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Bonus! » From: Virginia Beach, VA Dear TaxMama: Are bonus's taxable? We are supposed to receive X amount off of each service agreement we sell to customers, and I was wondering since they are tax'd on this, are we supposed to be, too? Thank you. Mike Uh Mike, That's income to you, right? Think - Congress, wants tax money. Lots of it. If you receive it, they want their cut. In fact, it's even wages - just, a more nebulous kind of wages. (You don't know how much, until you get it.) You bet you're taxed. Besides, if they didn't treat it as wages, you'd have to report it as freelance income and pay both halves of the Social Security. Right now, as an employee, you only pay 7.65%. If this were paid as freelance income, you'd have to pay 15.3% additional on that money - besides the income tax. Your real question is - how come they take such a big chunk of withholding from this check? Talk to your payroll department and see if they will accept a Form W-4 from you JUST for the bonuses. Fill it in as 9 dependents. They'll take a lot less out. Right now, those checks are treated as unscheduled payments. One shot deals. They are taxed at the highest rate in the tables. So go clear that up with your payroll folks. Ok? (Yes, your employer is taxed on the income. But they deduct what they pay you. So, that income is only taxed once.) Best wishes, Eva Rosenberg Your TaxMama

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