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I've been offered a retention bonus if I remain at my job until 6/15/2017 which according to the offer document is subject to 409A. Will this be taxed a regular rate or

am I subject to an additional 20% because it will be paid in current year?
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DianeW
Expert Alumni

I've been offered a retention bonus if I remain at my job until 6/15/2017 which according to the offer document is subject to 409A. Will this be taxed a regular rate or

If there is a payment that is specifically designated as a bonus then the employer is required to withhold according to the following rules.

Supplemental wages are wage payments to an employee that aren't regular wages. They include, but aren't limited to, bonuses, commissions, overtime pay, payments for accumulated sick leave, severance pay, awards, prizes, back pay, retroactive pay increases, and payments for nondeductible moving expenses. Other payments subject to the supplemental wage rules include taxable fringe benefits and expense allowances paid under a nonaccountable plan. 

  • Withhold a flat 25% (no other percentage allowed), or
  • If paid with regular wages they can determine the amount of required federal withholding based on the gross amount if it is more. (a condensed version of another option)
  • For more information on the employer requirements on bonus pay you can use the link here.
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