re: Advice re: YE Bonus

quote:

---

Not my bank/ADP. I literally take home 40%-45% of my gross bonus every year after 401k contribution and taxes. It’s sick.

---

I manage HR for a bank and like the other poster said, unless you make $1M/year that doesn't make a whole lot of sense. 401K aside, bonuses should be taxed at the supplemental rate of 22%. Keep in mind, this is FITW tax only. Your bonus is also going to be subject to 6.2% SS tax (up until you've grossed $147K), and 1.45% for MED.

On the 401K, contributions still come out but employers don't typically match on bonus payments. You can also "turn off" your 401k contributions if you know when the bonus will be paid out. You would need to get with your HR/payroll department to let them know a few days in advance that you want to either change your contribution percentage or turn them off altogether. Then pick it back up after the bonus has been paid. Downside to this obviously as well since you then are exposing more of your bonus amount to taxes but your bank account will see more of the funds.

Even in the unlikely event that you're correct in that you net 40-45% of your gross bonus payment, it only goes to help you in April. You're much more likely to receive a tax refund at that point. The downside then is that the govt has been holding a surplus of your money interest free (albeit for just a few months).

Lastly, you can always change your W4 to reflect normal FITW on bonus payments. Employers have to grant employees the ability to change their W4 at anytime throughout the year. Keep in mind, though, that doing so is going to change your tax bill.