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I don't do our payroll, but in a similar situation years ago it was explained by our payroll company this way:
Your pay period tax withholding is calculated at a rate that assumes you make that much every pay period of the year. So if you get a bonus that would bump you into the 37% rate if you got it every pay period, they calculate tax withholding at the 37% rate for that period. If at the end of the year your income puts you at, say, the 15% rate, the extra you paid is refunded by the IRS.
That's why we pay all our bonuses at the end of the year. No reason to give Uncle Sam any interest free loans.
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Last edited by wdfifteen; 03-17-2013 at 01:08 PM..
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