Key Highlights
- The federal flat rate for bonus pay is 22% for supplemental income under $1 million.
- Add Social Security (6.2%), Medicare (1.45%), and state taxes, and total withholding is roughly 30%-35%.
- “That 22% federal withholding might be higher than your…regular tax bracket,” according to workforce management software company Homebase.
- “If they usually pay 12%, seeing 22% disappear from their bonus stings.” Why can this spell financial disaster for Americans?
- For the holidays, many Americans may have spent like they were receiving the full amount of the bonus instead of the bonus amount minus taxes, said Kevin Knull, chief executive of TaxStatus, which provides IRS data to financial advisers.
