2007-12-19 15:38:52 · 6 answers · asked by aero_8019 1 in Business & Finance ➔ Taxes ➔ United States
Well, it depends on how your company chooses to handle it. There are two options.
Some people think that you have to take a "statutory" flat rate of 25%. However, this isn't true, there is another option. The company you work for can recalculate your last paycheck before the bonus and add the bonus to that amount and then withhold accordingly. It is all covered in Circular E (which you can find at IRS.GOV).
However with that said, most companies will not take the extra time to do two calculations (unless it is a closely held corporation, or a very good company).
So, with a $26,000 bonus 25% is probably very close to being right...depending on the other circumstances.
And, of course you will have another 7.65% taken out for SS/MC and then whatever rate (if any) for state taxes.
2007-12-19 18:02:05 · answer #1 · answered by Russ B 6 · 0⤊ 0⤋
Bonuses and other irregular payments are subject to Federal income tax withholding at a statutory rate of 25%. That is in addition to Social Security and Medicare taxes and state income taxes if your state levies an income tax.
The bonus and any withholdings from it will be reflected on your Form W-2. The bonus is taxed as ordinary income so the final tax will depend upon your total earnings for the year.
2007-12-20 00:10:34 · answer #2 · answered by Bostonian In MO 7 · 1⤊ 0⤋
When the smoke clears, the same as any other kind of ordinary income. Withholding is higher on a one time big payment, but it evens out when you file your return.
2007-12-20 00:13:51 · answer #3 · answered by Anonymous · 0⤊ 1⤋
about 35% plus ss
2007-12-19 23:44:01 · answer #4 · answered by Curtis R 4 · 0⤊ 1⤋
bonuses are normally taxed at the highest rate. I believe it is 35%, so $9,100 would be witheld.
2007-12-19 23:42:40 · answer #5 · answered by Anonymous · 1⤊ 2⤋
Its earned income so 15% sounds right .
2007-12-19 23:43:44 · answer #6 · answered by MARIO 2 · 0⤊ 4⤋