I don’t know anything about the actual salary figures, but bonuses are actually not taxed much more highly. That’s a common misconception. It’s just the way the business has to handle the withholding that changes. Bonuses are considered “supplemental wages”, so employers have 2 options for how to handle their withholding.
The aggregate method: Bonuses are added to your regular paycheck. This amount is then annualized (amount for pay period number of pay periods in a year) and then taxed at the rate appropriate for someone making the annualized amount every year. If you get one big bonus in a monthly paycheck by the aggregate method, you take (bonus + regular monthly salary) 12 and have your tax withheld at that rate, which is much higher.
The flat percentage method: Most larger employers do this. Employers who choose this method withhold 25% of any bonus under $1 million across the board and 35% of each dollar above the $1 million mark. For those who receive their bonuses in large chunks, this is beneficial to the employee. It’s also easier for the employer.
However, when it comes time to file your personal income taxes, regardless of which method was chosen above, you only have one number that represents your total income for the year and you are taxed on that according to the marginal rate schedule that applies to everyone for that year. If your employer used the aggregate method and you had a giant chunk taken out of a small number of bonuses, you’ll get a lot of that back.
At the end of the day, for the IRS, employee compensation is employee compensation. It doesn’t matter how your employer classified it.
I don’t know anything about the actual salary figures, but bonuses are actually not taxed much more highly. That’s a common misconception. It’s just the way the business has to handle the withholding that changes. Bonuses are considered “supplemental wages”, so employers have 2 options for how to handle their withholding.
The aggregate method: Bonuses are added to your regular paycheck. This amount is then annualized (amount for pay period number of pay periods in a year) and then taxed at the rate appropriate for someone making the annualized amount every year. If you get one big bonus in a monthly paycheck by the aggregate method, you take (bonus + regular monthly salary) 12 and have your tax withheld at that rate, which is much higher.
The flat percentage method: Most larger employers do this. Employers who choose this method withhold 25% of any bonus under $1 million across the board and 35% of each dollar above the $1 million mark. For those who receive their bonuses in large chunks, this is beneficial to the employee. It’s also easier for the employer.
However, when it comes time to file your personal income taxes, regardless of which method was chosen above, you only have one number that represents your total income for the year and you are taxed on that according to the marginal rate schedule that applies to everyone for that year. If your employer used the aggregate method and you had a giant chunk taken out of a small number of bonuses, you’ll get a lot of that back.
At the end of the day, for the IRS, employee compensation is employee compensation. It doesn’t matter how your employer classified it.