big bonus check comming soon, what can i do so they wont take alot of taxes?

Question

can i change the amount of dependents? if so, how many dependents? is there a limit? im aware of the penalties at the end of the year, but i only want to do this on 1 check.

Answer 1

There is nothing you can do. The large W/H won't be really help materially by the amount of EXEMPTIONS (not dependents), it's really a matter of a bonus check being a large amount of $, therefore having a larger % withheld.

Answer 2

You can't do much about the bonus check - they'll probably just take a flat percentage from it. If it's a small company, you could talk to them and they might withhold less - a large one will probably just take out what they take out. Your W-4 won't have anything to do with what that is.

But if they take more than you'll end up really owing for it, you could increase your allowances on your W-4 so your paychecks don't have as much withholding for the rest of the year. Just remember next year to change it back to normal.

Answer 3

miketorse: its actually ALLOWANCES, not EXEMPTIONS on the W-4. Technically you could change your W-4 to claim more before the bonus is paid and change it back after it is paid. I doubt it will actually be worth your trouble. If you want to adjust your W-4, I recommend using the IRS calculator linked below. It will help determine how many allowances to claim ALL YEAR to match your total withholding to your actual tax liability.

TaxGurl: The IRS ALLOWS companies to choose to withhold at a flat rate of 25%. The company also has the option of withholding from bonuses at the same rate as if they were part of regular wages for the pay period.

Answer 4

There is nothing you can do to reduce the withholding on a bonus check. Bonuses, as well as other non-periodic income, are withheld at statutory rates. If you have not maxed out on social security wages yet, they will withhold 6.2% for social security, 1.45% for medicare, 26% for federal and whatever the statutory rate is for your state. These percentages are set by the various tax law (Internal Revenue Code for federal, state revenue code for state) and cannot be changed either by the employer or the employee.

Answer 5

They will probably take alot out when you get check. Make maximum deposits to IRA. See financial planner or CPA and see if there are other areas you can deposit part of the bonus. You may get some of the tax back at the end of the year.

Answer 6

I work in payroll and we have to tax all bonus checks at 25% federal and a specific rate for each state, regardless of the number of allowances on an employee's W4. Any check we send out which is designated as supplemental income - bonuses, grievances, etc - has to be taxed at the supplemental rate, not the employee's regular withholding rate.

Answer 7

One idea might be to negotiate an ownership grant in lieu of cash payment. For example, you could take half in cash and the other in stock options. This would could defer some of your tax obligation until you exercise the options, possibly during a time when you are in a lower tax bracket. Many businesses welcome the opportunity to hold onto their own cash if they can and you may be helping them out with this offer. Depending on your contract, company, and nature of the bonus, this may not be possible but its worth asking.

Good luck.

Answer 8

You can change the number of allowances you claim on your w-4 to a higher number. Just make sure you change it back after you get that check. Some employers don't like the hassle of people changing their allowances back and forth, so talk to your payroll dept. first.

Answer 9

I've tried it. Basically, you're screwed. Pay the taxes and be thankful for the remainder of the bonus you have to enjoy.

Answer 10

Sorry, but if your employer has any brains at all, they won't be roped in by that. If they see something suspicious going on with your withholdings, they're required to notify the IRS.