I should explain the situation better. Each year after the 1st quarter the employer pays a bonus which the IRS takes 22% of no matter what.
After April 15 I get back all of the previous year’s 22%.
The new W4 doesn’t let you choose an exemption # like the old one so if you DECREASE withholding, you are effectively lying about the # of dependents.
There isn’t a way to claim exempt just for the windfall witholdings.
If your bonus is based on your currrent calendar years performance, then its probably paid in December. If that’s the case, it’s only held until you file your taxes, not the whole year, just the period of time you take to file your FIT return.
I think you are misunderstanding something. Yes, bonuses have federal taxes withheld at 22% (37% if over $1M). But at tax time you owe the same amount of taxes no matter what the withholding rate was. They don’t keep the amount in perpetuity.
Since it’s a one time annual bonus, just accept a bigger refund next year. He seems to think that what they withhold is what they keep. It isn’t. I don’t know why they withhold that way…maybe to soften the blow if the bonus pushes them into a higher tax bracket. But no matter how much they withhold, the ultimate ‘net’ amount of the bonus will be the same.
the share is based on personal performance, the total is based on company performance so it gets paid after the 1st quarter of the next year so if the next bonus is about the same there is no real refund, just swapping old for new dollars
you can’t anymore without lying about # of exemptions. you used to be able to just NAME the #, now the calculator makes you name the number of people
i never pay 22%, I’M about 130% of the poverty level. I think you don’t understand, they just give back last year’s and take the next years.
I"m not following you. I had worked one job where I got a bonus and it was taxed at 40% back then. I wasn’t anywhere close to that kind of a tax bracket. IT reduced the amount of my bonus that was paid that year, but when I filed my taxes, I got a hefty refund in April of the following year. If they pay it aftre the first quarter of 2025, then file your taxes in January and it will be in your refund you get in 2026
No. You are thinking wrong. Hear me out.
The only way to adjust your witholding as a W2 employee is to vary the # of dependents. The goal is to not give the feds a free loan. Refunds (with some exceptions) are for people who don’t plan their finances.
One correction - someone chime in here. I seem to recall that on your W4 you can add an amount to be withheld not related to the deductions. So one option you have is to crank up the deductions, then fine tune with that X withholding amount.
In years past (I’m a C corp now, so I pay myself - hold that thought) I would estimate my taxes and adjust my dependents accordingly. The IRS does not care unless you have to make consecutive tax payments to them year over year.
As a C Corp, I determine what I want to pay myself, and I manage my tax payments on a monthly basis. If business is good, I can write myself a bonus, estimate what my taxes will be and pay accordingly. You can do the same thing if you have a general idea of your bonus.
In your case, you are a W2, so you are screwed. The company you work for has to take a certain amount. As others have said, it’s just a cash flow thing. But it’s NOT lying on your dependents.
And if you don’t have dependents, as would be revealed by your past tax returns, and you claim children under 17 or other dependents on the W-4, then you’re lying.
They do have a line for extra withholdings.
I wish they allowed us to specify a % or dollar amount.
They (IRS) do. Admittedly I had a lot of dependents over the years so that was my technique for fine tuning. If you go look at the federal W4 form, you can also go to lines 4a to 4c. if you need extra withholding.
The only way I ever limited the stupidity of the IRS was to add more dependents. I now see that there is a Step 3 on the form for “claim dependent and other credits” where you can adjust.
Again, the IRS does not give a crap about the forms you fill out as long as what you have withheld is close to your tax liability. Been there many times. It’s even in the 1040 instructions.