Author Topic: bonus not taxed by employer - annual tax implications  (Read 440 times)

katsiki

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bonus not taxed by employer - annual tax implications
« on: September 09, 2017, 04:26:29 PM »
This may be a silly question but I am unsure..

My employer does an annual bonus every year.  Last year, it was taxed "normally".  This year, I noticed it was higher than the previous year (same pre-tax amount both years).  When looking at the pay stub, it was clear that less tax was taken out.  After contacting the company, I was advised that tax was not taken out this year.  (It seems that some tax was taken out by the way). 

So, do I need to ensure that my annual withholding is equal to the previous year?  I am unsure since I had no control or input on how they chose to distribute the bonus this year.

If I need to make extra tax payments this year, is the best way to simply withhold extra out of the remaining paychecks this year?

Thank you for your help!
"busy eating lentils in a van by the river"

MMbergmann

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Re: bonus not taxed by employer - annual tax implications
« Reply #1 on: September 09, 2017, 06:22:16 PM »
Without knowing your income, it would be hard to say how worth it it is to avoid a tax penalty. IMO, if the penalty is less than $100 then it wouldn't be worth it. If last year's adjusted gross income was 150k or less then, yes 100%. If it was greater than 150k then it needs to be 110% of last year's tax (not last year withholding).

To answer your second question, that is completely up to you. If dealing with HR is more difficult, then just make an estimated tax payment by looking up the instructions and form 1040-es . You can find it on irs.gov

MDM

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Re: bonus not taxed by employer - annual tax implications
« Reply #2 on: September 09, 2017, 07:41:43 PM »
If I need to make extra tax payments this year, is the best way to simply withhold extra out of the remaining paychecks this year?
Withhold is usually "best" because it doesn't matter when you withhold during the year, just that you withhold enough.

With estimated payments, you have to get both the amount and the timing (~by quarter) correct.

katsiki

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Re: bonus not taxed by employer - annual tax implications
« Reply #3 on: September 09, 2017, 07:46:02 PM »
Thanks for the replies!  Luckily, I can setup extra withholding myself.  Time to figure out the expected difference and set it up.
"busy eating lentils in a van by the river"

katsiki

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Re: bonus not taxed by employer - annual tax implications
« Reply #4 on: September 09, 2017, 08:12:00 PM »
I found this article helpful: https://www.fool.com/retirement/2017/03/24/heres-how-to-avoid-an-irs-underpayment-penalty.aspx

If anyone finds themselves in the situation, it may be helpful.
"busy eating lentils in a van by the river"