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Payroll Bonus Tax California

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  • Payroll Bonus Tax California

    I just had a quick question. I am speaking on behalf of my Mother, who is a manager at a resteraunt. She regularly get's quarterly bonus pay for Overtime and Store Management. I was just curious about the taxes for the bonuses she recieves.

    The taxes deducted are well over 40% of her entire bonus and was just wondering if this is normal. Should that much really be taken out? It is an earned bonus for competent work and completely dependant on performance and job responsibility. I would understand a heavy tax on Holiday bonuses because they are considered more luxury then anything.

    Just hoping for a little insight here, don't want to continue hearing about how my Mother's $1,000 bonus was almost cut in half without knowing more about it.

    Thanks in advance.

  • #2
    7.65% total FICA/Medicare
    25% Federal income tax (assuming employer is using the supplemental wage method, which is legal and is the employer's option)
    6% state Income tax (same assumption as above)
    1.1% SDI

    That's 39.75%, right on.
    I don't respond to Private Messages unless the moderator specifically refers you to me for that purpose. Thank you.

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    • #3
      Ack

      Originally posted by Pattymd View Post
      7.65% total FICA/Medicare
      25% Federal income tax (assuming employer is using the supplemental wage method, which is legal and is the employer's option)
      6% state Income tax (same assumption as above)
      1.1% SDI

      That's 39.75%, right on.
      Ouchies. I read up on the 25% Supplemental Wage Method. Assuming she even had a choice in the method, not paying the California Flat Rate of 25% could result in having to pay an inflated amount at the end of the tax year? I hope I got this correct, but the excessive pay-in actually saves you money?

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      • #4
        Originally posted by Crusader2100 View Post
        Ouchies. I read up on the 25% Supplemental Wage Method. Assuming she even had a choice in the method, not paying the California Flat Rate of 25% could result in having to pay an inflated amount at the end of the tax year? I hope I got this correct, but the excessive pay-in actually saves you money?
        She's going to get the money back when she files her taxes. If she doesn't have money withheld (I'm not sure if that's even legal), she would owe taxes PLUS penalties and interest at the end of the year.

        The best thing is to adjust her withholding on her weekly paychecks so that she comes out close to even at the end. Some people prefer to have a little extra withheld on the premise that getting money back is better than paying in April. Given that the money would be earning a couple percent at best in a savings account, that decision doesn't really cost you much.

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        • #5
          Awesome

          Originally posted by mistoffolees1 View Post
          She's going to get the money back when she files her taxes. If she doesn't have money withheld (I'm not sure if that's even legal), she would owe taxes PLUS penalties and interest at the end of the year.

          The best thing is to adjust her withholding on her weekly paychecks so that she comes out close to even at the end. Some people prefer to have a little extra withheld on the premise that getting money back is better than paying in April. Given that the money would be earning a couple percent at best in a savings account, that decision doesn't really cost you much.

          Sounds good here. I'll make sure to relay the information. At the very least, i'm sure she will take comfort in knowing she would most likely get a hefty part of it back every year and if she so decides, she can recalculate her withholdings and not have so much taken out of future bonuses.

          I appreciate all the help. Thank you so much!

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          • #6
            Originally posted by Crusader2100 View Post
            Sounds good here. I'll make sure to relay the information. At the very least, i'm sure she will take comfort in knowing she would most likely get a hefty part of it back every year and if she so decides, she can recalculate her withholdings and not have so much taken out of future bonuses.
            I appreciate all the help. Thank you so much!
            The underlined portion of your message, no that's not true. The calculation I gave you IS for supplemental wages in California and I can pretty much bet you the employer is going to continue taking that option.

            What I think you meant was that she could have a little less deducted from her regular paychecks, so it would come out more even in the end.
            I don't respond to Private Messages unless the moderator specifically refers you to me for that purpose. Thank you.

            Comment

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