Originally Posted by Alspa14
I'm already in the 25% tax bracket, that's why I didn't figure it would save me any money to combine the two.
additionally I want to reiterate what they are trying to do. They said they'd pay $10,000. they want to send the entire $10,000 directly to my loan servicer. and then since it is subject to taxes take the taxes out of my earned income over the next year. They do not want to tax it initially and send the net. both methods we discussed involve taxing up front and sending the NET to the loan servicer not the full $10k is this not correct?
I'm already in the 25% tax bracket, that's why I didn't figure it would save me any money to combine the two. ==.basically, regardless of your marginal tax rate, your ER may choose one of the two methods as said previously, and to save you any money( I guess you mean to pay less tax, you may talk to yur ER to add the bonus payment to the most recent regular income payment, determine the standard withholding based on tax tables and the sum of the two payments, subtract the amount already withheld from the most recent regular income payment, and withhold the rest from the bonus. This method gives you higher take pay as said previously. However you can not, aslong as your receive the bonus, avoid reporting the bonus money on your W2 , as part of your gross income.
additionally I want to reiterate what they are trying to do. They said they'd pay $10,000. they want to send the entire $10,000 directly to my loan servicer. and then since it is subject to taxes take the taxes out of my earned income over the next year. They do not want to tax it initially and send the net. ========>>>>>>>>> I am not sure what they do however, asyou know, the bonus is reported for the year in which it is PAID. If your ER promises you the bonus next year, you won't have to report it until next year on your return;your ER can withhold income tax from any bonus. Any withholding will be based on a form W-4 which you filled out, showing exemptions and other information. The amount withheld will be included in Box 2, federal income tax withheld. It will be included with withholding from wages or other compensation and not reported separately.
both methods we discussed involve taxing up front and sending the NET to the loan servicer ========>>Correct as said previously ; they are typical methods being applied by an ER. Any bonus payments from your ER are included in your W2.There's no separation of bonus income from other types of taxable wages. The ER adds it to this total and enters it on Box 1 of the form . Or , if your ER meets certain conditions, they are allowed to withhold at a flat rate of 25%; If you receive a separate bonus check, your ERcan choose to withhold a flat 25 % if your supplemental wages,i.e., your bonus, will total less than $1 M for the year. The IRS does not allow any other percentage. If your ER expects that your supplementary wages will total more than $1M, they must withhold 35 % of your bonus pay or use the highest tax bracket you fall into for the year to calculate your withholding. While it might seem that you will pay less if your ER uses the aggregate method and computes the tax based on your W-4 information, that is not always the case. For example,assume that if you are married and file jointly with your spouse, claim 2 withholding allowances on your W-4 and make $52K per year paid in weekly installments, the federal taxes on a $5K bonus will be $1,348 using the aggregate method. If your ER used the flat-tax method, your federal taxes would be $1,250.
. . . not the full $10k is this not correct?========>>I am NOT quite sure of the method; however, you are not subject to double taxation . You may contact the loan servicer for more accurate info.