Bonus taxation = insane

[Gunslinger08]

Taxation on bonus money is crazy. Get a $5k bonus, and basically half of it goes to taxes. Really kills your spirit when you work so hard to earn some extra money, and the government takes as much as you do.

 

[BigJ]

EDIT: Here it is.

http://www.thestreet.com/funds/taxforum/990258.html

Blame It on Your Boss

Your employer actually can choose how to withhold on your bonus. Obviously, slapping a 28% rate on it is the simplest, so most opt for the easy way out.

But your employer also can elect to add your bonus to that period's wages and then figure out how much to withhold on that larger amount, says Kehoe; accountants call this the annualized method.

If you make $2,500 a month but get a $5,000 midyear bonus, your withholding will be computed as if you received a single wage payment of $7,500 for the monthly payroll period. Then that $7,500 is annualized, or assumed to be part of your yearly salary. So if you earned $7,500 a month, you'd be making $90,000 annually versus $30,000. But at $90,000, your tax rate jumps to the 31% tax bracket vs. the 28%.

Under this annualized method, you would end up taking home even less of your bonus because you'd be withheld at much higher rates.

 

[Tiamat]

For me, my bonuses were taxes as "gifts" at the lovely 40% level. 🙁

 

[BooGiMaN]

Originally posted by: Tiamat
For me, my bonuses were taxes as "gifts" at the lovely 40% level. 🙁

i believe thats the way it is everywhere.. what you get as a bonus is aways half of original amount

 

[DaiShan]

My last job was awesome, we didn't get "bonuses" but instead we got cash gifts that weren't taxed. I worked for an accounting company so I assume it was all legit. Nothin like an envelope full of cash for Christmas!

 

[KK]

I had gotten 2 bonus earlier this year, taxed to hell, but atleast the rest of the year I don't have to pay any taxes to break even.

 

[jadinolf]

Refuse the bonuses. Problem solved.

 

[JS80]

Increase your exceptions on your W-4 to decrease your future witholdings duh.

 

[Nebor]

Originally posted by: jadinolf
Refuse the bonuses. Problem solved.

That's what I do. :thumbsup:

 

[FelixDeCat]

Ive gotten 100% of my 15-20% annual bonus. Its deposited into a 401k profit sharing account and is now well over six figures. This was all annual bonus money, not a "matching account". It does have a matching feature, but its totally optional and not necessary to get a dime of bonus money.

You should see if theyll set this up for you, and.....



:music: God Bless the U.S.A. :music:

 

[jadinolf]

Originally posted by: Nebor

Originally posted by: jadinolf
Refuse the bonuses. Problem solved.

That's what I do. :thumbsup:

Same here.:thumbsup:

 

[xSauronx]

Originally posted by: Nebor

Originally posted by: jadinolf
Refuse the bonuses. Problem solved.

That's what I do. :thumbsup:

is accepting it and paying half of it in taxes really that bad?

i really dont know, i dont get such a large bonus (maybe 1500 for the year) and thats in cash (not all at once)

 

[Dracos]

You think 5K being taxed is bad. I had a 14K bonus this year and only received like 9K after taxes.

 

[yobarman]

Get yourself a tax sheltered account peoples.