If included in the W-2, are you saying it's included in box 1 of the W_2? If not, then where on the W-2? I would expect it to be included in box 1 since that box label includes the words "other compensation" in it.
If included in box 1, then taxes are being withheld on the additional money, based on the information you provided to the employer on the W-4. But you have several choices on what you can do for 2023 and beyond.
1. Submit a new W-4 to your employer and lower the number of exemptions so the employer will withhold more from each paycheck. There's also a place on the W-4 where you can have an additional amount withheld from each paycheck, be it a fixed dollar amount or a percentage of each paycheck.
2. Make at least quarterly tax payments yourself, directly to the IRS. (The state too, if applicable to you). If you send the IRS 20% of your gross untaxed earnings each quarter, then come tax filing time if it doesn't result in a refund, chances are good that any additional tax you owe will be well under $1000. This will avoid the underpayment or under-withholding penalty, if what you owe is less than $1K.
Now I'm self-employed. So I do option 2 above and send the IRS 20% of my gross earnings each quarter. For me come tax filing time, I am always within $1K of my tax liability and have been for the last 15 plus years. For the last two years, I ended up owing the IRS additional money and what I owed each of those years was actually less than $500. So I just wrote the check and was done with it.
In prior years where I got a refund, it's always been somewhere between $500 and $1000, and for me, the lower the refund the better. Means I'm not letting Uncle Sam use to much my money interest free, before they have to pay it back to me.
