So...I got quarterly bonuses last year of around $1600-2500 depending on the quarter. I'm not understanding how the taxes work - it seems like more than 50% of it goes right to taxes and that kinda sucks because those seemingly decent bonuses turn into a weeks worth of groceries haha.

Lets go with a quarter where I got $1779 last year.

Payroll said they'd break it up into 3 pay checks so that I didnt get screwed on taxes....but I dont think it actually mattered or helped....

I had 3 payments of $593 that were supposed to be divided between 3 checks
The first 2/3rds were added to 2 of my checks
The 3rd payment the payroll company screwed up and forgot to add it to my check, and since it was the end of the year, they cut a separate check for JUST $593

For the first 2 payments, I figured it out, I ended up with about $290 dollars MORE in each of those checks (in my pocket after $593 was added to my usual salary)....so that's $300ish more in taxes on top of my usual taxes taken out of my check which are quite hefty. So more than half of that was gone

As I said, the 3rd one came as a separate check because payroll forgot to add it to my last check of the year- and since it was the last week in December, they just cut me a separate check so that yearly accounting worked out. This is when I realized that things seemed odd all year.

The check was for the same amount, 1/3rd - $593 and I got $480 of it! Being a separate check like that, it may have made it look like my income was at that level every week and taxed it as if it were a whole check.

Can anyone help me understand this? I've read through google and heard a few explanations but none really seem to match up:

Bonuses are taxed at around 43%
-Okay if this is the case, then why was that third check what it was? And why does it seem MORE than 43% was taken out of the first 2 payments.

You stepped up into a different tax bracket
-I thought this might be the case too, but I don't think I am teetering on the border that close where adding $500 to my check one week is going to bump me up into such a bigger tax bracket. I dont think this one makes sense either.

You're taxed heavily NOW, because it looks like you make that much every check. When you do your taxes, you'll see quite a bit back in your refund since you're not actually in that higher bracket that they taxed you in.
-I was hoping this would make sense but I entered my tax info this weekend, and it doesn't seem like it. I'm not seeing a significantly higher amount for ALL the times that they took a huge chunk of the bonus.

So what's really going on? A separate check gives me almost twice as much in my pocket than adding it to my check....doesnt appear anything was "given back" to me in my tax return. I am very confused...none of the explanations seem to match what's really happening. Just wanted to get some HA thoughts/advice/knowledge before talking to payroll about it here. I'd like to have some facts and not just walk in blindly.

Thanks!

Cliffs: Bonus added to check = more than exact amount issued as a separate check. Where's the dough??!!!

 

I'm no accountant but my understanding is that payroll determines the amount of tax you pay per check, regardless of anything else. So you aren't assigned to a tax bracket or anything, it all depends on the single check you're getting. A check with an extra $593 on it more than likely does put you into a higher tax bracket. There are several, and if you're pushed into one your entire check will be taxed at that level which can bring the total amount down to barely more than your check would have been before the bonus.

As far as tax time goes, that's all calculated based on all your earnings for the year vs. the total taxes you've paid after deductions, etc. have been figured into it. Since you're more heavily taxed on a check with a bonus you'll theoretically get more back from those checks than from a typical check, but that's never seen directly.