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Merlo, Accountant
Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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What is the maximum withholding on a bonus check?

Resolved Question:

I have a large bonus check coming, and I want to adjust the with holdings to increase the net. What's the most withholdings I can claim for one bonus check?

Submitted: 7 years ago.
Category: Tax
Expert:  Merlo replied 7 years ago.
Hello tbmang,

Bonus checks are considered to be supplemental wages, and according to IRS regulations, you cannot adjust taxes at will on your withholding for this particular check.

Employers are required to use one of 2 methods to tax this check, assuming the check is less than $1 million.

1. Withhold a flat 25% (no other percentage allowed).

2. Add the supplemental and regular wages for the most recent payroll period this year. Then figure the income tax withholding as if the total was a single payment. Subtract the tax already withheld from the regular wages. Withhold the remaining tax from the supplemental wages. If there were other payments of supplemental wages (after the last payment of regular wages but before the current payment of supplemental wages), aggregate all the payments, calculate the tax on the total, subtract the tax already withheld from the regular wages and the previous supplemental wages, and withhold the remaining tax.

Because of the complexity of the second method, most employers choose just to tax bonus payments at the required flat rate of 25%. Please refer to the following IRS Publication 15 - Section on Supplemental Wages.

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Customer: replied 7 years ago.
My employer has given me a W4 to fill out just for the bonus check and I wanted to know what I could actually put.
Expert:  Merlo replied 7 years ago.
Hello again tbmang,

If your employer is going to allow you to fill out a W-4 just for this check, you may claim as many exemptions as you want to, even up to 99. The W-4 form itself is strictly an informational form that is used to figure your tax withholding. It is not a form that the IRS ever sees and you can claim as many dependents as you wish.

To help you figure what to expect, for every exemption that you claim in the year 2009, $3,650 will be excluded from your taxable income. So as an example, if you have a bonus check coming for $50,000 and you claim 10 exemptions, then $36,500 would be deducted from your payment, and you would be taxed on the remaining $13,500.

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Thank you.
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