Comments on: Why Are Bonuses So Heavily Taxed?

By: Roland

Roland — Fri, 29 Jan 2010 23:07:35 +0000

Not sure if this post is ever updated but I am running into this problem with bonuses too. I have moved my exemptions to ten, which helps a little but when my bonuses are getting taxed at almost 50% it’s insanity. Today on bonus of a little over $4k I paid $1800 in taxes!! And that’s not including my deductions for insurance, 401k etc. I am the head of house hold and I am supporting 3 other people. What bs!!

By: Lee Thomas

Lee Thomas — Mon, 29 Jun 2009 13:38:21 +0000

I want to know why my measley bonus of $400 was so heavily taxed? They took $140 out just for federal taxes, and the rest State etc. My check netted only $222.00! This is crazy! I have one dependant at home, and the only breadwinner in this family! I make less than $40,000 a year too!

By: Toast

Toast — Fri, 13 Mar 2009 17:47:47 +0000

47% taken here in NJ on a 5 figure bonus. All I can say is OUCH!

By: richard

richard — Sat, 20 Dec 2008 14:44:32 +0000

Are you referring to the amount a bonus check is cut for withholding taxes or the amount it is actually taxed when you file your income tax return. I find nothing in tax laws that states bonus earnings are taxed different on tax return.

By: MDR

MDR — Thu, 18 Dec 2008 21:44:56 +0000

Amen Don – I agree but I have to say that our whole office here in CA is in an uproar. The Fed tax just totally ate up our bonues. Doesn’t make much sense to me $69 taken out of my regular 2-week paycheck and $269 taken out of my 1-week bonus check. Ouch… I’m not looking a gifthorse in the mouth – I appreciate it but YIKES!

By: Don

Don — Sat, 13 Dec 2008 23:22:02 +0000

Let’s see: I thank God I even DID get a bonus check, and curse the fed and Charlie Crist for the flat tax.

By: Andi

Andi — Mon, 28 Jul 2008 01:19:11 +0000

Hi,
Posting this because I went through at least a dozen message boards like this about bonus taxation before I found the end-all be-all documentation explaining the logic of paycheck tax withholding:
http://www.irs.gov/pub/irs-pdf/p15.pdf
Bonus information can be found starting on p.13 under Supplemental Wages.
My husband was taking home only about 30% of his monthly bonuses, which are small relative to his salary. Since we’re married filing jointly and both work, he had needed to calculate a number for line 6 of his W-4 (Additional amount, if any, you want withheld from each paycheck). A worksheet gives you a lump annual amount, and you’re supposed to divide that by the number of paychecks in a year. Since his bonuses are treated like 12 extra paychecks, this same additional amount was being deducted from his bonus checks. Also the amount withheld from each paycheck was too high anyways because the total had been divided by 26 paychecks in a year instead of 38.
This calculator was also helpful:
http://www.irs.gov/individuals/article/0,,id=96196,00.html
If your withholding is out of whack, this tells you exactly what to do to your W-4 to make sure that you’ve paid in the correct amount by the end of the year. It’s also run by the IRS, so it feels more reliable to me than the link in the main post.

By: Duane

Duane — Fri, 06 Jun 2008 15:51:34 +0000

Can I request that the taxes not be with held? If so where can I find this in the tax code?

Thanks,

By: Martina Riordon

Martina Riordon — Mon, 03 Mar 2008 19:46:50 +0000

Do you happen to know if “commission” is considered the same as a bonus?

By: David

David — Sat, 01 Mar 2008 00:14:56 +0000

What about a gift turned into a bonus? An anonymous donor gave my employer (a non-profit) a check designated as a gift for me. My employer chose to call it a bonus and processed it through payroll. Is that proper? As I expected, the payroll person miscalculated the aggregate tax so a huge chunk was withheld. I used to do payroll, so I know how to tell the software that large one-time payments such as bonuses or retro salary increases ARE NOT part of one’s regular salary so it’s not fooled into putting you into a higher tax bracket. I hate when others don’t! Incompetent. On top of that, my employer didn’t want to get stuck with the employer-paid portion of FICA–SS & Med. (an employer has to pay another 7.65% on your salary, just like the 7.65% that is withheld from the employee’s pay) so they reduced the gross amount of the total gift. argh. Do I need to pay a payroll attorney to figure this out? I hate to look a gift horse in the mouth, but I want to make sure it’s handled properly. Thanks!