Are they asking to withhold medicare and social security taxes, or also income taxes.
They should not be withholding additional income taxes, because whatever income tax you pay or not is determined on your tax return, and if they did over-withhold income tax, you would get it back as a refund.
But, I can see them trying to withhold social security and medicare tax, because the bonus was "compensation" for work performed, even though it was paid in advance. Whether you are properly subject to those taxes is outside my competency, so we need to wait for @pk .
I will suggest, however, that if the employer does withhold social security and medicare tax (they don't accept any argument you can offer that you are exempt with regards to the bonus), you can attempt to request a refund by filing form 843. This is separate from your tax return and not included with Turbotax, you would have to prepare it by hand and file by mail.
