Bonus Run Checklist
Bonuses are a great way to reward employees and require special considerations for payroll processing. Considered "supplemental wages" by the IRS, bonuses must comply with payroll tax laws.
Watch our short video for an overview of considerations and tax implications of issuing bonuses and special payroll runs:
If you are planning to issue bonuses, contact your ASAP account manager with the following information so we can properly process your bonus payments:
- What is the "check date" for issuing the bonuses?
- Is the bonus a secret? Are you planning to surprise employees with bonuses by handing them a physical check?
- Should the bonuses be paid with the employee's standard wages or on a separate check?
- If you pay a bonus on a single check along with regular wages, you can use the employee's W-4 election to dictate the withholding. However, if you issue the bonus as a supplemental wage payment separate from the employee's regular wages, the IRS says to withhold federal income taxes at a rate of 22%. For additional guidance, refer to Taxing a Bonus or Commission.
- Are the bonus payments based on "gross before tax" or "net after tax" amounts?
- TIP: If amounts are greater than a few hundred dollars, we recommend you shy away from the "net bonus" method as it's more complicated to implement.
- Do you have a 401(k), SIMPLE or other retirement plan? If so, your plan may require that you still pull deferred contributions, as well as company match, from the bonus. Refer to your plan administrator for assistance or clarification.
- Would you like the bonuses paid as a direct deposit or live check?
- Any special delivery needs or other instructions for this run?
- Do you want to include a special message on the pay stub?
When in doubt, just shoot us an email and we can go through these items with you.