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Your payment penalty on employee bonus

How can I avoid an underpayment penalty on my taxes? I received a substantial employee bonus last year, and obviously my withholding was insufficient… What would you suggest for this year‘s bonus to avoid a high tax liability? The amount that I owe in federal tax was nearly half the bonus itself!

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2 Replies

Your payment penalty on employee bonus

I have the same question.

Linda-SG
Employee Tax Expert

Your payment penalty on employee bonus

You can ask the employer to withhold taxes on the bonus.   

Congrats on the bonus(!), but it most likely pushed you into a higher tax bracket, resulting in more tax. 

Another option is to use a calculator, such as TurboTax's W-4 CalculatorTurboTax's Tax Caster tax calculator, or https://www.irs.gov/individuals/tax-withholding-estimator  and pay estimated taxes when you receive the bonus (if they haven't withheld taxes).  You can pay estimated tax payments easily at IRS Direct Pay.  You may want to see this article to understand some of the changes for 2024:  The IRS provides tax inflation adjustments for tax year 2024. That IRS page will show you the tax brackets for your filing status for 2024.  

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