I get bonus checks where I can change my retirement contribution rate. For all bonuses I changed it to 100% traditional 401k bc its pre-tax. I get no bonus this way bit also no crazy tax withholding. At the end of the year, I would like to turn around and move it back to Roth 401k and pay the needed taxes. If I do this the same year, do I really save money.
Thanks for confirming what I thought. I first searched Google for articles and they all deceptively write bonuses are "taxed higher" because of the high withholding rate but don't explain that withholding is not the actual tax that's paid when you actually file. If you owe more than what was withheld at the end of the year, you still have to pay additional taxes, and if you overpaid in withholdings, you get the "rebate." The internet is a mess and misleads a lot of people.
So if i know I'll be in the 12% tax bracket I shouldn't bother withholding anything since the employer will be withholding way more than is needed right? So I'll get refunded the difference when i file right?
I am still not seeing the answernasnto why the company we use for payroll withholds more taxes of bonus payments instead of normal salary. Why do they get to decide that they withhold more? What if I don’t want them too? Can I tell them to stop?
Thanks for the explanation. Most links I found only explained the upfront flat tax for federal/state withholding. Which in my case was 40%!! Hoping some of that come back next tax season since that’s above my usual income tax bracket
Hmm I think it depends on your tax bracket you fall in. I read that bonuses are taxed at a flat rate of 22%. My ordinary income tax rate is lower than that at 12% for 2023 so in my case bonuses are taxed higher. While long term capital gains taxes are lower for me. My company usually gives a discretionary bonus of 3% of salary where half goes into the 401k and the remaining paid in cash. This year we are given the option to contribute the full amount or take the full amount paid out in cash but not a 50/50 split. Due to my tax bracket I’m better off contributing the full amount and not taking any cash!
For example tax bracket is 20% tax who earns $12-$15 a year, 15% tax who earns $8-$12 a year. I earn $10 a year and $3 as any kind of bonus. What would be my tax bracket 15% (bcz base salary is $10) or 20% (bcz my overall gain is salary $10 + bonus $3 = $13) ?
My question is if there is an option to give a 100 % on your bonus to your 401k. Then uncle sam couldn't tax that 20 or 25 % on the bonus that the company gave you.
from what I understand yes. the bonus check gets hit at a higher rate because it puts you in a higher tax bracket basically, but in the end you'll get some back if you over paid
What about the taxes on bonuses? Does anyone understand if it's safe to take a bonus when you have to pay the government taxes plus you have to repay the company 100% of the bonus if you quit the job? So let's say you take a $10,000 bonus and then you have to pay the government $2,500 in taxes. That if you quit the job you have to pay $10,000 back to the company and you lose the 2500. There are supposed to be ways to get your taxes back but does anyone know this for sure?
Depending on your tax bracket, you will owe a certain amount of taxes on your earnings, no matter where the tax withholdings (tax contributions on each paycheck) came from. On your tax return, your earnings is a total amount and your tax withholdings is a total amount, and your taxes for that total earnings is a total amount. Where they came from is irrelevant. So if your tax withholdings is $2500 over your tax liability, then you will get it back. Tax withholdings are a way for you to contribute to your tax owed along the way and throughout the year. Look at it like an IRS savings account, you are adding to that savings account throughout the year and when it is time to pay taxes on your earnings, the money is in your IRS savings account waiting for you to use it to pay your tax liability on your earnings. Think about it, if most taxpayers didn't have these withholdings, most people wouldn't have enough money to pay their taxes every April 15.
The video was helpful- thank you! I don’t think you need such a long elevator pitch for your channel in there tho, just my two cents. Id like to learn more about taxes for online businesses (like selling courses) work :)
Thanks for watching! What would you do with a big bonus? 🏎️ 👠 💍
I get bonus checks where I can change my retirement contribution rate. For all bonuses I changed it to 100% traditional 401k bc its pre-tax. I get no bonus this way bit also no crazy tax withholding. At the end of the year, I would like to turn around and move it back to Roth 401k and pay the needed taxes. If I do this the same year, do I really save money.
video starts at 1:22
Saw. And closed the video. Thanks
My experience is the employer hands out 40% of the bonus upfront to the IRS. 😬👎 WHY ???
Because the IRS robbing your money. These guys using our money for nonsense bullshit too. Let's stop overpaying the IRS
Basically your bonus is taxed the same as your salary, but more of the bonus is withheld.
Thanks for confirming what I thought. I first searched Google for articles and they all deceptively write bonuses are "taxed higher" because of the high withholding rate but don't explain that withholding is not the actual tax that's paid when you actually file. If you owe more than what was withheld at the end of the year, you still have to pay additional taxes, and if you overpaid in withholdings, you get the "rebate." The internet is a mess and misleads a lot of people.
