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Message
Adjusting tax withholding for annual bonus
Posted on 12/15/14 at 4:59 pm
Posted on 12/15/14 at 4:59 pm
I will receive 20-25% of my salary for my bonus in February. My company pays it on a separate check. I have heard of other employees claiming "exempt" right before the bonuses are paid. Is this a good idea?
3
Posted on 12/15/14 at 5:02 pm to LSU6262
Income is income is income. You aren't going to pay a higher or lower percentage of taxes just because it is a bonus.
If your salary is $100,000 per year and you know you'll get 25,000 at the end of the year, adjust your withholdings accordingly.
To answer your question, it doesn't matter. There isn't a way to game the system that I know about.
If your salary is $100,000 per year and you know you'll get 25,000 at the end of the year, adjust your withholdings accordingly.
To answer your question, it doesn't matter. There isn't a way to game the system that I know about.
Posted on 12/15/14 at 6:13 pm to LSU6262
You pay it now or you pay it laterI would rather have a lower withholding all year long and crank it up at year end. Doing it this way makes little sense.
Posted on 12/15/14 at 9:49 pm to LSU6262
Depends on the payroll software and settings.
Most tax withholdings get calculated based on the combination of the amount paid and the frequency.
If the payroll dept has set up $xxx paid 24 or 26 times a year, it applies certain withholding tables on an annualized basis.
If a once a year bonus is paid and its frequency calculation is is the same as your regular pay, the software will multiply the 1x bonus by the 24 or 26 pay periods and assume you make that rate for the rest of the year and deduct a shite ton of taxes at the highest rates.
In those cases, you want minimal deductions. Take your dependants up to 9 or something for that one payroll maybe.
Most tax withholdings get calculated based on the combination of the amount paid and the frequency.
If the payroll dept has set up $xxx paid 24 or 26 times a year, it applies certain withholding tables on an annualized basis.
If a once a year bonus is paid and its frequency calculation is is the same as your regular pay, the software will multiply the 1x bonus by the 24 or 26 pay periods and assume you make that rate for the rest of the year and deduct a shite ton of taxes at the highest rates.
In those cases, you want minimal deductions. Take your dependants up to 9 or something for that one payroll maybe.
This post was edited on 12/15/14 at 9:50 pm
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