Year-End Bonus vs. Regular Paycheck: How Taxes Differ
Year-end bonuses tend to arrive with a bit of sticker shock once the paycheck actually lands — the withholding looks a lot higher than a regular check for the same amount. Here's exactly why, side by side. Regular paycheck withholding A regular paycheck uses your W-4 elections and the standard IRS withholding tables, which spread your annual standard deduction and bracket structure evenly across the year. The withholding is designed to approximate your actual effective tax rate over time. Bonus (supplemental wage) withholding The IRS classifies bonuses as supplemental wages, which employers can withhold using a flat 22% federal rate (for bonuses up to $1 million in a year), regardless of your regular tax bracket. This is simpler for employers to calculate, but it doesn't account for your specific situation the way regular paycheck withholding does. Side-by-side example: $3,000 in one case, split two ways Scenario A: $3,000 added to a regular paycheck as extra base p...