I adjusted my tax withholding and 401k to maximize my bonus but payroll didn’t recognize my exempt status. Did this happen to anyone else? What’s the point of a bonus if half goes to the government…
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I changed my status to exempt at the beginning of the year to ensure I didn't have ILLEGAL fed taxes taken out - i'm sick of them getting 60% of my bonus. There is a cut-off date for when it will be in effect compared to when you'll get paid...maybe it wasn't processed on time? Not sure. Mine went in pretty quickly and although I haven't received my check yet I did check "My paystub" on TW and see that they didn't take the fed tax out. WOOHOO. Now if we can just get the world straight and the 14% tax rate across the board and no other taxes by next tax season I'll be a happy camper.
Gotcha. It’s always hard to tell what rate they’re taxing it at because they don’t deduct it exactly correct to begin with anyway. I usuallt end up getting 800-1000 back on my federal taxes and owing 80-100 on my state when I file.
But regardless of what they deduct, at the end of the year your salary + bonus is treated as one income number for determining what your final tax liability is.
@egj. The employer, at it's discretion, can tax the Bonus at the 30% federal tax rate for bonuses for Federal withholding.. The state tax rate is then at the same as your regular payroll rate. A lot of companies do it this way.
Someone in payroll posted this article in another thread a week or so ago: https://www.nerdwallet.com/article/taxes/bonus-tax-rate-how-are-bonuses-taxed
Bottom line, none of your pretax deductions have an impact on the fed rate being 22% on the bonus. You also get 6.2% social security text and 1.45% Medicare tax. Most states also withhold higher taxes on bonuses. You’ll probably get a refund when you file next year.
Before anyone tries to claim such, bonuses are not taxed under a separate tax structure.
At least my Bonus never has been. Perhaps there are different laws for state taxes in some states. Yes, they appear as a separate line item on the goes pay section of your pay stub, but the clue you should be looking is the “total Federal/State/OASDI/Medicare Taxable Income” lines. If these = salary + bonus - pre-tax deductions on the paystub that contains your bonus, it’s taxed under the same income tax structure as your salary. Another clue is your W2. If it’s like mine, you should just have one taxable income number, that includes your bonus in there. The reason it seems to tax your bonus more when it gets paid out is probably because for that pay check they tax it according to the progressive tax structure as if you made that total every paycheck. So if your base salary is 100k and you make a 10k bonus, that paycheck the total will be taxed at the same marginal bracket as someone who makes 360k per year. But then when you file, they just look at your total income for the year to determine tax brackets, so any extra tax you paid on your bonus will get factored into your refund (or how much you owe if you ended up underpaying somehow or have other sources of income you’re just reporting then). It’s the same thing if you get laid off and then either find a lower paying job or finish the year unemployed, you’ll get a bigger refund because when they deducted taxes from your pre-layoff paychecks they assumed you’d continue to make that much the rest of the year.
There’s probably a way to game it so your bonus pay check gets taxes deducted closer to what your final effective rate for the year will be, and not have to wait for next year’s refund, by changing your allowance info for just this pay cycle (I think that’s what the OP was trying to do?), but at this point it’s too late to do that for Friday’s pay.
Uncle Sam needs to launder more of your $ to ukraine for pronoun research and trans rights.
"What’s the point of a bonus if half goes to the government…"
Tell me you don't understand how taxes work without telling me you don't understand how taxes work.
It all evens out in the end. You're paying the same in taxes whether you pay now or pay later.
Based on your posting, especially the 401k reference, you don't qualify for exempt status. You need to research what constitutes exempt withholding and what the employer has to do to verify it.
You missed the deadline.
You must be new to...the US
You probably didnt qualify for exempt status.