My husbands Xmas bonus was taxed at 39% because they called him an hourly employee (he's not, he's salary and always has been) with the bonus being lined as a 1 hour earning for $2500. They took $981 for taxes. Is this right? Doesn't the bonus get taxed as a salary earning?
2007-12-17 14:07:48 · 8 answers · asked by Shepherd 5 in Business & Finance ➔ Taxes ➔ United States
Let's get technical, here.
Your husbands bonus had taxes WITHHELD at 39%. Your husbands company cannot determine his TAXES...that is up to the government and the IRS.
The company is required by law to treat withholding on bonues differently...general 25% plus SS etc = 39%.
What your husband PAYS will be determined by the 1040 tax form that you fill out and file in April. If 39% is too high in fact, you will get a higher refund.
The company did the right thing. If you don't like it, get mad at the government.
2007-12-17 14:32:35 · answer #1 · answered by Anonymous · 1⤊ 1⤋
ALL bonuses are taxed at a higher rate. You can thank Jimmy Carter. They range from 39 - 42%.
And his company is well aware of this which is probably why he got a $2500 bonus instead of a $2000 bonus.
2007-12-17 14:11:40 · answer #2 · answered by ValleyR 7 · 0⤊ 2⤋
Bonuses are taxed as regular income just like wages. There is just a large amount of withholding required. Don't worry about it. The bonus will be included with wages on your W-2 and the large amount of withholding will be included with your other withholding. It will all come out when you prepare your return.
2007-12-17 14:29:12 · answer #3 · answered by Anonymous · 0⤊ 1⤋
One of two things happened. Either his wages were taxed like his regular paycheck which doesn't seem likely. Or, the more likely scenario, his bonus was taxed at a flat rate of 25% for Federal tax. Social security was taxed at 7.65%. Plus your state income tax which could have been taxed at a flat rate as well.
2007-12-17 14:14:47 · answer #4 · answered by Steve 6 · 1⤊ 1⤋
Bonuses are considered "unearned income" by the IRS and taxes are witheld at the maximum rate. However when you file your return at the end of the year, all the income is considered and taxed at the same rate, so it is not actually taxed at a higher rate, just a higher rate is witheld when it's received. The higher witholding actually makes your refund higher (or your bill lower) at the end of the year.
2007-12-17 14:12:09 · answer #5 · answered by Anonymous · 0⤊ 2⤋
Hourly vs Salary doesn't matter.
Bonuses are considered supplemental income and taxes are withheld at a higher rate.
I will all work out when you file your return.
2007-12-17 14:13:35 · answer #6 · answered by Wayne Z 7 · 2⤊ 1⤋
It will be taxed at his/your normal rate. You are referring to WITHHOLDING rate, which may be higher. When you file your return, you will wind up at the same place. Its not a big seal.
2007-12-18 02:05:01 · answer #7 · answered by Anonymous · 0⤊ 0⤋
Over the long haul, same as any other income. Withholding is higher but it works out.
2016-04-10 05:15:32 · answer #8 · answered by Anonymous · 0⤊ 0⤋