Photo by 401(K) 2013
Are you a straight up salary kind of guy or gal? Or do you have a base salary and love it when the commission checks roll on in? Perhaps you are salary and get a bonus every so often. Whatever your case may be, all types are taxable. I mean of course they are! Good Ol’ Uncle Sam! The truth is, both commissions and bonuses are taxed differently than a simple salary. They are taxed as supplemental wages and the amount withheld is not the same.
Bonus Checks
A majority of your bonuses earned will be combined with your salary to make a grand total to be reported on your W-2 form. This amount will show in Box 1 on the W-2 form. However, if bonuses are paid in property or items rather than cash or check then you can receive under $1,600 tax free. This is only if your company has a plan that qualifies though. This is something you would have to ask your company. No matter what position you hold, even safety-related bonuses can be taxable if 10% or more of the employees are given this bonus.
Commission Checks
Your commission income is included in Box 1 of your W-2. The commission income is to be reported on your tax return just the same. No matter how you receive your commission, you are taxed in the year it is paid to you. Therefore, if you get commissions in advance, then you are taxed in that same year. It is all about when payment is received on your part. Not when the work is done.
What You Really Want To Know
Now, no matter what way your employer withholds taxes on commissions or bonuses, you will notice that the more you make, the more money that is withheld. Keep in mind all that is withheld is simply an estimate of what is owed to the IRS. You might end up getting some of it back. You will have a better idea of what you owe or what kind of refund you will receive once you reach the end of the tax year and do your tax return with all of the final numbers. We are getting closer to that time of the year.
Jolly tax season!
Yours truly,
www.checkissuing.com
No comments:
Post a Comment