That rate will be applied to any supplemental wages, such as bonuses, up to $1 million during the tax year. If your bonus totals more than $1 million, the withholding rate for any amount of the bonus above $1 million is 37 percent. ...
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A performance bonus is a supplemental compensation that an employer offers to employees in exchange for targets met.
Tax Treatment of Retention Bonuses The IRS treats all bonuses, including retention bonuses, as supplemental wages. A supplemental wage is defined simply as compensation paid in addition to the employee’s regular wages. Taxes are usually applied to a retention bonus using either the aggregate method...
Bonus payments are also subject to withholding for Social Security tax, Medicare tax, state income taxes, and local income taxes. Many states use a supplemental tax rate. You will also have to pay anyemployer payroll taxeson the bonus. ...
Flat-Rate Cash BonusesExtra cash during the holidays is welcomed by almost all employees. One reason is that most have extra expenses during the holidays. A flat-rate cash amount means all employees are given the same amount of cash. To comply with tax laws, the “cash” amount gets added...
Cash bonuses, which are technically called supplemental wages are subject to a 22% flat tax. Economic Impact of Cash Bonus Cash bonuses can have a significant short-term impact on the local economy in areas where the average bonus level is high. For example, in financial centers like New Yor...