There is no "magic" to the calculation. There are two ways to withhold tax on a bonus.
1. Include the bonus in the regular calculation. Tax is withheld on the check as if the standard payroll was higher and thus the percentage withheld will be higher.
2. Withhold federal tax at a flat 25% on the bonus amount.
See IRS Publication 15, page 14, link below.
Please provide following information:
I will do withholding estimate both ways.
The most common practice is to withhold 25% for federal income tax from the gross bonus pay as this is considered a supplemental wages. Plus state income tax if applicable.
Thus for $1000 bonus you should withhold:
You may, however, withhold federal income tax the same way as from regular wages based on W4 filing (single/married? number of allowances?). The choice - how to withhold - should be made by the employer and should be applied to all employees during the year - you may not withhold differently for different employers.
The withholding type for supplemental wages - yes - that should be the same for all employees. Most employers withhold flat 25% from bonuses.
If you as an employer selected to withhold all supplemental wages based on W4 filing, and
considering Gross Pay of $50,000.00 paid weekly and W4 was filled by the employee as Single with 2 Exemptions,
the paycheck should look as
Weekly Gross Pay $962 Federal Withholding - $126 Social Security - $60 Medicare - $14 Net Pay - $762
If at the same pay period the employee receives $1000 bonus - the paycheck should look as
Weekly Gross Pay - $1,962Federal Withholding - $385 Social Security - $122 Medicare - $28 Net Pay - $1,427
Please be aware that the actual taxes would be determined at the time the person files tax return based on all circumstances.
Because the gross pay for pay period is more than doubled - from $962 to $1962 - so the withholding does...
the actual ADDITIONAL federal withholding from the bonus is $385 - $126 = $259 - so there is almost no difference in this case.
but the result might be different if you pay biweekly, or W4 is filled differently.
No - that is incorrect expectation -
while Social Security withholding is based on the flat rate - federal income tax withholding is based on withholding tables which in turn are based on the tax rate schedule - the more the person earns - the larger percentage of income taxes he/she will likely pay. There is no neither flat rate for federal income taxes nor for income tax withholding from regular wages.