How do we calculate the withholding of taxes from bonuses?
Bonuses are “supplemental wages” that include, but are not limited to, vacation pay, overtime, sales awards, bonuses, commissions, and stock options.
If supplemental wages are provided to the employee simultaneously with regular wages, an employer must treat the sum of the payments as regular wages and withhold taxes based on the regular payroll period.
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If the supplemental wages are not provided simultaneously with regular wages, an employer may use either of these options to calculate the withholding amount:
- Compute the withholding amount on the combined regular wages and the supplemental wages. This computed tax, minus the tax withheld from the employee’s regular (gross) wage payment, is the amount that should be withheld from the supplemental wages.
- Withhold the listed percentage on these types of supplemental wages without allowing for withholding allowances claimed by the employee: 1) bonuses and stock options: 9.3 percent; or 2) other types of supplemental income (e.g., overtime pay, commissions, sales awards, and vacation pay): 6 percent.