Yes, taxes should come out of your bonus. He's right, and he should have always done that. It's part of your income.

Yes. Everyone at DH's company gets a small amt. at Christmas. Taxes are deducted. If the company doesn't deduct, the IRS will expect you to pay the taxes anyway because that is taxable income.

Yes

Yes, my job used to be payroll and you should have taxes taken out of your bonus. Why not, it's income.

When we've gotten them our boss did not take out taxes, instead he would 1099 us. If it's a check for more than 10k and deposited to your bank the bank notifies the IRS anyway.

My husband gets a bonus every year. Because its classified as "a bonus", our good ole government takes 40%!

I get monthly bonuses for my sales. They take out more taxes then my income requires, treating the once a month bonus like a weekly payout. My coworkers, not having other jobs or income get a BIG tax return. I on the other hand have other income and it comes out even.

All income from your employer should be taxed.

A $100 gift from Grandma....maybe not. :0)

Yes, taxed at a higher rate than regular tax bracket. At least 28%, more the higher your income is.

My bonuses when I worked and the bonuses my dh receives have all had the taxes taken out before the bonus money reaches us.

Depending upon the intent of the employer, the bonus may be given in various ways. For instance, if the employer wants to give everyone a $500 bonus, then the taxes and everything else is taken into consideration so the employee may receive an actual $500, but the employee is taxed on $600 to account for the amount withheld for taxes. Usually the bonus is given as a percentage of salary and the tax is taken out as a percent of that amount.

Yes, about 40% goes to taxes. Every year.

DH gets a year end performance bonus paid this Fri (YEA) that is taxed at 40%. It is income and classified as a bonus so taxed at 40%, in his case the bonus qualifies at the highest income tax rate anyways so paying the upper rate for bonuses is not that much more. His bonus is a percentage of his salary and his managers can give up to 110% of that to him. He actually got all 110% of his bonus, the only one on his team! ~ liz

Always. And yes, he should have been doing it all along.

every year we've received one, it's like a regular paycheck and taxes removed...

DH gets quarterly bonuses....whatever amount he tells me I cut it in half because that is roughly what the take-home will be.

You should take them out when you write the check or when you do your taxes...one or the other so it's a moot point..

Yes, taxes are taken out - it's income.

But what if it's less than $600? From the IRS website (this is "other income", not salary):

"At least $600 in rents, services (including parts and
materials), prizes and awards, other income payments,
medical and health care payments, crop insurance proceeds,
cash payments for fish (or other aquatic life) you purchase
from anyone engaged in the trade or business of catching
fish, or, generally, the cash paid from a notional principal
contract to an individual, partnership, or estate"

rob333 - the rule you're reading applies to payments made by a business to a non-employee, items needing to be reported on a Form 1099.

A bonus is no different than salary from a employer/employee standpoint, fully reportable on Form W-2 (not 1099) and subject to federal and state taxes and withholdings.

ruthie, how payments are treated are not a moot point. Just the opposite. Compensation payments made to employees (whether salary or bonuses) are subject to the payment and reporting of EMPLOYER payroll taxes of various kinds in addition to the employee's payroll and income taxes. Such amounts get aggregated to determine allowable contributions to retirement plans (whether by employee or employer or both). Total amounts also matter in discrimination tests for certain employee benefits.

So, it does matter. For bonuses not previously reported correctly, is there a consequence? Probably not, unless your employer is subject to an employment tax audit at some future time. Yes, those do exist too.

actually snidely, CPAs have conveyed this information to me. I think I'll continue to listen to them. Nobody has to listen to them or consider asking the IRS for a distinction, but I would certainly suggest making sure before simply subjecting to an unnecessary tax payment.

Not a "moot point" at all. I get a check for, say, 1,000.00 a year as a year-end bonus for 21 years. Company pays the 400.00 in taxes. 1400.00 is included on my W-2 as wages. Now my bonus is 1,000.00 with taxes taken out. I get a check for 600.00 and 1,000.00 is included on my check as wages.

This post was edited by angelaid on Sat, Mar 1, 14 at 0:28

Actually, rob333, I'm a CPA with over 30 years of doing exclusively tax work in a major market. What I said is correct but you should feel free to listen to whomever you wish. Unless your source misunderstood your question, you should perhaps think about finding someone else to get tax advice from.

Angela, you changed the facts or used the wrong terminology. For the sake of my explanation, let's say the amount of withholding is also equal to the tax ultimately due on that bonus, on your return.

In your first post, you said for 21 years, no taxes were deducted from your bonus but that's changed for the last two years. So using your $1000 number as the amount of each year's gross bonus, what your words mean is that you got a check for $1000 for 21 years (nothing deducted) and these last two you got a check for $600. Whether taxes were correctly deducted from the payment (as in the last two years) or not, the $1000 should have been reported by the employer on your W-2 as income and you paid the tax in the 1040 calculation, your net after tax was $600. That's a $1000 gross bonus, and $600 net after tax. Tax paid as withholding, or as part of your tax return, same thing, same tax, same net. Just no employee FICA or employer payroll taxes if misreported.

In your most recent post, the facts are different. What you're saying is that you were given a $1000 NET bonus that was "grossed up" for taxes. If so, the gross income amount should have been $1667, with $667 (40 % of $1667) paid in by the company for taxes and $1000 net for the check. 40% of your $1400 number is $560, the net check if correctly calculated would have been $840 and not $1000. The reason for the change from 1400 to 1667 is that the payment of tax by your employer (in the grossup) is itself subject to tax and so the total needs to be higher to cover the tax on the amount plus the tax on the tax.

I probably should have let this pass, but I am trying to be helpful. Sorry if too long.