What is Bonus?

Bonuses are supplemental wages paid in addition to regular compensation. The IRS treats bonuses as supplemental income, which can be withheld at a flat 22% federal rate (37% for amounts over $1 million) OR using the aggregate method (adding the bonus to regular wages and calculating withholding on the total). Many employees are surprised to see a large tax bite on their bonus check — this is normal and usually evens out when filing taxes.