Your employer is probably using the percentage method rather than the aggregate method
there is a simple rule to avoid penalties even though you might end up owing come 4/15
- The percentage method: Many employers choose the percentage method for its simplicity. Using this method, your employer withholds a flat 22% federal income tax rate from your bonus pay (assuming it’s under $1 million), regardless of your tax bracket. Any amount over $1 million gets hit with a bonus tax rate of 37%, and your employer has to use the percentage method if your bonus exceeds $1 million.
- The aggregate method: Using this method, your employer adds your annual bonus with your regular income in one lump sum, and you’ll have taxes withheld at your normal rate, depending on your tax bracket.
the simple rule to avoid penalties is that withholding for the year must equal or exceed 100% of your prior year taxes. That jumps to 110% if your prior year AGI was over $150,000
different rules may apply for state income tax purposes.
if you do not like owing discuss with your employer how to go about having extra taxes withheld from your bonus. if need be 50%
