Submitted by dragunight t3_10q0mt1 in personalfinance
I live in IL. I recently received a bonus for around $48,067.15. In my paystub, it said taxes paid totaled $21,597.40.
The breakdown of these taxes were as follows:
- FEDERAL INCOME TAX $15,585.49
- MEDICARE - EE $696.98
- SOCIAL SECURITY - EE $2,980.16
- IL INCOME TAX $2,334.77
Maybe I'm missing something, but doesn't the federal income tax seem especially high? For supplemental income, I'm pretty sure the tax rate is something like 22%. So shouldn't the federal tax coming out of this bonus only be like ~10k?
Please help me understand what's going on. Thank you!
wijwijwij t1_j6n3cmd wrote
I think there are two ways for computing taxes on bonuses.
If the bonus was {treated as if} tacked onto a regular paycheck, the dumb withholding algorithim annualizes that one paycheck as if it were standard pay for every paycheck in a full year. That would make it think your income for the year is huge and withholding should be very high.
If that's what happened, you get a refund when you do your taxes, because the actual tax on your overall income isn't as high as the withholding algorithm calculated.
You could adjust a new W-4 to force a little less withholding during rest of the year from each pay check. The steps to do are a little convoluted to describe, so you might let the online tool at www.irs.gov/w4app help you out. You can pretend you had two jobs this year (one from Jan-now that you no longer hold, and one from now-Dec), tell it the total income from the first job and total withholding (including your big check), and the anticipated income from the second job; it'll give you a suggestion about how to set up the new W-4. Probably will have you enter some amount on Step 3 as if you had a "tax credit."