Should My Employer Tax My Bonuses?

Question

I work in Colorado for a Mom & Pop business that has been operating for 40 years. The sales team does not work on commission,we all work as a team. A few years ago they started to give us all a sales bonus based on weekly sales,in cash. Last year they told us that they were no longer going to give us this bonus in cash but rather included in our paycheck but that they would not be taking out federal taxes only social security,on the bonus amount only. Is this legal? And if not,how should I go about talking to my employer about this?

Answer 1

Yes, of course they tax bonuses. Legal and legally mandated by law. The way they WERE doing it was illegal (as well as illegal for you not to claim it on your tax return). They should be withholding income taxes as well.

Answer 2

Bonuses to employees are considered income and are taxable to the employee. You must withhold income taxes and FICA taxes on employee bonuses (unless the employee is over the Social Security maximum for the year.

How to Deduct Employee Gifts, Awards, and Bonuses

https://www.thebalancesmb.com/how-to-deduct-employ...

Answer 3

It's income so they should be deducting taxes.

Answer 4

Not the way it's supposed to be done, but they are trying to put more money in your pocket. Bonuses are supposed to be taxed a flat 25% for federal income tax + social security and medicare. They also should be withholding state tax. They should never have paid your bonuses in cash and therefore "off the books".

Answer 5

Do not talk to your employer about it. It is not up to you. They have to take out deductions. That's the law. Handing you cash was not too smart because it looks like there was a theft. There would be no accounting for the money. You can bet that an accountant set them straight.

Source(s): Certified Paralegal, with 25+ years' experience & with Employment law experience.

Answer 6

Yes, federal and state (if you have state income tax) should be withheld from the bonus. Bonuses are considered supplemental income and the federal tax withholding is 22%. It was 25%, which is what the rate was before the 2018 changes to tax rates.

Answer 7

Your employer DOES NOT tax anything. They are legally REQUIRED to withhold taxes on behalf of the GOVERNMENT.

Answer 8

bonus is part of pay and pay is subject to tax (including social security, federal income and state income)

Answer 9

1st of all, I would guess that most if not all of the employees did NOT claim the cash when they filed tax returns; 2nd - I am not 100 % certain, but am fairly sure that any funds paid by check need to have all deductions taken out of them; in other words, an employer can't decide to only take deductions for some items but not others

Answer 10

Yes, that's required.

If it's reported on your paycheck then taxes are going to be withheld automatically.

Bonuses are taxed at the maximum tax rate, so you'll probably get a refund when you file your 2018 taxes next year.