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re: bonuses and taxes

Posted on 3/13/15 at 10:54 am to
Posted by swanny297
NELA
Member since Oct 2013
2189 posts
Posted on 3/13/15 at 10:54 am to
My federal withholding on my bonus has always been much higher than my federal withholding for my monthly gross salary, how are they not taxed differently?
This post was edited on 3/13/15 at 10:56 am
Posted by southernelite
Dallas
Member since Sep 2009
53178 posts
Posted on 3/13/15 at 10:59 am to
Some softwares assume that you'll always make that and may withhold from a higher tax bracket than you're actually in.

Also, funny story for this thread, my dads friend changed his status to married and 9 to take a bonus. Well, HR never changed it back. He owed like 15k at the end of the year.
Posted by tigeraddict
Baton Rouge
Member since Mar 2007
11828 posts
Posted on 3/13/15 at 11:02 am to
quote:

My federal withholding on my bonus has always been much higher than my federal withholding for my monthly gross salary, how are they not taxed differently?



guess it all depends on your companies payroll software

But, each check is taxed like it is a recurring check forecast for the entire year to derive the tax rate.

so if you get paid weekly then your weekly check is taxed as if you will receive 52 checks at that rate to derive your weekly tax rate. so a large bonus check will be taxed at the highest rate.

This is the reason i have seen guys in the field get 1 or two hours of OT and actually bring home less then a 40 hr check because it bumps them up into a higher tax bracket.

But when filing your taxes at the end of the year, that bonus check gets averaged out with all your weekly checks since you are only looking at your net income at that point.

In December i call accounting and have them take a fixed % out of my checks for state and federal instead of using number of deductions. That way my bonus check is not hit so hard....
Posted by TigerstuckinMS
Member since Nov 2005
33687 posts
Posted on 3/13/15 at 11:50 am to
quote:

My federal withholding on my bonus has always been much higher than my federal withholding for my monthly gross salary, how are they not taxed differently?



Because you aren't getting taxed every paycheck. You get taxed on April 15. The withholdings are usually just based on a projection of what your gross income (and ultimately what taxes you're going to owe) is going to be, based on things like the amount of the check and assuming that forward until the end of the year. Because of how the withholding is calculated, what happens is that large one-off checks often end up skewing high and getting a higher withholding percentage than usual payroll checks.

However, the actual tax you owe isn't known until you calculate and file your tax return. Once you have calculated the tax you owe the government, all of the withholdings that you made over the year are subtracted from the tax due. If the withholdings were too high and you had more money withheld and sent to the government than you actually owed, you get a refund check. Without interest, of course.

That's the general idea.
This post was edited on 3/13/15 at 11:57 am
Posted by LSUFanHouston
NOLA
Member since Jul 2009
37162 posts
Posted on 3/13/15 at 1:16 pm to
quote:

My federal withholding on my bonus has always been much higher than my federal withholding for my monthly gross salary, how are they not taxed differently?


Others have explained why this is.

Think of withholding as an estimate, and your tax return as the truing up at the end of the year. If your estimates were too high, you get money back, if they were too low, you owe money.
Posted by BACONisMEATcandy
Member since Dec 2007
46644 posts
Posted on 3/13/15 at 4:36 pm to
quote:

My federal withholding on my bonus has always been much higher than my federal withholding for my monthly gross salary, how are they not taxed differently?


It's the witholding software - it basically thinks you now will have that as your month salary. You get it back on your returns.
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