Originally Posted by
Biggbird
With many airlines giving bonuses I keep getting reminded “the taxes are more on bonuses” and to plan not to actually get much of the bonus. Correct me if I’m wrong but I still cant undestand why people are saying this. The withholdings are going to be higher but you get it all back when you file your taxes.
Example- If pay went from 5,000/month to 15,500 per month with a 10k bonus included on it, the aggregate earnings payroll uses to calculate withholdings with would go from 60,000 for the year to 186,000. Thanks to our progressive tax system that would put the check with the bonus on it in a higher tax bracket and the withholdings would be higher.
The other option is if the company issues a specific check for the bonus outside of my regular paycheck, withholdings are done at 22% as a base line. At the end of the year when I do my taxes sometimes the withholdings were to much and I get a refund, sometimes not enough and I would owe.
Is this all correct or am I missing something?
You are correct, some people don't understand the difference between withholding and actual taxes paid. Most large employers will withhold at a flat rate 22% for a bonus payment below $1 million. What you actually owe is determined when you file your return.