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Bill Hines, Retirement Planner
(@hines202)
Trusted Member Customer
Joined: 11 months ago
Posts: 89
Topic starter  

Bonuses are treated as supplemental income and taxed at the federal level at 22% (normal ones, not 7 figure-land). States may or may not tax. I have a client that gets a pretty large six figure bonus and was trying to find a way to put this in. Using it as regular employment income would be off if the tax rate for that year is anything but 22%. Is there a way to do bonuses?

Bill Hines
Investment Advisor/Financial Counselor/Retirement Planner
Emancipare Investment Advisors LLC
https://emancipare.com
bill@emancipare.com


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Stuart Matthews
(@smatthews51)
Member Admin
Joined: 1 year ago
Posts: 248
 

Bill,

PRC2021 does not support this and I have to admit that I wasn't aware of this rule. I'll investigate implementation in the 2022 model and get back to you.

Stuart


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Bruce M
(@hawks28)
New Member Customer
Joined: 5 months ago
Posts: 1
 

Hello, my understanding is that bonuses are taxed as ordinary income. The withholding is at 22%, but the final tax will be whatever it will be with the bonus just included with other income. I think there are actually two options for withholding related to bonuses - (1) 22% method or (2) including with regular wages and withholding accordingly. I think #2 is fairly rare and most employers use #1.

In either case, I believe the bonuses are included with regular income for tax purposes and, as a result, I am guessing Pralana handles the actual tax calculations correctly.


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Stuart Matthews
(@smatthews51)
Member Admin
Joined: 1 year ago
Posts: 248
 

@hawks28 Thanks, Bruce. I just did a little more checking on this myself and I think you're right. Bill, please chime in if you disagree and steer us to some supporting information. Thanks, Stuart!


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Bill Hines, Retirement Planner
(@hines202)
Trusted Member Customer
Joined: 11 months ago
Posts: 89
Topic starter  

@smatthews51 I also believe this is correct, after looking around. It's really hard to find clear, definitive answers on this one! It had stumped me at first, because I'd never heard of the 22% thing either. So, this makes sense. Whew, more work saved for the 2022 version 🙂 Can't wait to check it out.

Bill Hines
Investment Advisor/Financial Counselor/Retirement Planner
Emancipare Investment Advisors LLC
https://emancipare.com
bill@emancipare.com


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Stuart Matthews
(@smatthews51)
Member Admin
Joined: 1 year ago
Posts: 248
 

@hines202 Bill, thanks for the follow-up! I'll happily scratch it off my to-do list.


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