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Bonus Advice
Posted on 6/11/17 at 1:09 pm
Posted on 6/11/17 at 1:09 pm
It looks like this year will be a good bonus year for the company. I have never understood how bonus money is taxed and if there is any way to take less of a hit on the money. Anyone know the formula on how this is done?
Posted on 6/11/17 at 1:50 pm to tigerlife36
Someone told me to go to HR and claim more dependents a month or two before bonus time, then switch it back afterwards.
Another possible idea is to get your 401-K contribution raised. Our company let's us do a separate % for bonuses is what I think I remember.
I got $28K in performance and project bonuses last year so I finally starting looking into ideas like you recently.
Another possible idea is to get your 401-K contribution raised. Our company let's us do a separate % for bonuses is what I think I remember.
I got $28K in performance and project bonuses last year so I finally starting looking into ideas like you recently.
Posted on 6/11/17 at 1:58 pm to tigerlife36
Income is income it is all taxed the same
Posted on 6/11/17 at 1:59 pm to notiger1997
Mine is 28k too this year. I think our company uses the aggregate method when taxing a bonus.
Posted on 6/11/17 at 2:10 pm to tigerlife36
My company allows us to designate a specific contribution % of our bonus. If you don't currently max 401K this can be a way to defer tax.
Posted on 6/11/17 at 5:27 pm to tigerlife36
Your bonus will just have a higher amount withheld because the software is likely treating the payment as if it is the amount you get every paycheck. In other words, it thinks your bonus payment is your weekly pay, and taxed at the highest rate.
You can have payroll withhold less, that's pretty much it. You need to get an idea of what you will owe for the entire year. If this is a large portion of your take home, consider withholding less the rest of the year. Do whatever you can to not just let it sit with the treasury until you file your tax return next year.
You can have payroll withhold less, that's pretty much it. You need to get an idea of what you will owe for the entire year. If this is a large portion of your take home, consider withholding less the rest of the year. Do whatever you can to not just let it sit with the treasury until you file your tax return next year.
Posted on 6/11/17 at 7:09 pm to tigerlife36
It doesn't matter what they withhold.
You owe what you owe. Period.
There's no such thing "bonus money is taxed".
You owe what you owe. Period.
There's no such thing "bonus money is taxed".
Posted on 6/11/17 at 7:11 pm to OceanMan
I just let it ride because I end up owing at the end of the year anyway.
Posted on 6/11/17 at 7:14 pm to Rize
Yeah I have done the same in the past.
Posted on 6/11/17 at 7:16 pm to OceanMan
Thanks for the good response Oceanman
Posted on 6/11/17 at 7:17 pm to notiger1997
Sure thing. You are certainly not the first person that has been confused by this
Posted on 6/11/17 at 11:55 pm to tigerlife36
The only way to reduce taxes on income/bonus is to increase 401k and/or HSA contributions if you aren't already maxing those out.
Posted on 6/12/17 at 11:27 am to gpburdell
My company doesn't do bonuses regularly, but I did get a decent one a couple of years ago for some unused vacation time.
I maxed out my 403b and my HSA and it really dropped my tax liability.
I maxed out my 403b and my HSA and it really dropped my tax liability.
Posted on 6/12/17 at 12:17 pm to gpburdell
quote:
The only way to reduce taxes on income/bonus is to increase 401k and/or HSA contributions if you aren't already maxing those out.
no, not really
Posted on 6/12/17 at 4:31 pm to tigerlife36
tax software looks at a check and taxes it at the rate if that check was received every pay period.
IE, if you get paid weekly and get a $20k bonus check, the tax software looks at the check as 1/52 of the year and taxes you on making that amount for the entire year. so it will put you in the $1,040,000 yearly tax bracket at your deductible rate. But the IRS only looks at your total income for the year in determining your tax rate, so its all averaged through the year. So you are not losing money by being taxed so high on this one check. you are just over paying, and will get it back at the end of the year
I don't claim married and 4 when setting up my withholdings. I tell my accounting department to take out a fixed amount per week for both state and federal. and then i send my Controller and email every December telling them to take a fixed percent out of any bonus check.
i told them to take out 5% fed/2.5% state this past year on that check.
IE, if you get paid weekly and get a $20k bonus check, the tax software looks at the check as 1/52 of the year and taxes you on making that amount for the entire year. so it will put you in the $1,040,000 yearly tax bracket at your deductible rate. But the IRS only looks at your total income for the year in determining your tax rate, so its all averaged through the year. So you are not losing money by being taxed so high on this one check. you are just over paying, and will get it back at the end of the year
I don't claim married and 4 when setting up my withholdings. I tell my accounting department to take out a fixed amount per week for both state and federal. and then i send my Controller and email every December telling them to take a fixed percent out of any bonus check.
i told them to take out 5% fed/2.5% state this past year on that check.
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