A bonus is compensation over and above the amount of pay specified as a base salary or hourly rate. You might want to give bonuses to thank employees or a team for reaching a significant goal, or to improve employee morale, motivation, and productivity.

Intuit recommends you to follow the guidelines outlined in Source-Section 7-Supplemental Wages of Circular E, Employer’s Tax Guide

Pay a bonus

Create a bonus on a regular paycheck
Create a bonus on a separate paycheck

Add a bonus on a regular paycheck

Before you can give an employee their first bonus on a paycheck, you need to add the Bonus pay type to the employee's profile.
If the employee already got the bonus pay (such as in cash), record the payment as a manual check and not as a direct deposit check.

Intuit Online Payroll and Intuit Online Full Service Payroll

Add the Bonus pay type to an employee

  1. Select the Employees tab.
  2. Select the employee's name.
  3. In the Pay section, select Edit.
  4. In Show all pay types section, select Bonus, then OK.

Add Bonus on a paycheck

  1. Select the Payday tab.
  2. Select the employee, then enter the amount in the Bonus field.
  3. Create and approve the payroll.

QuickBooks Online Payroll and QuickBooks Online Full Service Payroll

Add the bonus pay type to an employee

  1. From the left menu, select Workers, then Employees.
  2. Select the employee's name.
  3. In the Employee details section, select the pencil icon next to Pay.
  4. Select Add additional pay types, then Bonus.
  5. Select Done.

Add Bonus on a paycheck

  1. From the left menu, select Workers, then Employees.
  2. Select Run payroll.
  3. Select the employee, then enter the amount in the Bonus field.
  4. Preview and submit payroll.

Create a separate paycheck for the bonus

Here are some of the common reasons for creating a separate bonus check:

  • Control the tax treatment of a bonus or the withholding of retirement account deductions. For example, an employee may want a discretionary bonus to be withheld at 22% supplemental rate for federal income tax.
  • Turn off direct deposit for the bonus check.
  • You are paying the bonus off-cycle, not on a regularly scheduled payday. (You can use a bonus check to pay back wages or underpaid wages.)
  • Your employee has accumulated $1,000,000 or more in supplemental wages and you are required to withhold federal taxes at 37%.
  • Deliver the bonus check as a special event to the employee.

Note: For separate bonus checks, you cannot use the direct deposit to 2 accounts pay method.

Special settings for separate bonus checks

  • Use supplemental tax rates

    Since a bonus is considered supplemental pay, it is subject to the supplemental tax rates. To apply the special federal supplemental tax rate to a bonus, two conditions must be met:

  • Pay the bonus separately from a regular payroll check.
  • Withhold at regular withholding rates on the employee's regular salary.

The federal supplemental tax rate is currently a flat 22%. This special rate may not be the best option to your employees if it is higher than their regular rate. If you want to apply the supplemental tax rate to some employees only, do separate bonus runs. If your state also has a supplemental tax rate, Online Payroll applies the state rate when you select the supplemental rates.

  • Use net-to-gross calculation

There are several reasons to create a separate bonus check with a specified net pay:

  • Employees will receive a certain amount of net pay. For example, you want to give your employee a net check of $100.
  • You pay the employee portion of taxes for the bonus check. When an employer pays an employee's taxes, the amount paid is an employer-provided benefit. The taxes paid on the employer's behalf are also taxable income to the employee.
  • You gave your employee a cash award and need to calculate the taxes and report the amounts through payroll.

Notes:

  • You cannot use net-to-gross together with any deductions (retirement, HSA, or garnishments).
  • If the employee has any additional withholding deducted from each paycheck, it will be subtracted from the net pay during the net-to-gross calculation. To ensure that the net pay on the bonus check is the amount you expect, add the additional withholding to the amount in the Net Bonus field.Example: You want to give your employee a $500 bonus check, but the employee's profile is set up to withhold and an additional $350 in federal taxes each paycheck. To ensure that the net pay on the bonus check is exactly $500, add the $350 to the Net Bonus field (for a total of $850). Then, we will calculate the correct amount on the check.
  • Include retirement account deductions, contributions, and garnishment

    You have the option to include the employee's deduction, contribution, and garnishment in the bonus check but you can not do this along with a net-to-gross calculation.

    For more details, see Set up voluntary payroll deductions or Set up a garnishment.

Create a separate bonus check

Intuit Online Payroll and Intuit Online Payroll for Accountants

  1. Select the Payday tab.
  2. Under Check Type, select Bonus Checks.
  3. Select Go.
  4. Select the applicable settings for the bonus check.User-added image
  5. Select the employee and enter the amount.
  6. Create and approve paycheck.
  7. If you select net-to-gross, the pay stub will list Employee Taxes Paid by Employer under the pay section.User-added image

QuickBooks Online Payroll and Quickbooks Online Full Service Payroll

  1. Select Workers, then Employees.
  2. Select Run payroll, then Bonus only.
  3. Select the applicable settings for the bonus check (see the preceding section for more details), then Continue.User-added image
  4. Select the employee, then enter the Bonus amount.
  5. At the bottom, select edit (pencil) icon beside "Payroll options".User-added image
  6. Select the payroll options you want (see the preceding section for more details), then select Apply.
  7. Select preview and submit payroll.
  8. If you selected As net pay, the pay stub includes Employee Taxes Paid by Employer in the pay section.User-added image

Intuit Online Full Service Payroll

  1. Select Payday, then Bonus
  2. Select Pay Schedule, then Pay method
  3. Select the applicable settings for the bonus check, then Next.
  4. Select the employee and enter the amount.
  5. Create and submit paycheck.
  6. If pay method was paper check, Print check.