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| *The Commerce Journal>>>Other Taxes |
On a salary/ commission pay plan? |
I hear that on bonus checks, you are taxed at 40%. Im single, and independent, would I be getting most of that back at tax time? The withholding may well be higher than other forms of payment but the tax on that money at the end of the year is the same. Your employer might deduct at the higher rate for bonus checks and commissions, but at tax time it will all be taxed at the same rate as salaries. I can't say you'll get MOST of it back, that would depend on your total income from the year, but you should get quite a bit back if 40% is withheld from any large amount of your pay for federal income tax, since the top tax rate is 35% and you have to have several hundred thousand dollars worth of income to reach that rate. You have to pay your social security/medicare on any income that is considered contract labor as well as your taxes. Social security is paid on your net income (form C) so that you can save receipts for any expenses involved in your commissions as well as your mileage. You need to give more info. Bonuses and irregular payments are subject to withholding at a statutory rate, normally 25%. You can request a higher withholding rate but not a lower one. Bonuses are also subject to SS and Medicare tax along with State income tax if your state levies one. Depending upon your state's income tax rates and withholding rules, it's possible for the total withholdings to add up to nearly 40%. Whether you get any refund will depend upon your total tax liability and how much was withheld during the year. If you're in a 25% tax bracket, you would not get any of the 25% withheld on bonuses back. |
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