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The IRS determines this personnel’s full owed taxes based on the twelve% charge (as an alternative to the 22% fee useful for the bonus), then will get a refund around the bonus because they paid out a lot more than they actually owed.
The key reason why why is mainly because bonuses are categorised as “supplemental wages” under IRS guidelines, which triggers companies to implement a flat withholding level of twenty-two% (which is in fact prescribed from the IRS) to include the estimated taxes owed.
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