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Either way, the paying of the supplemental wages will increase your tax rate for that period, so be prepared.
But before you all red poker feel too sorry for yourself, remember: It's a far better option than getting no bonus at all.
Any compensation you receive in exchange for work, including cash bonuses, is taxable income according to the Internal Revenue Service (IRS).But unfortunately, your ultimate payout may not end up being nearly as high as you'd expect.Though it's disheartening to see such a large portion of your bonus disappear due to taxes, keep in mind that you may get some of that money back when you file your return.If you are self employed and you receive more than 600 including any cash bonuses from a single source, the source should supply you with a Form 1099-misc.Bonuses paid with your typical drf bets m wages, and not separately identified, will be taxed in the same manner as your usual wages.References Photo Credits Stockbyte/Stockbyte/Getty Images.
Lets cover some important points regarding the tax on your bonus.
Losing a significant chunk of your bonus to taxes is a definite bummer to say the least.
Image source: getty images.The first is the percentage method, where a 25 flat tax rate is applied to any wages that are considered supplemental.Try high stakes poker episode list any of our Foolish newsletter services free for 30 days.The employer should also withhold all appropriate federal income taxes, social security taxes and Medicare taxes from the bonus.But if you are going to spend that money on the things you want and don't necessarily need, make sure you account for the taxes that will inevitably be applied to your bonus.Your employer can also choose to treat the bonus as though it was paid with other wages to determine your tax rate.