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Tax rate on bonus checks

montanamontana 3 Posts
in Compensation Vote Up0Vote Down
We issued gain share (profit share, or bonus) checks for the first time this year. Our accounting firm took normal taxes out of these checks. Now I'm hearing that there is a special (much higher) tax table to be used for such checks. Is this true? Do we have to use it?
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  • MrCreosoteMrCreosote 144 Posts
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    There are two methods allowed by the IRS. The first is a flat 25% tax rate. The second is a little more complicated - when I tested it on some of our employees I found that it caused those making more than 50K to actually pay more than 25% and those making less than 50K to pay less than 25%, depending on salary, allowances, etc.. We will use the 25%. You can find the rules on the IRS website. Look in Circular E,Section 7 -Supplemental Wages.
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