It comes down to whats called supplemental income. Although all of your earned dollars are equal at tax time, when bonuses are issued, theyre considered supplemental income by the IRS and held to a higher withholding rate. Its probably that withholding youre noticing on a shrunken bonus check.
Can I claim tax back on my bonus?
Put simply, yes; your bonus is taxed the same way as your salary. You pay income tax and national insurance, assuming you take it as cash. The primary way to avoid paying tax is to sacrifice your bonus into your pension.
How does bonus get taxed?
When you pay your employee a bonus, this is treated by the ATO as paying wages. Because of this, bonus payments are liable for payroll tax. For example, in NSW the payroll tax rate is 5.45% for businesses exceeding the payroll tax threshold of $1,000,000 annually.
Do you have to pay a bonus back?
– Bonus Payback in a Different Year As always, since overpayments are regarded as paid upon receipt, they must reflect in the employees income upon receipt as well. Following our example above, youll need to pay back the gross amount of the bonus ($20K) instead of the net ($15K) to your employer.