{"id":3217,"date":"2019-06-24T12:15:11","date_gmt":"2019-06-24T16:15:11","guid":{"rendered":"https:\/\/keysolutions.us\/blog\/?p=3217"},"modified":"2019-06-24T12:15:30","modified_gmt":"2019-06-24T16:15:30","slug":"action-steps-needed-if-you-receive-a-bonus","status":"publish","type":"post","link":"https:\/\/keysolutions.us\/blog\/action-steps-needed-if-you-receive-a-bonus\/","title":{"rendered":"ACTION STEPS NEEDED IF YOU RECEIVE A BONUS"},"content":{"rendered":"\n

IRS Announces New Withholding Rate on Bonuses Paid to Employees \u2013 Action Steps Required To Avoid IRS Underwithholding Penalty<\/strong><\/p>\n\n\n\n

<\/p>\n\n\n\n

The Good News<\/strong><\/p>\n\n\n\n

A company bonus paid to an employee is great news \u2013 it means more money in your wallet. <\/p>\n\n\n\n

The Bad News <\/strong><\/p>\n\n\n\n

As with any form of compensation an employer pays to an employee, income tax withholdings (federal, state and local) are required. The amount of federal tax withholdings is dependent upon whether the employer includes the bonus in the employee\u2019s regular paycheck or in a separately issued bonus check. <\/p>\n\n\n\n

If the employer issues a separate bonus check, the IRS requires that such supplemental payments have a federal tax withholding rate of 22% (IR-2019-88). If the bonus is included with your normal paycheck, then your Form W-4 withholding allowances controls the taxes withheld. <\/p>\n\n\n\n

Day of Reckoning<\/strong><\/p>\n\n\n\n

When the current year tax return is filed (usually by April 15 of the following year), if those bonus withholdings resulted in you overpaying your taxes, then you will recover those overpaid taxes when you file Form 1040. You may find this undesirable because you have given the IRS an interest-free loan. <\/p>\n\n\n\n

If your bonus withholdings were too low, then you will not only\nowe the IRS a payment come April 15, but you may also have to pay a penalty for\nfailure to pay sufficient taxes during the year. <\/p>\n\n\n\n

Tax Planning Tip #1<\/strong>: <\/p>\n\n\n\n

After the bonus is paid, provide your tax professional with your year-to-date pay stub and ask that s\/he provide you with a projection of your current year taxes. If the finding is that you will be significantly overpaid, then a revised W-4 can be submitted to your employer to have fewer taxes withheld over the remainder of the year to get you closer to a break-even position. If you are significantly underpaid, again a revised W-4 can be submitted to your employer. <\/p>\n\n\n\n

Some\ntaxpayers do not realize that bonuses can create an underpayment situation for\nthem. Assume that your effective tax rate is 37%. If the bonus payment is\nwithheld at 22%, you can readily see that an underpayment situation may\ndevelop. <\/p>\n\n\n\n

Tax Planning Tip #2:<\/strong><\/p>\n\n\n\n

If there\nis a significant balance due, you have two options. You can provide your\nemployer with a revised W-4 to increase your withholdings during the remainder\nof the tax year to get you closer to a break-even position. You can also remit\nan estimated tax payment (Form 1040-ES) to the IRS to pay the shortfall. <\/p>\n\n\n\n

We prefer\nthe former because W-2 tax withholdings are considered ratably made throughout\nthe calendar year, whereas an estimated tax payment is credited to your account\non the date paid. For example, assume you receive a bonus payment in January\nbut that you don\u2019t meet with your tax advisor until May and then remit the\nestimated payment. Since the estimated tax payment was not made on or before\nApril 15 (the first due date for making an estimated tax payment), you may have\nunderpaid your taxes in the first quarter and be subject to an underpayment\npenalty. <\/p>\n\n\n\n

Tax Planning Tip #3:<\/strong><\/p>\n\n\n\n

Change your mindset about paying income taxes. Rather than being reactive and wondering how to reduce your taxes in the waning days of the tax year, be proactive and consult with your tax advisor during the year to discuss life-changing events and changes to your financial situation. <\/p>\n\n\n\n

