Can I change my withholdings for my bonus?

[Frugal Nurse]

I recently signed a contract with my employer, and am due to get a decent bonus on my next paycheck ($3000). I have heard from co-workers who have gotten this bonus in the past that they just add it onto your paycheck, which throws you into an insanely high tax bracket, and then your bonus basically goes to taxes. I would like to avoid this by changing my withholdings for that pay period. It would be easy to do, I can access my w4 online. But is this legal? I currently claim 2 exemptions, as it is just DH and I (no kids). How many could I/should I claim to avoid being taxed to the hilt?

[Deleted]

Changing your w-4 is perfectly legal. It is near the end of the year, so you may be able to fairly accurately calculate what your tax liability is going to be and then change your w-4 to get close to that number. You can also use paycheckcity.com and plug in your paycheck info to see what your net pay is going to be.

[mwcpa]

you can change your W-4..... but under the law "bonuses" are generally hit with "withholding" tax of 25% (which I would venture to guess is your tax bracket) plus social security and medicare tax and many states have a "statutory" withholding rate for bonuses.

As there are many variables to compute ones tax obligation, such as total income, the possibility of itemized deductions, etc.

[jeffreymo]

^^^^^^^^^^^^^^^^This is correct.^^^^^^^^^^^^^^^^^^^^^^^^

Usually the savvy employees will adjust their W-4 for the paychecks that follow a bonus to recoup the withholdings that way. I just wait until the end of the year, and my refund is slightly higher.

[bluecluessubtlety]

My ex gets a uniform allowance in July. Everyone I know adjusts their withholdings to 10 for that one pay period and then back down to normal on the next. Must be a pain for payroll to have a couple of thousand employees do that every year. But they accept it.