How Do Work Bonuses Get Taxed?

Get a bonus from your employer can facilitate financial worries, and you immediately think of ways, sensibly used the money. But before your bonus it is imperative spending this money for taxes, by a percentage aside. While bonuses from your regular pay are separated, the IRS sees this money as income and you are obligated to pay income tax on the amount.

Definition of Bonus or Supplementary Income

Bonuses work relate to payment or income from your employer that is separate from your regular pay. Employers give bonuses for different reasons. For example, your employer to the end of the year bonus, which is a part of the company can offer or your individual sales. In addition, can employers create contests that reward productivity or sales to increase and then top producers with a cash bonus. Bonuses are usually an employer way show appreciation towards its employees.

Withholding tax

Employers are not required, bonus pay wages with regular wages. For this reason, employers can print out a separate examination for bonus payments. Because not income from regular wages include this check, can employers to withhold or pulling off a flat 25 percent of premium testing for federal income taxes. This deduction applies up to $1 million for bonus payments. Employees who will exceed the $1 million mark in bonuses taxed another 35 percent on any amount exceeding $ 1 million.

Alternative method

While employers can exhibit any separate checks, they have to determine the ability of the counting of the sum of the two payments and then the necessary withdrawal based on this amount. In this case, employers calculate the sum of the bonus payment and steady income. Use the sum of the two, employers to determine the standard tax deduction. Employers then the routine rather than deduct payment amount from the regular income and subtract the remaining deduction of the bonus payment of income.

Issue a cheque

Instead of printing two separate invoices can employers decide, give employees a consolidated check reflecting premium wages and steady income. Includes the sum of the two numbers, determine calculation of the tax in this case the standard hold back and then subtract this amount from the single test computing.

Testing

Although the deduction of the tax can also use several methods employers from your income, bonus income with your regular pay is a pot, deposit of income taxes. In the event that your employer too much of your wage is deducted, the IRS will refund this overpayment after you your annual tax return.