Remember: Bonus payments are initially taxed at the IRS's supplemental withholding rate of 22%, but this rate is adjustable. On the other hand, regular payrolls treat bonuses as standard wages for taxation.
Running a bonus payroll
- Navigate to the Payroll section and click on "Run payroll."
- From the "More payroll options" menu, choose "Bonus Payroll."
- On the following page, pick the employee(s) for whom this Bonus payroll is intended.
- Enter a work period to display on your employees’ paystubs.
- If you input a period when an employee has asked for time off, their bonus payroll will factor in the time off and provide compensation for it.
- Enter a date when you’d like your employees to receive the payment.
- Choose whether deductions and contributions should be included:
- Block all deductions and contributions: No benefit deductions or contributions will be made, except for 401(k) which cannot be turned off due to plan requirements.
- Make all regular payroll deductions and contributions: All standard benefit deductions and contributions will be processed.
- Please examine the tax withholding rates. If you wish to make changes, click on "Edit rates" located within the withholding rates section.
- Input the bonus amount for each employee, choosing either Gross Earnings or Net Earnings.
- Gross Earnings: The sum your employees earn prior to any tax and deduction deductions.
- Net Earnings: The amount your employees receive on payday after all deductions have been subtracted. This is the money they take home.
- Click on Submit.
Important: In the case where your employee has an ongoing garnishment, it's advisable to reach out to the garnishment authority to determine if there are any specific guidelines for deducting the garnishment from the bonus payment.