1. What is Bonus Pay Tax?

Bonus pay tax refers to the federal supplemental withholding rate applied to bonus payments in the United States. The IRS requires employers to withhold federal income tax from supplemental wages like bonuses at a flat rate of 22% (or 37% for amounts over $1 million).

2. How Does the Calculator Work?

The calculator uses the bonus tax formula:

Where:

• \( Bonus\ Amount \) — The gross bonus amount before taxes
• \( Supplemental\ Rate \) — 22% federal withholding rate

Explanation: The IRS treats bonus payments as supplemental wages and requires a flat 22% federal withholding rate, separate from regular income tax withholding.

3. Importance of Bonus Tax Calculation

Details: Understanding bonus taxation helps employees plan their finances accurately and avoid surprises when receiving bonus payments. It also helps employers comply with IRS withholding requirements.

4. Using the Calculator

Tips: Enter your gross bonus amount in dollars. The calculator will compute the federal tax withholding at 22% and show your net bonus after tax deduction.

5. Frequently Asked Questions (FAQ)

Q1: Is the bonus tax rate always 22%?
A: For federal withholding, yes - for bonuses up to $1 million. Amounts over $1 million are subject to a 37% withholding rate.

Q2: Do I pay state taxes on bonuses too?
A: Yes, most states also tax bonus income. State withholding rates vary by state and may be different from the federal rate.

Q3: Can I get a refund if too much tax is withheld?
A: Yes, if your total tax liability for the year is less than the amount withheld, you'll receive a refund when you file your tax return.

Q4: Are bonuses subject to Social Security and Medicare taxes?
A: Yes, bonuses are subject to FICA taxes (6.2% for Social Security and 1.45% for Medicare) in addition to federal income tax withholding.

Q5: How are bonuses reported on my W-2?
A: Bonuses are included in your total wages in Box 1 of your W-2 form, and the taxes withheld are included in the appropriate boxes.