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For decrease earners, a withholding fee of twenty-two% may possibly even feel unfairly superior, offering them the feeling that bonuses are in excess of-taxed and never truly worthwhile.
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As a rule, the IRS will simply conclude that you choose to’ve overpaid within the bonus and will refund you for the excess (now using your true tax amount).
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Matters play out otherwise for employees with larger salaries, because their bonus is usually subjected to more withholding in addition to the flat 22% if their bonus crosses a specific threshold.
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Probably the best source of confusion encompassing how bonuses are taxed could be the failure to grasp the difference between withholding revenue upfront for tax needs and the particular tax price applied at the conclusion of the yr.
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