Q:

How are Christmas bonuses taxed?

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Quick Answer

No matter what time of year a bonus is paid, it's taxable under the heading of supplemental wages, according to the SBS CPA Group. In fact, the IRS requires that employers hold out a "supplemental rate" of 25 percent, although some employers assume that by making the original bonus bigger.

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Full Answer

Employers get a deduction of $25 for giving bonuses as of December 2014, states the SBS CPA Group, no matter what the amount of the bonus is. Employers can avoid taxes on bonuses by treating them as a bonus for profit-sharing through the company's 401(k) plan, according to the SBS CPA Group.

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