QuickBooks Desktop allows you several options to pay bonuses to employees.
Choose the option that best fits your bonus situation:
- Pay a bonus on a regular paycheck
- Pay a bonus on a separate paycheck
- Pay employees with a gift certificate or cash bonus
Bonus Taxation options:
Once the method of paying the bonus is chosen, you must consider the taxability of bonuses. The net pay on a bonus check can drastically change based upon the selection and disbursal of taxes and whether the bonus is on the same or separate check than the regular payroll wages.
Intuit recommends you follow the guidelines outlined in Source - Section 7 - Supplemental Wages of Circular E, Employer's Tax Guide.
Bonus checks are subject to normal tax deductions, including state and federal taxes. However they may be subject to supplement tax rates for federal and state withholding. QuickBooks does not automatically calculate the state or federal withholding supplemental rate on bonus wages. To calculate the supplemental rate for state or federal withholding, you must manually change the amounts calculated on the paycheck.
- There is a federal supplemental wage rate of 22% for supplemental wages identified separately from regular wages: "withhold a flat 22% (no other percentage allowed)." If the supplemental wages are more $1 million, withhold using the 37% rate. Source - Section 7 - Supplemental Wages of Circular E, Employer's Tax Guide.
- Some states also have supplemental wage rates, if you are unsure of the state s individual requirements for the use of supplemental rates, please contact your tax/financial advisor or your state.
- Calculate withholding taxes from a different pay schedule when creating the check (i.e., annually instead of weekly to reduce the amount of taxes withheld. To do this, the employee record would need to be edited to change the pay frequency prior to creating the paycheck).
- Calculate withholding taxes from the supplemental tax rate and override the withholding amount on the paycheck (22% federal supplemental rate).
- Allow QuickBooks to calculate withholding taxes at the standard tax rate within the paycheck.
- Allow QuickBooks to calculate withholding taxes at the standard tax rate within the paycheck with and without the bonus amount then override the withholding amount on the paycheck.
Note: QuickBooks Desktop Payroll Assisted customers: Please contact Payroll Support at 888-712-9702 if bonus check needs to be reported in a prior quarter or year. After you create bonus checks, you need to send them to QuickBooks Desktop Payroll Assisted for processing. You can create both regular paychecks and bonus paychecks in a single payroll, as long as both the bonus checks and paychecks have the same date; or you can create and send them separately. The usual deadline for sending payroll applies.