How are bonuses taxed and how to I account for them on my 1040?

Question

I recevied a bonus last year and they taxed it before hand as bonuses should be taxed - that's what I was told. Now, I don't see this bonus amount indicated specially in any way on my W-2 - it looks as though it's been lumped into my total wages. Does that mean that the bonus taxation has be lumped into my federal income tax witheld?

Should I use the 1040 non-EZ to specially indicate the bonus? It was taxed at a very high rate and the controller told me at the time that it could be refigured at my filing time to take into account exemptions.

A little lost, can't afford an accountant.

Answer 1

Your bonus might be itemized on your last pay stub for the year. It might have a line for regular wages, and federal tax withheld, then a line for your bonus and federal tax withheld.

Your employer may label your bonus amount in box 14 of your W-2, but should add the amount to your regular wages and include the amount in Box 1 of your W-2. Total federal tax withheld (regular wages and bonus) will be in Box 2.

See page 13: http://www.irs.gov/pub/irs-pdf/iw2w3.pdf

Or your employer is allowed to report the bonus in box 3 of form 1099-Misc. Your employer will show the federal tax withheld, entered in box 4 of the same 1099-Misc form. Maybe that is what the comptroller is talking about. If he can tell you that it was taxed at a high rate, then he should be able to tell you how he reported it.

If they are reporting your bonus separately, then the 1099-Misc would be mailed in a separate envelope from your W-2.

If your bonus is rolled into regular wages on your W-2, then just report the entire amount in the regular wages, tips, etc on line 7 on your 1040.

If the bonus comes separately on a 1099-Misc, then report that income in the "other income" line of your 1040 (Line 21). Then add the tax withheld to the total tax withheld (Line 64).

http://www.irs.gov/pub/irs-pdf/f1040.pdf

If you do not have a complicated return, and your bonus is rolled into your regular wages, then "yes" you can use Form 1040 EZ, instead of a Form 1040.

Answer 2

Its not going to show up differently. Bonuses are considered specialy payments and they withhold more thats it. FIle the W2 as is. Do you own a house, lots of medical expenses etc.? IF so, you should figure if your itemized deductions are more than the standard dedcutions. That will determine if you should file the EZ vs the standard 1040.

Answer 3

The bonus won't be stated separately on your W2. It's already included in the wages in block 1. The tax withheld is included in the amount in block 2.