Report the bonuses that you paid an employee during the year in box 1 on a W2 form. Bonuses are a form of compensation. The Internal Revenue Service subjects them to the same taxation as your employees’ salaries or additional wages. Withhold a specific amount from employee bonuses for Social Security, Medicare, and additional income tax withholdings. Employers should consider a bonus as a supplemental wage. Total the amount of bonus wages and then calculate the bonus value for bonuses that the IRS do not classify as direct wages, including vacations. Enter your employee’s total wages and supplemental wages in box 1 on a W2 form.
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