If you would like to discuss your business or personal tax planning<\/a>, tax preparation<\/a> and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601<\/a> today to make an appointment at our Exton PA CPA office<\/a> to discuss your situation. You can also schedule a consultation at Click Here<\/a>. <\/p>\n\n\n\n

Copyright \u00a9 2019 Keystone Financial Solutions, Inc.  All rights reserved.  BE SURE TO READ THE DISCLAIMER PAGE: Content in this blog is for educational purposes only and should not be considered as the rendering of tax, legal or investment advice. The publisher of this blog makes no representations as to the accuracy or completeness of any information herein, will not be liable for any errors or omissions, and shall not assume liability for any losses, injuries, or damages from the display or use of this information.<\/strong><\/p>\n\n\n\n

About F. Bryan Haarlander, EA, CTRS:<\/strong><\/p>\n\n\n\n

Bryan\nHaarlander is an IRS licensed Enrolled Agent and who owns and operates a\nspecialized tax services firm serving clients in the western suburbs of\nPhiladelphia, PA, which includes the cities of Chester Springs, Coatesville,\nCollegeville, Devon, Downingtown, Exton, Frazer, King of Prussia, Paoli, Philadelphia,\nPhoenixville, Pottstown, Radnor, Reading, Wayne, West Chester in Berks,\nChester,  Delaware, Montgomery and\nPhiladelphia Counties, as well as clients in Delaware, New Jersey, New York and\nthroughout the continental USA. <\/p>\n\n\n\n

A Certified Tax Resolution Specialist, Bryan is well-known for his IRS tax resolution expertise and his book How to Resolve Your IRS Tax Debt Problems. <\/strong><\/a><\/em><\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

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IRS Announces New Withholding Rate on Bonuses Paid to Employees \u2013 Action Steps Required To Avoid IRS Underwithholding Penalty The Good News A company bonus paid to an employee is great news \u2013 it means more money in your wallet. The Bad News As with any form of compensation an employer pays to an employee, […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[3],"tags":[207,132,69,73,208,63,33,77,34,21,64,71,31,72,66,23,41,65,32,40,39,67,68,38,70,201,200,202,151,37,36,35,150,42,74,28],"class_list":{"0":"post-3217","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-irs-tax-planning-ideas-tips-news","7":"tag-1040-es","8":"tag-accuracy-related-penalty","9":"tag-audits","10":"tag-bankruptcy","11":"tag-bonus-payments","12":"tag-bryan-haarlander","13":"tag-chester-county-cpa","14":"tag-estimated-tax-payments","15":"tag-exton-accountant","16":"tag-exton-cpa","17":"tag-f-bryan-haarlander","18":"tag-first-time-abatement","19":"tag-frank-haarlander","20":"tag-innocent-spouse","21":"tag-installment-agreements","22":"tag-irs","23":"tag-irs-tax-debts","24":"tag-irs-tax-payments","25":"tag-keystone-financial-solutions","26":"tag-offer-in-compromise","27":"tag-oic","28":"tag-partial-installment-agreements","29":"tag-penalty-abatement","30":"tag-philadelphia-cpa","31":"tag-reasonable-cause","32":"tag-reasonable-compensation","33":"tag-s-corporations","34":"tag-self-employment-taxes","35":"tag-tax-adviser-near-me","36":"tag-tax-blog","37":"tag-tax-expert","38":"tag-tax-planning","39":"tag-tax-professional-near-me","40":"tag-tax-resolution","41":"tag-w-4","42":"tag-west-chester-cpa","43":"entry"},"aioseo_notices":[],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9W9tf-PT","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/posts\/3217","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/comments?post=3217"}],"version-history":[{"count":11,"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/posts\/3217\/revisions"}],"predecessor-version":[{"id":3257,"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/posts\/3217\/revisions\/3257"}],"wp:attachment":[{"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/media?parent=3217"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/categories?post=3217"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/keysolutions.us\/blog\/wp-json\/wp\/v2\/tags?post=3217"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}