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Old 04-16-2019, 07:52 AM
 
46 posts, read 13,859 times
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People at my job are saying that they increase the dependents as high as 9 to get more money for their bonus and they do this 1 week before they get it and change it back to what it was after they got the bonus. Is someone supposed to increase the dependents for federal or state or both? And does this affect their tax return even though they increase dependents up as high as 9 but only for 1 week? Before this they are saying they had it as low as 0 and 1.
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Old 04-16-2019, 08:02 AM
 
1,207 posts, read 1,047,686 times
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You can adjust your withholdings at any time during the year. There's nothing illegal about it.

I don't understand how that would affect a bonus. I've never heard of one tied to take home pay the week it's awarded.
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Old 04-16-2019, 08:04 AM
 
Location: Western Washington
8,947 posts, read 8,406,922 times
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A person can be fined $500 for making a false withholding statement. https://www.irs.gov/taxtopics/tc753

It is unlikely though.

At the end of the year, it will make no real difference, as taxes are paid on gross income, not on weekly withholding declarations. Your coworkers will either get a lower refund, or owe more.

I wouldn’t worry about this.
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Old 04-16-2019, 08:09 AM
 
46 posts, read 13,859 times
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I guess it's not worth doing it then but they say it doesn't affect tax return and they always get paid more for the bonus.
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Old 04-16-2019, 08:12 AM
 
9,778 posts, read 16,983,142 times
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What "bonus" are you talking about? Do you mean a tax refund?
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Old 04-16-2019, 08:12 AM
 
Location: OHIO
2,353 posts, read 1,079,067 times
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Maybe their bonus is taxed less if they do that? I really don't know.
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Old 04-16-2019, 08:16 AM
 
Location: Greensboro, NC
645 posts, read 241,207 times
Reputation: 1546
Their logic leaves me scratching my head - my only guess is it helps them short term. When it comes to filing their tax returns, wouldn't it balance out?
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Old 04-16-2019, 08:24 AM
 
Location: Western Washington
8,947 posts, read 8,406,922 times
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Quote:
Originally Posted by crd08 View Post
Maybe their bonus is taxed less if they do that? I really don't know.
That would be the rational for doing it.

Bonuses are a bit weird when it comes to taxes, and how they are taxed depends n decisions made by your employer. The employer can withhold at a flat rate, or at the rate indicated by your exemptions. Your employer apparently does the latter.

Because bonuses are often many times the size of s standard weekly (biweekly, whatever) check, the IRS tax tables dictate a higher level of withholding, because it looks like you are earning more money. As an example:

If you earn $1000/week, you are withheld as if you earn $52,000/year.

If you get a $5000 bonus, and they add it to your weekly pay, you are withheld as if you earn $312,000, year. That is obviously a higher withholding rate, so it will look really high.

At the end of the year, when you file taxes, no matter what was withheld for your bonus, you will be taxed as if you earned $57,000 that year, because that is the actual gross wage. This means if a lot was withheld, you will get a bigger refund.
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Old 04-16-2019, 08:34 AM
 
1,226 posts, read 522,472 times
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I calculate my allowances based on what I think I'm going to make full year including assuming full bonus. An allowance of 4 had me oweing only about 850 to feds when I did my taxes
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Old 04-16-2019, 09:03 AM
 
Location: Los Angeles
12,184 posts, read 10,359,091 times
Reputation: 33210
They are doing this so they don't get taxed as hard on their bonus. In the end it's a wash. Their taxes next year are what they are. If they had not done this they may have gotten more back next year or owed less. But they choose to take some $ now as opposed to waiting a year.
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