bpgui wrote:
Bonuses aren't taxed at a higher rate. They just have different withholding requirements which usually cause more to be withheld, but you get the overage back when you file your taxes.
And, if I'm not mistaken, there are ways to reduce the withholding if you are willing to do some work figuring out how much should be withheld. That can be useful especially if your income is lumpy.
A 46% tax withholding still does not make sense to me. Mine works out to be about 20%. My income is a little higher than what you stated and my wife's is about the same. We live in a state with lower taxes. But still, it's really hard to get from 20% to 46% even if you have to pay the employer portion of SS. Are you computing the 46% on your net income or gross?
I think it is important for you to understand this tax/withholding situation. Your statements suggest you don't understand it well and I think that might be leading you to pay and have withheld far more than you are obligated to. If it truly is that high then you really ought to be looking into various deferred compensation options and 401(k)s.
The flip side of having to pay the self employment tax would be eligibility for various forms of tax deferral like SEP-IRAs and Keogh plans to shelter income from tax. If your tax situation truly is as you described it, you ought to be in a CPAs office this week looking into how to fix it!
