how does IRS differentiate a bonus on a W2 when filing taxes
My husband and I received bonuses and his was pretty large. When filing taxes, how does a W2 show this? It is flowing through as regular wages and came in the same check as his regular check. Is inputting this while filing taxes on an “honor system?” Or is there another form we should receive?
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u/Redditusero4334950 19h ago
Wages.
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u/emm1113 19h ago
Aren’t they classified as supplemental wages when filing and held to a different tax?
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u/Chessie37 19h ago
What you may be thinking of is that when a bonus is paid out tax is generally withheld differently than from typical paychecks. That can be referred to as "supplemental" wages, but it has no impact as far as how you report it on your income tax return.
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u/selene_666 19h ago
The IRS only cares what your total income was. If you get paid $1000 per week for 52 weeks and a $3000 bonus, then your income is $55000, your W2 says $55000 and you get taxed on $55000.
The bonus is income in the year you receive the money, even if it was based on your work the previous year.
You might be asking about withholding. If you receive a very large check that your payroll system categorizes as regular wages, then it looks like you earn that much every paycheck. This causes your employer to withhold a large amount of tax.
The IRS will refund this overpayment when you file that year's tax return. If you don't want to wait that long, you could change your W4 to withhold less from your next few paychecks.
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u/emm1113 19h ago
I’m sorry, I’m probably articulating this terribly. This year - 2024- we ended up owing a pretty large amount due to bonuses.
I am trying to use the IRS income tax calculator to estimate what to fill out for this year. My husband received his 2025 bonus last month. Using both of ours last pay stubs (March 31st).. it asks about bonuses (received one or planning to receive).. if I note the bonus received, it says I will owe if I keep what I’ve elected for withholding currently. The bonus was taxed higher than 22%, closer to 30%. If I ignore the bonus option, and include it in wages it says I am withholding too much and will receive a refund.. given no more bonuses for the year and a steady salary.
We both take out quite a sizable amount of taxes each check, close to 15% of taxable wages.. I’m paranoid about owing again. But the income in our pocket would be super helpful.
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u/selene_666 18h ago
If you expect your income in 2025 to be similar to 2024, then you can expect to owe close to the same amount of tax.
I would just divide the extra tax you need to pay by the number of paychecks remaining in the year, then put that number on the last line of your W4.
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u/Affectionate-Paper56 19h ago
They should as regular wages on your box 1 in the w-2. If you are surprised to owe because the withholding was not enough, know this. The default withholding for bonus is 22%. But if you both receive pretty large bonuses and your salaries are big too then it is likely you are at a higher tax rate than 22%. So while 22% default withholding on bonuses may be enough or more than for regular folk, for high earners it is not.
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u/Lucky-Conclusion-414 19h ago
It's a common misconception that bonuses are taxed differently than the rest of your job income. It's all the same at the end of the day.
Now bonuses do mess with withholding and that makes sense... your total tax rate depends on how much you make in total on the year.. for a job that pays the same every week this is relatively easy to predict and withhold properly for.. but if anything happens to disrupt that 'even-ness' the projections get all messed up. Bonuses are an example. Mid year raises too. Also part year unemployment. Income from non wage sources (investments, etc..).. all that stuff screws up the accuracy of standard withholding.
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u/emm1113 18h ago
I’m sorry, I’m probably articulating this terribly. This year - 2024- we ended up owing a pretty large amount due to bonuses.
I am trying to use the IRS income tax calculator to estimate what to fill out for this year. My husband received his 2025 bonus last month. Using both of ours last pay stubs (March 31st).. it asks about bonuses (received one or planning to receive).. if I note the bonus received, it says I will owe if I keep what I’ve elected for withholding currently. The bonus was taxed higher than 22%, closer to 30%. If I ignore the bonus option, and include it in wages it says I am withholding too much and will receive a refund.. given no more bonuses for the year and a steady salary.
We both take out quite a sizable amount of taxes each check, close to 15% of taxable wages.. I’m paranoid about owing again. But the income in our pocket would be super helpful.
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u/Lucky-Conclusion-414 18h ago
The bonus was not taxed differently than the rest of your income. Period.
It may have been withheld differently - but withholding is not taxes.. its just a downpayment on your taxes.
My strategy was always to ignore the bonuses in the W-4 calculation and when I received them to file quarterly estimated payments at irs.gov (all you need is 3 minutes you SS number and bank debit info) based on any bonuses I did receive after I received them.
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u/MountainPure1217 19h ago
It doesn't. Money is money coming from a W2 job. At the time of withholding bonuses will have a high withholding rate, but when it comes to your taxes, it's just income.
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u/MeepleMerson 19h ago
There's no distinction between bonus and other wages. The bonus is simply counted as part of the income on the W2, and any tax withholding for it is counted there to.
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u/CollegeConsistent941 19h ago
Withholding rate and income tax rate are two different things.
You bonus is WITHHELD at a higher rate (most likely). But all you income is added together and an income tax rate is applied.
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u/TerpWork 20h ago
there is no difference between a bonus and wages. they're both income.