There are several reasons to do a separate payroll run for bonus checks (bonus run) instead of including the bonus on a regular check run. In a bonus run, you can:
- Control the tax treatment of a bonus or the withholding of retirement account deductions.
For example, an employee might want a discretionary bonus to be withheld at the flat 25% supplemental rate for federal income tax. It is not possible to control the tax rate when you include the bonus on a payroll check. What other special tax rates should be considered?
- Turn off direct deposit for the bonus check.
- Pay the employee bonus offcycle, not on a regularly scheduled payday. (You can use a bonus check to pay back wages or underpaid wages.)
- Use net-to-gross calculations for the bonus check.
- Give a bonus to an employee who has accumulated $1,000,000 or more in supplemental wages and you are required to withhold federal taxes at 39.6%.