turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

Are incentive payments taxed the same as bonuses? I receive a pretty decent amount of incentive payments if certain metrics are met. Or is this counted as income?

Under a new payment plan at work a sizable portion of new income would be in the form of incentive payments for stuff I already do. They went this route over a pay raise.
x
Do you have an Intuit account?

Do you have an Intuit account?

You'll need to sign in or create an account to connect with an expert.

4 Replies

Are incentive payments taxed the same as bonuses? I receive a pretty decent amount of incentive payments if certain metrics are met. Or is this counted as income?

If it's on your W2 you get taxed on all your income.   Same for 1099Misc.   If you get a 1099NEC for it you also pay self employment tax in addition to regular income tax.

 

Or do you mean the tax withholding taken out of the payments?   

Are incentive payments taxed the same as bonuses? I receive a pretty decent amount of incentive payments if certain metrics are met. Or is this counted as income?

And yes it is counted as income and all your income is taxed. Even your bonuses were taxed as income. So I don't understand your question.   

Are incentive payments taxed the same as bonuses? I receive a pretty decent amount of incentive payments if certain metrics are met. Or is this counted as income?

@mitch-mccom-gmai - it is income just like your ordinary income.... maybe what you are asking about is the withholding on the paycheck itself.  Normally, bonuses are withheld at a flat 22% tax rate, but that is all reconciled when you do your taxes in April.  

 

 

rjs
Level 15
Level 15

Are incentive payments taxed the same as bonuses? I receive a pretty decent amount of incentive payments if certain metrics are met. Or is this counted as income?

If you are an employee (you get a W-2), all payments from your employer are supposed to be included in the wages in box 1 of your W-2. That includes regular pay, bonuses, incentive payments, or any other payment from your employer. They are all treated the same on your tax return.


As others have pointed out, the calculation of the withholding might be different for different types of payments, but withholding is just a down payment on your total tax for the year. On your tax return, all the tax that was withheld during the year is added together and applied to your total tax for the year.


If your employer gives you a Form 1099-NEC or 1099-MISC for the incentive payments, or for a bonus, they are not following the rules. If that happens, post the details when you get your tax forms next January and we'll tell you how to report it correctly on your tax return. You do not pay self-employment tax on income from an employer who gives you a W-2.

 

message box icon

Get more help

Ask questions and learn more about your taxes and finances.

Post your Question
Manage cookies