If you receive a bonus it is usually a cause for celebration, at least in the short term. Whether you receive a bonus on a contractual basis, as a performance award, or for an end-of-the-year perk, it is important to understand how they may impact your taxes.
First, any bonuses you receive are taxable at the federal, state, and local levels (depending on your specific tax nexus). Be sure that you check what tax obligations you have in each of these areas.
Next, be aware that federal tax withholding is mandated at 22% for bonuses because they are treated like supplemental income. This tax rate will also apply to Social Security and Medicare taxes based on the bonus amount. You may owe less or more tax, depending on your total taxable income and other tax implications which will affect your marginal tax rate.
The nuances of tax payments on bonuses, similar to restricted stock units, can become confusing. If you do have questions regarding tax withholding or reporting for bonuses you have received, it may be beneficial to talk to a tax professional.