Originally Posted by tennisguru

This is a common misconception. Any "supplemental income", of which bonuses and profit sharing qualify as, are WITHHELD at a 25% federal tax rate, along with the other standard social security, medicare, state tax, etc. However, all income, regardless of type, is lumped together when you actually file your taxes for that year. So, hypothetically if your marginal tax rate for the year was only 20%, you'd get that additional 5% that was withheld back as a refund.