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Financial Planning / Tax Strategies


Subject:  Re: tax on bonus Date:  9/2/2011  3:21 PM
Author:  aj485 Number:  113891 of 127549

If the bonus is rolled into a regular check, the withholding is the same as if you had that much more regular salary in that pay period.

It doesn't even necessarily have to be a 'separate check' - as long as the bonus is identified as a separate line item on the check, it is allowed to be withheld at the 25% 'bonus withholding' rate by the Feds, not the marginal rate. This has been the case for bonuses paid to me for at least the last several years (not that I get a physical check either - just a check statement that I can look at on a website).

IRS Pub 15 says:
Supplemental wages combined with regular wages. If you pay supplemental wages with regular wages but do not specify the amount of each, withhold federal income tax as if the total were a single payment for a regular payroll period

Supplemental wages identified separately from regular wages. If you pay supplemental wages separately (or combine them in a single payment and specify the amount of each)
.... and goes on to give some additional information about how to withhold, where the 25% rate is given as an option.

In states that charge income tax, there may be a requirement for the payments to be separate checks/deposits in order for bonuses to get separate withholding.

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