) and the company is small enough to be personable enough to work with their employees. You simply ask your employer in the case of the bonus to withhold a fixed percentage amount - say the percentage amount you are normally withheld. That way you are not over withheld.
2006-12-15 11:05:35 · answer #1 · answered by Flyboy 6 · 2⤊ 0⤋
Your bonus gets taxed because it is income. Also, for withholding purposes, a bonus usually gets taxed at a flat 25% or 28% (can't remember which one) to insure that there is enough tax withheld by the end of the year. This does not include state income tax of social security taxes.
Once you file your income taxes, you will either get a larger refund or owe less taxes.
2006-12-16 01:35:59 · answer #2 · answered by Steve 6 · 0⤊ 0⤋
Two reasons: first, it is considered earned income by the IRS- yes, it is a bonus but your work, or whatever reason, "earned" that extra payment, so it goes into the pot with all other earned income. Second, your employer wouldn't want to send you a 1099 if you are a W-2 employee- he would have lots of questions from the IRS about learning how to classify workers. Either way, the law requires the money to be reported.
However, congratulations on the bonus.
2006-12-16 01:43:05 · answer #3 · answered by besttaxexpert 2 · 0⤊ 0⤋
Bonus is an income and as a rule all income gets taxed unless there are exceptions to the rule.
2006-12-15 09:47:56 · answer #4 · answered by Bri 2 · 1⤊ 0⤋
The bonus was "earned" by you and is therefore part of your earned income in addition to wages, salaries, and tips.
The rate at which it is taxed depends on the marginal tax bracket you fall into after counting up all your earnings for the year.
The previous poster who mentioned 40-50% is incorrect.
2006-12-15 10:17:29 · answer #5 · answered by personalfinancedaily 3 · 2⤊ 0⤋
Generally, taxes apply to all income. In fact bonuses have a different (higher) tax withholding than regular (weekly/monthly) income.
Now - just because tax was withheld, does not mean you will owe taxes. You might need to file a tax return to get the money back (if you don't owe it).
2006-12-15 09:52:09 · answer #6 · answered by Bryan J 4 · 1⤊ 0⤋
All income is subject to Federal Income Tax.
It is taxed as your regular income would be taxed.
2006-12-15 09:52:55 · answer #7 · answered by T D 2 · 1⤊ 0⤋
Because it's income and is included in you W-2
2006-12-15 22:31:39 · answer #8 · answered by crazydave 7 · 0⤊ 0⤋
all bonuses get taxed, usually more then your regular pay check (40 - 50%). They get taxed because it is income
2006-12-15 09:47:13 · answer #9 · answered by Anonymous · 0⤊ 3⤋
The government is greedy and there is no way around it... well unless you get cash! and even then you are SUPPOSE to claim taxes on that too!
2006-12-15 09:53:05 · answer #10 · answered by S.F 2 · 0⤊ 3⤋