Bonus , Thank you so much! It’s so hard navigating taxes sometimes. Glad I found this page.
Thank you for making this a short video, you are awesome!
This helps. But is it the same for On, Canada too?
So if i know I'll be in the 12% tax bracket I shouldn't bother withholding anything since the employer will be withholding way more than is needed right? So I'll get refunded the difference when i file right?
thank you so much for all your information ! I learned so much from this short video
You didn’t mention the most important thing that is how to save tax on bonus. I am sure there are many ways.
I am still not seeing the answernasnto why the company we use for payroll withholds more taxes of bonus payments instead of normal salary. Why do they get to decide that they withhold more? What if I don’t want them too? Can I tell them to stop?
Usually no, they won't withhold less. What you can do is toss more money at your 401k which would lower the withholding amount.
Thanks for the explanation. Most links I found only explained the upfront flat tax for federal/state withholding. Which in my case was 40%!! Hoping some of that come back next tax season since that’s above my usual income tax bracket
Did you get it back? :)
That's my question too. I'm not in 25% tax bracket so do I get refunded the difference when I file?
This is great. Very clear and concise. Thank you!
Hmm I think it depends on your tax bracket you fall in. I read that bonuses are taxed at a flat rate of 22%. My ordinary income tax rate is lower than that at 12% for 2023 so in my case bonuses are taxed higher. While long term capital gains taxes are lower for me. My company usually gives a discretionary bonus of 3% of salary where half goes into the 401k and the remaining paid in cash. This year we are given the option to contribute the full amount or take the full amount paid out in cash but not a 50/50 split. Due to my tax bracket I’m better off contributing the full amount and not taking any cash!
Nice job! Totally understand.
It was ok, you should consider going through a specific example.
Im a California resident and my bonus is getting taxed 40% 😢, what should I do?
For example tax bracket is 20% tax who earns $12-$15 a year, 15% tax who earns $8-$12 a year. I earn $10 a year and $3 as any kind of bonus. What would be my tax bracket 15% (bcz base salary is $10) or 20% (bcz my overall gain is salary $10 + bonus $3 = $13) ?
My question is if there is an option to give a 100 % on your bonus to your 401k. Then uncle sam couldn't tax that 20 or 25 % on the bonus that the company gave you.
But a supplemental tax will even out the following year right? That's all that matters
from what I understand yes. the bonus check gets hit at a higher rate because it puts you in a higher tax bracket basically, but in the end you'll get some back if you over paid
Hii
Where we included cash bonus in T1 return ??
Alexandra, good, clear information on bonuses! I like your videos, keep them up!
Thanks a lot! There tends to be a lot of confusion about this, so I'm glad to clear it up! :)
Does the bonus that you mentioned in this video include supplemental bonus? Thanks you for sharing this info
What about the taxes on bonuses? Does anyone understand if it's safe to take a bonus when you have to pay the government taxes plus you have to repay the company 100% of the bonus if you quit the job? So let's say you take a $10,000 bonus and then you have to pay the government $2,500 in taxes. That if you quit the job you have to pay $10,000 back to the company and you lose the 2500. There are supposed to be ways to get your taxes back but does anyone know this for sure?
Depending on your tax bracket, you will owe a certain amount of taxes on your earnings, no matter where the tax withholdings (tax contributions on each paycheck) came from. On your tax return, your earnings is a total amount and your tax withholdings is a total amount, and your taxes for that total earnings is a total amount. Where they came from is irrelevant. So if your tax withholdings is $2500 over your tax liability, then you will get it back. Tax withholdings are a way for you to contribute to your tax owed along the way and throughout the year. Look at it like an IRS savings account, you are adding to that savings account throughout the year and when it is time to pay taxes on your earnings, the money is in your IRS savings account waiting for you to use it to pay your tax liability on your earnings. Think about it, if most taxpayers didn't have these withholdings, most people wouldn't have enough money to pay their taxes every April 15.
This is great! Thank you!
How much tax deduction for joining bonus 50000k my joining bonus is 50000k How to calculate
With that kind of English I doubt ur getting that
30% for me.
bonus, This was awesome!!! very helpful!
Thanks!
The video was helpful- thank you! I don’t think you need such a long elevator pitch for your channel in there tho, just my two cents. Id like to learn more about taxes for online businesses (like selling courses) work :)
Thanks for the feedback Phillip!
Way higher
Great explanation btw don't hear your voice well.
Bonus
Bonus!
BONUS! 😉
Bonus!