From CNBC:



Some workers may find their year-end bonuses smaller than expected due to higher tax withholding on bonus income. Typically, employers withhold tax from bonuses at a flat 22% federal rate, which may be higher than the taxpayer’s actual income tax rate, leading to a smaller net bonus amount. Additionally, bonuses may also be subject to state and local income taxes, as well as Social Security and Medicare payroll taxes.

However, the high tax withholding on bonuses may mean that workers are due for a tax refund when filing their annual tax return. This can be a silver lining for those who see a smaller bonus check than they were anticipating. On the other hand, higher earners may end up owing the IRS more money at tax time if their bonus was withheld at a flat 22%, particularly if they are pushed into a higher income tax bracket by a large bonus amount.

Overall, the tax withholding on bonuses may result in smaller net bonus amounts for some workers, and may affect their tax situation when filing their annual tax return.



Read more: Does the tax on your year-end bonus check seem high? Here’s why