Everything You Need to Know (Taxwise) About Year-End Bonuses
Bonuses are treated like other pay
They are subject to income tax withholding, FICA, and FUTA taxes in the same manner as regular pay. In figuring the cost of a bonus to you, factor in employment taxes. For example, if an employee earning $65,000 is given a $5,000 year-end bonus, the cost of that bonus to you is $5,382.50 ($5,000 + $382.50 employer share of FICA tax).
When withholding income taxes on the bonus (called “supplemental pay” by the IRS), there are several options.
More from the Small Business Administration