![]() In the eyes of the IRS, bonuses are typically categorized as “ supplemental wages.” As a University of Minnesota summary explains: ![]() The IRS goes to great lengths to categorize different types of income and treat them differently, and bonuses are another example of this. Are bonuses considered “supplemental wages?” ![]() ![]() However, bonuses can also quickly change one’s tax return and the amount of taxes initially withheld depending on the payout.Īre bonuses treated as regular income or singled out for special tax treatment? Are some types of bonuses more favorable than others? And are there any ways to minimize the tax impact of getting a bonus? These questions are explored below. Bonuses are an excellent way to motivate employees and reward top performers. ![]()
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