Originally Posted by CrewRest

Also from what I understand we do no want any retro money to be labeled as a "bonus" from the company because of much higher tax rates. Does this sound correct? And of course it is absolutely not a bonus.

Originally Posted by CantStayAway

This is a common misconception. Either way the taxes are the same. Large payments made at once (be it retro, bonus, etc) are WITHHELD at a higher rate. The reason for this is the company projects that income on a monthly basis. In other words if they pay you $40,000 at once then they project you to make at least $480,000 that year ($40k*12 months). Someone making that money pays more taxes then someone making $100k/year.

The good news is at any rate, you get back the tax overpayment in a refund when you file.