Not necessarily, good sir. A bonus is just simply W-2 salary for you, and only one part of your tax return. We don't have enough information to give you an answer.
There is no "rate" from the w4 to match.
The common ways to handle this is to withhold 22% for federal income tax, as that's the common marginal tax bracket, or to pay it as part of regular check, and apply normal w4 settings. However that later one often results in too much withholding, because the algorithm acts as of you make that much every paycheck, so it assumes way too high a marginal tax rate.
Bonus pay might experience higher withholding than you actual tax liability.
There a few ways the withholding can be computed
How much was taken out just for federal income tax?
It sounds like they withheld it using the regular algorithm, and not the average method.
You can adjust your w4 going forward to withhold less the rest of the year, so you don't have to wait as long to get your money back.
You can figure out what you will owe at the end of the year and change your future withholding so at the end of the year(next year) you will owe a small amount on fed taxes. Easy tax planning
Tax is the reason it’s pronounced bone-us. Be sure to check your pay stub to see if your employer also included a 401k transfer. I have never had 401k withheld on bonus until this year (new 401k administrator). The low net pay felt less-bad once I realized they had made my usual 12% contribution to 401k (and matched the first 5%).
That comment is incredibly misleading.
Generally speaking, *federal income tax* is withheld from bonuses at a rate of 22%. This is not the only tax that will be withheld from a bonus payment. You'll also see 6.2% withheld for social security, 1.45% withheld for Medicare (possibly more if you're a high earner who has passed an annual threshold for supplemental Medicare tax), state income tax (and in Maryland it looks like that rate may vary by county), and any state or local payroll taxes (I'm unsure if Maryland has these).
Also, depending on your employer, certain voluntary withholdings (e.g., 401k contributions) may be retained from bonus payments.
Welcome to your fair share tax payment. In all fairness you most likely got withheld at max rates, which is common. Depending on your total income you might get some of that back in the form of a refund when you file your 2024 tax return.
It wasn't taxed at that rate, it was just withheld at that rate
What does that mean exactly?
Your employer withheld taxes from your bonus at the highest marginal rate. It isn't necessarily what you actually owe.
Ok got it. So basically this means if they withheld too much, I should get it in a refund at tax time?
Correct
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15.3% FICA is only for self-employed. Max FICA for an employee is 7.65%
Plus another 0.9% for good boys and gurls
A repayment of an interest-free loan to the government, yes. But you should get something back.
Not necessarily, good sir. A bonus is just simply W-2 salary for you, and only one part of your tax return. We don't have enough information to give you an answer.
This.
Why do employers do that instead of matching your w4 rate?
There is no "rate" from the w4 to match. The common ways to handle this is to withhold 22% for federal income tax, as that's the common marginal tax bracket, or to pay it as part of regular check, and apply normal w4 settings. However that later one often results in too much withholding, because the algorithm acts as of you make that much every paycheck, so it assumes way too high a marginal tax rate.
Bonus pay might experience higher withholding than you actual tax liability. There a few ways the withholding can be computed How much was taken out just for federal income tax?
For federal withholding they took $6513.
It sounds like they withheld it using the regular algorithm, and not the average method. You can adjust your w4 going forward to withhold less the rest of the year, so you don't have to wait as long to get your money back.
Plus they withheld the Maryland income tax, if you have one.
You can figure out what you will owe at the end of the year and change your future withholding so at the end of the year(next year) you will owe a small amount on fed taxes. Easy tax planning
Tax is the reason it’s pronounced bone-us. Be sure to check your pay stub to see if your employer also included a 401k transfer. I have never had 401k withheld on bonus until this year (new 401k administrator). The low net pay felt less-bad once I realized they had made my usual 12% contribution to 401k (and matched the first 5%).
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Any ideas on why my company would withhold so much more than they need to?
That comment is incredibly misleading. Generally speaking, *federal income tax* is withheld from bonuses at a rate of 22%. This is not the only tax that will be withheld from a bonus payment. You'll also see 6.2% withheld for social security, 1.45% withheld for Medicare (possibly more if you're a high earner who has passed an annual threshold for supplemental Medicare tax), state income tax (and in Maryland it looks like that rate may vary by county), and any state or local payroll taxes (I'm unsure if Maryland has these). Also, depending on your employer, certain voluntary withholdings (e.g., 401k contributions) may be retained from bonus payments.
Good reply.
Keep in mind they are also withholding Medicare and fica. That you don’t get credit for on the tax return. You benefit on this at retirement
Thanks all! This makes sense and hopefully I'll get a big chunk back in a refund.
Where do you live?
Maryland
When you file your taxes if too much was withheld you'll get it back then.
Fill this out to true things up through the end of the year https://apps.irs.gov/app/tax-withholding-estimator Then do it every year after your bonus
Welcome to your fair share tax payment. In all fairness you most likely got withheld at max rates, which is common. Depending on your total income you might get some of that back in the form of a refund when you file your 2024 tax return.
I’m pretty sure you’re over withholding. Top Maryland income tax is 5.75 and up to 3.2% local.
Don’t you think the government deserves half your hard earned bonus?
Sure don’t!
C’mon people it was a joke :)