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wijwijwij t1_j6n3cmd wrote

I think there are two ways for computing taxes on bonuses.

If the bonus was {treated as if} tacked onto a regular paycheck, the dumb withholding algorithim annualizes that one paycheck as if it were standard pay for every paycheck in a full year. That would make it think your income for the year is huge and withholding should be very high.

If that's what happened, you get a refund when you do your taxes, because the actual tax on your overall income isn't as high as the withholding algorithm calculated.

You could adjust a new W-4 to force a little less withholding during rest of the year from each pay check. The steps to do are a little convoluted to describe, so you might let the online tool at www.irs.gov/w4app help you out. You can pretend you had two jobs this year (one from Jan-now that you no longer hold, and one from now-Dec), tell it the total income from the first job and total withholding (including your big check), and the anticipated income from the second job; it'll give you a suggestion about how to set up the new W-4. Probably will have you enter some amount on Step 3 as if you had a "tax credit."

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dragunight OP t1_j6n4eqs wrote

It's all direct deposit so I'm not quite sure, but In my company's payroll software, there are 2 paystubs. 1 for my bonus and 1 for my normal base salary.

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wijwijwij t1_j6n58u5 wrote

Sounds like they're calculating the withholding using the method (b) that is described in Publication 15 on withholding supplemental wages. I guess they can do that with separate checks as long as it's "paid concurrently."

>...Figure the income tax withholding as if the total of the regular wages and supplemental wages is a single payment. Subtract the tax already withheld or to be withheld from the regular wages. Withhold the remaining tax from the supplemental wages.

https://www.irs.gov/pub/irs-pdf/p15.pdf (page 19)

If you don't like the idea of overpaying so much during the year and waiting for refund, consider making an adjustment to W-4 that counters this across the year. It would be a Step 3 adjustment.

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dragunight OP t1_j6n6cnw wrote

My bank direct deposit was just 1 number. The Payroll software has them broken out as separate paystubs, but again I'm not really sure.

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