Best tax option for bonus check?

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want to try to minimize the tax hit

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Don't know how you get around this?? Every bonus wife and I recieve each year is already taxed when you get it.

It will still be taxed but wasn't sure if one tax selection would be better than the other.

Our payroll was asking me if I wanted to change my tax selection for this and it got me thinking.

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Are you trying to minimize the amount of taxes taken out of the bonus check? You need to consult with your payroll admin and see if it's possible to change your filing status before you receive your check.

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Yes, she is letting me change my filing status if I want. She didn't really have good insight though on which filing status would be better though.

If you don't need the money right now, couldn't you roll it into your 401K or an IRA to protect it for now?

This late in the year, you should have your tax professional estimate your 2012 total tax and see where your withholdings have you. You may have already over-withheld and not need to take any taxes out, or the exact opposite.

Either way there's no blanket answer for your question. The payroll department is asking you those questions about your status to determine how much tax to withhold based on tables estimating tax. I'm sure they could accommodate if you told them exactly how much you wanted withheld.

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I will be getting a bonus shortly and want to try to minimize the tax hit. What tax option do y'all feel would be best?

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Assuming you are talking withholding tax, when a bonus was sizable my employers would always default to 25% Fed, + state tax. Talking like 20% or higher relative to base comp. Start talking $25k bonus or more and I would believe you will have little say in the matter as the IRS wants its/your money upfront. Higher marginal tax rate, deal with it.

The issue you have to consider is how withholding is calculated. If your W-4 instructions say you are single with 2 withholding allowances then your withholding is made by reference to a table or mathematical formula using those criteria, the frequency of your pay and the amount of your gross pay for that pay period. So withholding works best when you have a constant, or near constant, gross pay. A one time spike in gross pay for a bonus will not treat the bonus as an increase in marginal income, and it could result in withholding less than necessary to avoid underpayment penalties.

The safe approach is to have withholdings from your bonus at your marginal tax rate unless you prepare tax projections. The tax projections should give you a more accurate estimate of the specific amount you need to have withheld, and that is the best approach.

Last two posts are money. I work with a lot of people who do this towards this time of the year, they change their withholding thinking that they are actually getting taxed less. I wouldn't suggest doing it unless you have probably already had enough withheld to meet your estimated tax liability. The IRS is going to get that money regardless, it's just a matter of when.

If you do change your W-4 don't forget to change it back to what it is now.

I get so annoyed by people who do this, but these are the people who get a ton of EIC and bull anyways so they'll get a refund regardless.

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Pay now or later .. Not really any other choice ...

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I don't think this is entirely accurate. Some bonuses will be taxed as if that amount of money is earned every pay period. If that is the case, the progressive nature of tax rates could have that one check taxed at a very high rate. In that case, the govt would get some of his money and he wouldn't get it back until he is able to file his return. To the OP, try to figure it out so that you pay what is due. Being that we are in the last quarter, if you paid no taxes on it, I dont think you would have any penalties or interest as long as you file your return on time next year. Just know that the hit will be big so you need to save a few bucks for it.

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I'm pretty sure that Federal law sets witholding for lump sums like bonuses at the highest marginal rate.

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they do not