Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

How to pay less taxes on bonus?

Any tricks to get less...

Any tricks to get less tax on a bonus? I'm supposed to give someone that works for me a bonus, but I heard that there's special taxes to the recipient of bonuses? Higher taxes. Is that true, and if so, there any way to avoid this? (Like higher salary for a month?)

Show More
Show Less
Ask Your Own Tax Question
Answered in 14 minutes by:
7/3/2008
MequonCPA
MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2,342
Experience: CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
Verified

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.

http://www.irs.gov/pub/irs-pdf/p15.pdf

Ask Your Own Tax Question
Customer reply replied 9 years ago
I guess I'm trying to figure out how much the employee will be taxed? Same as regular salary or more? And, if more, any way around that for the employee's benefit?
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,163
Experience: Taxes, Immigration, Labor Relations
Verified

Please provide following information:

  • your gross pay
  • gross amount of bonus
  • how you filled W4 form - single/married? number of allowances?
  • in which state do you work?

I will do withholding estimate both ways.

Ask Your Own Tax Question
Customer reply replied 9 years ago

All I want to know is if she's making $50,000 and is going to get a $1,000 bonus. What's the tax on that $1,000 bonus vs. the extra $1,000 if we just upped the salary to $51,000?

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:

  • federal income tax 25% - $250
  • Social security - 6.2% - $62
  • Medicate tax - 1.45% - $14.5

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.

Ask Your Own Tax Question
Customer reply replied 9 years ago

Okay. So, the tax to the employee is the same either way?

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 - $1,962
Federal 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.

Ask Your Own Tax Question
Customer reply replied 9 years ago

Why is the federal withholding so much higher in the bonus example? Everything else is approximately double. But, Federal withholding is over triple.

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.

Ask Your Own Tax Question
Customer reply replied 9 years ago
But, 1962/962 = 2.04. Almost exactly 2X.

Social Security goes from $60 to $122. What we'd expect.

But, Fed goes from $126 to $385. We'd *expect* it to be 2.04 * $126 = $257 Total. No?

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.

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,163
Experience: Taxes, Immigration, Labor Relations
Verified
Lev and 87 other Tax Specialists are ready to help you
Ask your own question now
Ask Lev Your Own Question
Lev
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,163
30,163 Satisfied Customers
Experience: Taxes, Immigration, Labor Relations

Lev is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,310 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,695 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
I need a copy of my 2015 federal income tax ( I need a copy
I need a copy of my 2015 federal income tax ( I need a copy of my federal income tax W2 form. How do I go about getting a copy? … read more
abci168
abci168
Principal
27 satisfied customers
I would like to know how to get my voluntary federal income
I would like to know how to get my voluntary federal income amount changed to 0. I do not want any federal income to come out of my check … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,490 satisfied customers
I need to get a copy of my 2015 state and federal tax. I
i need to get a copy of my 2015 state and federal tax … read more
abci168
abci168
Principal
27 satisfied customers
Where can I get the Federal income tax regulation? Where can
Where can I get the Federal income tax regulation? … read more
Lev
Lev
Tax Advisor
30,163 satisfied customers
I filed for federal tax extension and was approved, file
I filed for federal tax extension and was approved, file under married separate, after divorce finalized, in divorce decreed I am to file singe from 2016 forward, so do I have to complete the extensio… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
736 satisfied customers
I asked for an Federal Income Tax extension to 10/16/17 and
I asked for an Federal Income Tax extension to 10/16/17 and I paid taxes due. This was for 2016. Am I able to extend it further?… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,230 satisfied customers
I'm going my federal income taxes. I have a small business.
I'm going my federal income taxes. I have a small business. I have 1099s from some of the companies that paid me, and the rest were individuals, various amounts. I listed all the 1099s separately in T… read more
abci168
abci168
Principal
27 satisfied customers
I recently filed amended federal tax returns (1040x) for
I recently filed amended federal tax returns (1040x) for 2013 and 2014. I have received a refund for 2014 and am answering some additional questions for 2013. Do I need to file amended tax returns for… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Im. In 2016 i filed federal taxes and used standard
in 2016 i filed federal taxes and used standard deduction, not realizing i might have some itemized deductions … read more
abci168
abci168
Principal
27 satisfied customers
What would the federal and state tax rate percentages be for
What would the federal and state tax rate percentages be for a $7700 IRA early withdrawal in Ohio?… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,490 satisfied customers
We have a NOL carryover on our federal income taxes. While I
We have a NOL carryover on our federal income taxes. While I was working on our taxes this week, I noticed an error was made in 2013, 2014 and 2015 in the calculation of the NOL carryover. I neglected… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
FEDERAL INCOME TAX: A SINGLE WOMAN RECEIVES A 2016 FORM W-2
FEDERAL INCOME TAX: A SINGLE WOMAN RECEIVES A 2016 FORM W-2 FROM HER EMPLOYER WITH A TYPO IN THE SOCIAL SECURITY NUMBER. TO DATE THE EMPLOYER HAS NOT PROVIDED A "CORRECTED" FORM W-2. IS THERE AN IRS "… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,230 satisfied customers
US FEDERAL INCOME TAX. QUESTION: A SINGLE WOMAN OWNS A
US FEDERAL INCOME TAX. QUESTION: A SINGLE WOMAN OWNS A HOUSE, HER PRINCIPAL RESIDENCE, AND LIVES IN IT FOR 4 YEARS. IN 2017 SHE MARRIES A MAN WHO WILL ALSO USE IT AS HIS PRINCIPAL RESIDENCE BUT NOT HA… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,230 satisfied customers
What is the ADDRESS of the Federal Income Tax Service?????
What is the ADDRESS of the Federal Income Tax Service????? … read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,230 satisfied customers
I filed my 2016 federal taxes and attached IRS Form 5329 and
I filed my 2016 federal taxes and attached IRS Form 5329 and asked for a waiver on the tax on an RMD. We received the RMD (in 2017) late through no fault of our own but because of the financial compan… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I actually have a Tax question. Federal Income Tax, State.
I am wondering about tax liability on a small inheritance from my mother.… read more
Lev
Lev
Tax Advisor
30,163 satisfied customers
Form 1040 line #44 what taxes--federal income tax + social
form 1040 line #44 what taxes--federal income tax + social security +medicare tax, all or just federal? … read more
Lev
Lev
Tax Advisor
30,163 satisfied customers
IRS Federal Tax and State taxes: I filed IRS Taxes late as
IRS Federal Tax and State taxes: I filed IRS Taxes late as well as State taxes for 2012, 2013 and 2014 late in 202016. I have not received any response. I am concerned as this was more than enough tim… read more
ABC Accounting Group
ABC Accounting Group
Bachelor\u0027s Degree
682 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x