I'm looking for a way to pay the taxes on my bonus toward the END of the tax year (April 15) instead of when I receive the bonus (January). Last year (January 2007) I got hit with a 45% tax deduction which completely ruined the bonus for me. Is there a form I need to file with my payroll department to avoid the taxes and then after receiving the bonus change it back? Thanks very much taking a minute to assist me.
2007-10-18 05:00:48 · 6 answers · asked by xavier64_11219 1 in Business & Finance ➔ Taxes ➔ Other - Taxes
Look at the bright side, some of that money could come back as a tax refund. You could also ask your boss to split the bonus in half - one half in December and the other half in January.
Think about all the Wall St. investment bankers with 7 or 8 digit bonuses or NFL players with signing bonuses.
2007-10-18 09:53:45 · answer #1 · answered by Anonymous · 1⤊ 0⤋
You can't. Even if your withholding exemptions are so high that no tax is legitimately withheld from your regular paychecks, bonuses and other irregular payments are subject to statutory withholding (i.e. by law) at 25% for Federal Income Tax. SS and Med are also withheld. Many states now have statutory withholding on bonuses as well so it's entirely possible to see 45% off the top in high tax states such as CA and NY.
There is NO WAY to avoid this. Sorry!
Assuming that your tax bracket is less than 25% you'll get any excess back when you file your return. If your tax bracket is over 25% it's entirely possible that not enough will be withheld and you'll still have a balance to pay at tax time.
Ignore the poster who suggested an updated Form W-4 (with a broken link, DUH) since what you put on your Form W-4 has no affect on statutory withholdings. The reason that the law was changed a couple of years ago is due to this type of abuse. The fixed withholding makes this a fruitless exercise.
2007-10-18 09:31:53 · answer #2 · answered by Bostonian In MO 7 · 1⤊ 0⤋
By law, companies have to withhold 20 or 25% Federal income taxes plus state and FICA from bonuses . You cannot change that.
Sorry
2007-10-18 08:33:38 · answer #3 · answered by Mark S 5 · 0⤊ 0⤋
W-4, http://www.irs.gov/pub/irs-pdf/fw4.pdf, same as for any other pay for which you want to change the withholdings
2007-10-18 11:22:54 · answer #4 · answered by StephenWeinstein 7 · 0⤊ 2⤋
You can't.
2007-10-18 05:08:03 · answer #5 · answered by llibretrac 3 · 0⤊ 0⤋
its illegal
2007-10-18 05:20:24 · answer #6 · answered by Fun N Sun 4 · 0⤊ 0⤋