Sample Bonus Template With Calculator In Philadelphia
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Your employer can withhold taxes in one of two ways: the percentage method or the aggregate method. The percentage method withholds taxes on your bonus at a 22% rate. The aggregate method is more complex and involves adding your bonus to your regular paycheck and withholding taxes on the total.
Bonuses are taxable income, but the IRS also considers them supplemental wages, which means taxes may be withheld on your bonus differently than they are on your ordinary wages. Employers can either withhold taxes on your bonus at a flat 22% rate or use a more complex withholding calculation.
The federal bonus tax withholding rate is typically 22%. However, employers could instead combine a bonus with your regular wages as though it's one of your usual paychecks—with your usual tax amount withheld. There are ways to reduce the tax impact of your bonus.
The percentage method Bonus amount$10,000 Federal tax $10,000 X 22% = $2,200 federal income taxes withheld Remaining bonus $7,800
Your total bonuses for the year get taxed at a 22% flat rate if they're under $1 million. If your total bonuses are higher than $1 million, the first $1 million gets taxed at 22%, and every dollar over that gets taxed at 37%. Your employer must use the percentage method if the bonus is over $1 million.
The percentage method is used if your bonus comes in a separate check from your regular paycheck. Your employer withholds a flat 22% (or if over $1 million, 37% which is the highest rate of income tax).
How to Calculate Bonuses for Employees. To calculate a bonus based on your employee's salary, just multiply the employee's salary by your bonus percentage. For example, a monthly salary of $3,000 with a 10% bonus would be $300.
